Introduction – Why True-Downs Matter for SAP Customers
Once you buy SAP licenses, you keep paying for them — even if you stop using them. This stark reality has led many enterprises to accumulate shelfware – SAP licenses that sit idle while still incurring annual maintenance fees. Over time, companies often end up with far more SAP licenses than they actually need, incurring support fees without any return on investment.
True-downs are the logical fix for this problem. A true-down refers to formally reducing your purchased SAP license quantities (and the associated support costs) to better align with actual usage. In theory, a true-down lets you eliminate waste and stop paying support on software you no longer use.
In practice, however, convincing SAP to accept a license reduction is a significant negotiation challenge. SAP’s stance is that once a license is sold, it’s yours for life (and so are the maintenance fees). For more insights, read our guide SAP True-Downs & License Transfers: Reducing Your License Footprint.
That makes true-downs both a cost-saving opportunity and a negotiation battleground with SAP. For CIOs, CFOs, and IT procurement leaders, the challenge is clear: how do you right-size your SAP investment when the vendor is financially motivated to resist any reduction?
Definition – What Is a True-Down in SAP Licensing?
SAP True-Down: A true-down is the formal process of reducing your SAP license counts under maintenance (usually at renewal) to match actual usage. In a true-down, you formally surrender unused licenses and stop paying maintenance on them.
How a true-down works:
- Identify Unused Licenses: Inventory your SAP users and modules to find any completely unused licenses (due to layoffs, divestitures, system replacements, etc.).
- Request Removal: Formally notify SAP (per contract procedures) of the specific licenses you want to terminate from support.
- Reduce Maintenance Fees: Once those licenses are removed from your entitlement, their annual maintenance charges should be eliminated in the next renewal cycle.
True-downs can be quantitative (reducing the total number of licenses), qualitative (removing entire products or modules), or financial (reducing the maintenance fee base through discounts or credits).
Not all SAP contracts allow reductions by default, so true-downs typically must be specially negotiated via contract terms or at renewal time (more on this below).
Why SAP Rarely Allows True-Downs
SAP has strong commercial reasons to discourage true-downs. The vendor’s revenue model relies heavily on recurring support and maintenance fees (around 20–22% of the license cost per year). Allowing customers to reduce license counts would shrink that steady income stream.
In general, SAP’s stance is clear: licenses are perpetual and non-refundable, and support fees are based on the original license count, not actual use. You can add licenses easily, but you generally cannot remove them once purchased.
From the customer perspective, this creates several pain points:
- Ballooning maintenance costs: You pay annual 20%+ maintenance fees on all licenses, even those you aren’t using. This quickly becomes wasted spend on shelfware.
- No post-change flexibility: If you downsize or sell off a business unit, your SAP costs don’t drop accordingly. You could be paying for users or modules that your company no longer needs.
- Wasted budget and frustration: Nobody likes paying for software that isn’t being used – but without a true-down, that’s exactly what happens. IT and finance teams feel trapped, funding shelfware year after year.
Bottom line: SAP has little incentive to voluntarily allow reductions that shrink its recurring revenue. That means customers must create leverage or a compelling justification for SAP to even consider a true-down.
When True-Downs Are Possible
Despite SAP’s reluctance, there are scenarios where a true-down can be negotiated:
- Contract Renewal: At the end of your license term, you can try to renew with fewer licenses. SAP is most open to reductions at renewal time, especially if you offer something in return (e.g., committing to a new purchase or extended support on remaining licenses). Remember to give any required notice (often 2–3 months before renewal) if you plan to drop licenses.
- Corporate Restructuring: In a merger, divestiture, or major re-org, you may have a clear reason to reduce licenses (e.g., a divested unit no longer uses SAP). SAP may allow license reallocations or reductions tied to these events, though they often prefer transfers to another entity over cancellations.
- Product Retirement: When you retire an SAP product or move off a module (for example, shifting from an older SAP solution to a newer platform), you can attempt to remove those now-obsolete licenses from your support contract.
- Trade-In Deal: Sometimes SAP will accept a partial trade-in if you simultaneously invest in new SAP products. For instance, under a cloud conversion program, you might trade unused on-prem licenses for credits toward SAP cloud subscriptions. It’s not a pure reduction, but it lets you eliminate shelfware as part of a broader deal.
Checklist:
- Timing: Plan your turnover for a natural opportunity (contract renewal, corporate changes, etc.).
- Business Justification: Document exactly why those licenses are no longer needed (downsizing, system decommissioned, etc.).
- Sweetener: Consider bundling the reduction request with something SAP values (e.g., new purchases or longer commitments on the remaining licenses).
SAP’s Alternative to True-Downs: The Cloud Extension Policy
SAP’s Cloud Extension Policy allows you to trade in on-premise licenses for cloud subscription credit. In this program, SAP terminates maintenance on the licenses you give up, and you use their value as a credit toward new SAP cloud subscriptions.
Essentially, you stop paying for the old licenses and start paying for a cloud product instead.
The catch: This is not a cost-cutting measure so much as a way to modernize your spending.
It prevents double-paying during a transition to the cloud, but it won’t lower your overall budget unless the new subscriptions cost less. Use it if you already plan to move to SAP cloud solutions – not simply to save money.
Checklist:
- Evaluate fit: Only use Cloud Extension if it aligns with your cloud migration plans.
- Crunch the numbers: Ensure the credit value for your old licenses makes financial sense compared to the cloud subscription costs.
- Get it in writing: Document exactly which licenses are terminated and confirm that their support charges will cease.
Building a Case for a True-Down
To get SAP to consider a true-down, you need a well-prepared business argument:
- Data: Gather accurate license usage data (e.g., SAP’s USMM/LAW reports) to show what’s actually being used.
- Evidence: Document the business reasons licenses are unused (systems retired, workforce reductions, etc.).
- Timing: Start the true-down conversation ~6 months before renewal, and be mindful of any contract notice deadlines for dropping support.
- Leverage: Plan what you can offer SAP in exchange (new purchases, longer commitments, etc.) to incentivize their cooperation.
- Executive Support: Involve senior management on both sides. Have your CIO/CFO communicate the request to SAP’s account leaders, since high-level approval is often needed.
How to decommision SAP, Decommissioning SAP Software: How to Retire Systems Without Wasting License Spend.
Risks and Misunderstandings Around True-Downs
- No automatic right: You cannot reduce licenses unless it’s explicitly allowed in your contract (and standard SAP contracts generally don’t allow it).
- No refunds for past fees: SAP will not credit back the maintenance you already paid for shelfware. A true-down only saves you money in the future.
- Get it in writing: Verbal assurances won’t protect you. Make sure any agreed reduction is formalized in a contract amendment or similar documentation from SAP (and later verify your SAP invoice reflects the change).
- Don’t drop maintenance on your own: Unilaterally stopping payment on licenses without SAP’s agreement is a breach of contract. If you simply stop paying for certain licenses, SAP can penalize you (up to terminating support or demanding back fees). Always use the proper process to avoid legal and support risks.
Preparing Internally for a True-Down Discussion
Even before you approach SAP, make sure your own house is in order:
- Team Alignment: Bring together IT, finance, procurement, and legal to ensure everyone is on board with the plan.
- Financial Analysis: Calculate how much maintenance a true-down could save, and consider any impact on support coverage or