SAP S/4HANA Licensing Guide: Models, Costs, and Migration Insights

Introduction – The New Licensing Era – SAP S/4HANA Licensing

SAP’s shift from ECC to S/4HANA isn’t just a technical upgrade – it’s a wholesale change in how you pay for and consume SAP software.

Under S/4HANA, licensing becomes a strategic decision, not just a cost-of-IT issue. CIOs and CFOs must weigh perpetual on-premise licenses versus subscription-based cloud licenses (RISE with SAP) – essentially control vs. convenience. That choice carries significant financial implications.

“S/4HANA licensing isn’t a technical upgrade — it’s a new commercial model disguised as one.”

S/4HANA Licensing Overview

At a high level, S/4HANA still uses familiar building blocks of named users and package (engine) licenses, but SAP has tweaked the structures and pricing for the new system.

On-premises S/4HANA uses updated user categories (Professional, Functional, Productivity, etc.) plus specific engine metrics for certain modules.

In the cloud RISE with SAP model, SAP introduced a Full Usage Equivalent (FUE) metric – a unified way to measure users by their roles. The FUE approach consolidates various user types into one pool of credits for subscription licensing.

Checklist: Before diving into S/4HANA licensing, make sure you:

• Align licenses to roles: Map each user to the appropriate license type. Don’t over-license everyone as “Professional” if many users only need limited access.
• Understand engine metrics: Identify any module engines (e.g. transactions, revenue, or data volume measurements) and know how those usage fees are calculated.
• Confirm support costs: Know your annual support rate (typically ~22% of license value) and include it in cost projections.
• Validate FUE counts: If you’re considering RISE, have SAP convert your existing users to FUEs and verify the numbers. Ensure inactive users aren’t inflating the FUE count.

Key Differences Between ECC and S/4HANA Licensing

While the core concepts remain, several key differences separate ECC’s licensing from S/4HANA’s model:

Advisory Note: S/4HANA’s “simplified” licensing centralizes costs into fewer line items, making it easier for SAP to bundle, but not necessarily easier for you as the customer.

Licensing Models: On-Premises vs. RISE (Cloud)

SAP S/4HANA offers two distinct licensing models, each with pros and cons:

• On-Premises (Traditional): You buy S/4HANA licenses upfront and pay ~22% yearly for support. You own and run the software on your infrastructure. This offers maximum flexibility (customizations, third-party support options) but requires upfront cost and in-house system management.
• RISE with SAP (Subscription): You pay a subscription fee covering S/4HANA software, HANA database, hosting, and support. SAP runs the system for you. The downside is less control (standard environment) and no ownership – stop paying and access ends.

Comparison: On-Prem vs. RISE

Negotiation Tip: RISE may seem cheaper in year one, but be cautious – at renewal time, SAP holds the leverage. Prices often rise once you’re dependent on their cloud, so negotiate long-term protections upfront.

Key Cost Drivers in S/4HANA

Several factors drive the total S/4HANA license cost beyond just user numbers:

• User Volume & Mix: The count of users and their roles heavily drives licensing costs. Professional users cost far more than limited users – right-size your user licenses by assigning each person the lowest tier needed for their job.
• HANA Database Size: S/4HANA’s in-memory HANA database is licensed by memory volume. A larger data footprint means a higher DB license cost. Size your HANA environment carefully (and archive or tier old data) to avoid overpaying for unused memory capacity.
• Digital Access: Indirect use is now licensed by document count in S/4HANA. If external systems (CRM, e-commerce, etc.) create SAP documents (orders, invoices, etc.), you need Digital Access licenses. Plan for these to prevent surprise audit fees.
• Add-On Modules: Advanced capabilities often require separate licenses even in S/4HANA. Tools like Extended Warehouse Management (EWM), Transportation Management (TM), or SAP Analytics Cloud (SAC) are not included in the base license – budget for them if needed.
• Migration Overlap: Running ECC and S/4HANA in parallel can double costs. If both will operate during transition, negotiate a grace period so you’re not paying full maintenance on ECC and S/4 at the same time.

Example: A global manufacturer saw costs jump ~30% in year one because they didn’t negotiate dual-use rights – they ended up paying SAP maintenance on ECC and S/4HANA concurrently during the migration.

Migration Licensing Paths: Brownfield vs. Greenfield

When moving to S/4HANA, you have two approaches for licensing your move:

• Brownfield (Convert Existing Licenses): Carry over your ECC licenses into S/4HANA. SAP provides conversion programs to map your old licenses to new equivalents, but a 1:1 match is rare. Many legacy user types or modules don’t perfectly align with S/4’s bundles. You should negotiate conversion credits for the value of your ECC licenses – ensure your past investments count. Brownfield license conversions require careful mapping and contract adjustments so you don’t pay twice for the same capability.
• Greenfield (New Purchase): Treat S/4HANA as a new implementation with new licenses. This clean-slate approach is simpler contractually, but often more expensive since you’re not leveraging any credit from what you already own. If going greenfield, seek aggressive discounts or migration incentives from SAP to offset the cost of “starting over” with licensing.

Checklist – Before Migration:

• Check conversion eligibility: Confirm what license conversion or trade-in offers SAP currently has. Get any conversion credit percentage in writing.
• Avoid double maintenance: Negotiate a halt on ECC maintenance fees once S/4HANA is live. During any overlap period, ensure you’re only paying for one set of licenses/support.
• Map users early: If moving to RISE, map your ECC-named users to FUEs ahead of signing. Adjust for any users you can retire to keep the FUE count (and subscription cost) as low as possible.

RISE with SAP Licensing Deep Dive

RISE with SAP introduces the Full Usage Equivalent (FUE) model as the cornerstone of its pricing. Instead of buying separate license types for each user role, you purchase a pool of FUE credits and allocate users against that pool:

• Each user role has an FUE weight. For example, a full-power Professional user might count as 1.0 FUE, while a light Employee Self-Service user might be 0.2 FUE (five such low-level users equal 1 FUE).
• This allows a mix of roles under one subscription metric. As long as you have enough FUEs, you can flexibly assign users of different types without juggling individual license counts.

The RISE subscription itself is all-inclusive. One fee covers the S/4HANA software, the required HANA database, cloud infrastructure, and SAP support. This bundling is convenient (no separate negotiations for databases or hosting), but it brings a transparency trade-off – you can’t see the cost breakdown. You won’t know how much of the fee is for software versus infrastructure, which makes it harder to benchmark or optimize later.

Negotiation Tip: Insist on cost transparency in your RISE agreement.

Ask SAP to internally break out the cost components (software, database, infrastructure) for you. Knowing these numbers gives you leverage if you later consider switching away from RISE or need to negotiate renewals.

Managing Dual Operations During Transition

Most S/4HANA migrations involve a period where legacy ECC and new S/4HANA systems run in parallel. You may need to keep ECC running for a while (for data validation, phased rollouts, or fallback) even as S/4 goes live. However, operating both can create licensing complications and double costs unless you plan for it.

To avoid paying for two systems at once, negotiate dual-use rights in your migration contract. Dual-use provisions explicitly allow you to use ECC and S/4HANA concurrently for a limited time without additional license fees or double maintenance charges.

SAP typically grants 12–18 months of overlap if you ask, but it’s not automatic – you must get it in writing.

Action Points for Dual Operations:

• Define the ECC sunset: Set a clear date when ECC support charges stop (e.g., X months after S/4HANA go-live). This prevents open-ended costs for the old system.
• “No double maintenance” clause: Include language that maintenance fees for ECC end upon S/4HANA production go-live. This ensures you don’t keep paying SAP support on the retired system.
• Cover non-prod environments: Get written confirmation that, during migration, running S/4HANA development/test systems in parallel with ECC is permitted under your licenses. You shouldn’t be charged extra for using S/4HANA in sandboxes or training while ECC is still live.

S/4HANA Licensing Pitfalls to Avoid

Be wary of these common licensing mistakes as you transition to S/4HANA:

• Assuming ECC licenses convert 1:1, Many legacy user types or modules don’t have a direct S/4HANA equivalent. Never accept a simple one-for-one conversion without analysis – validate every mapping and get SAP’s terms in writing.
• Ignoring HANA sizing: Underestimating HANA memory needs can trigger costly true-ups later, while overestimating wastes budget. Do a proper HANA sizing (with growth plans) before finalizing your license purchase.
• Overcommitting on FUEs: For RISE subscriptions, don’t over-buy Full User Equivalents. Overestimating users “just in case” means paying for shelfware. Start with a realistic count and negotiate flexibility to add users if needed.
• Paying support on shelfware: After go-live, identify any ECC licenses or modules you’ve retired. Make sure they’re removed from your contract so you aren’t paying 22% maintenance on software you no longer use.
• Missing indirect use costs: If third-party systems connect to S/4HANA, account for Digital Access licensing. External apps that create SAP documents (sales orders, etc.) will incur document license fees – plan for it upfront.

Governance Tip: If SAP markets something as “simplified,” expect complexity in the fine print. Always double-check the details behind any “simple” licensing claims.

Related articles

• S/4HANA License Cost Drivers & Optimization: How to Control Costs Before You Buy
• SAP S/4HANA Licensing FAQ for CIOs: What Every Executive Should Know Before Migration
• S/4HANA vs ECC Licensing Differences: What Changes When You Migrate
• S/4HANA Cloud vs On-Premise Licensing: Subscription vs Perpetual Models Explained
• Greenfield vs Brownfield Licensing Implications: How Implementation Approach Impacts S/4HANA Costs

S/4HANA Licensing Governance Framework

To stay in control of SAP licensing during and after your migration, establish a governance framework:

• License Mapping: Maintain a matrix that links each ECC license (users and modules) to its S/4HANA equivalent. This reference clarifies which licenses convert and which require new agreements, thereby avoiding entitlement gaps.
• Regular Audits: Use SAP’s audit tools (LAW and USMM) before and after migration to check usage vs. entitlements. Finding compliance issues (like unused licenses or unlicensed usage) early lets you address them proactively.
• Cross-Functional Oversight: Treat S/4HANA licensing as an ongoing governance process. Involve procurement and finance in negotiations and reviews to optimize costs and ensure alignment with corporate policies.
• Monitor SAP Changes: Stay updated on SAP’s licensing policy updates or new migration offers. Revisit your contract terms annually – if SAP changes definitions or credit programs, be ready to renegotiate or adapt your licensing strategy.

Example – License Conversion Matrix: Build a table of your legacy products vs. new S/4HANA licenses to spot gaps. For example:

This matrix helps you identify which parts of your ECC footprint can transition smoothly and which require fresh licenses or subscriptions.

5 Licensing Lessons for S/4HANA Migration

1. Never assume conversions are automatic – verify every ECC-to-S/4 license mapping and demand clarity on how each item transitions.
2. Secure a dual-use grace period by negotiating overlap rights, so you aren’t paying double maintenance during your migration.
3. Plan HANA sizing early – get your HANA memory estimates right and secure the right to adjust your license if requirements change.
4. Demand transparency in RISE deals – know what you’re paying for in a RISE subscription (software vs. infrastructure) to maintain leverage later.
5. Continuously optimize your user licenses – review your mix of user types (Professional vs. Functional, etc.) every quarter to align licenses with actual usage and avoid overspending.

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fredrik.filipsson

Fredrik Filipsson is the co-founder of Redress Compliance, a leading independent advisory firm specializing in Oracle, Microsoft, SAP, IBM, and Salesforce licensing. With over 20 years of experience in software licensing and contract negotiations, Fredrik has helped hundreds of organizations—including numerous Fortune 500 companies—optimize costs, avoid compliance risks, and secure favorable terms with major software vendors. Fredrik built his expertise over two decades working directly for IBM, SAP, and Oracle, where he gained in-depth knowledge of their licensing programs and sales practices. For the past 11 years, he has worked as a consultant, advising global enterprises on complex licensing challenges and large-scale contract negotiations.

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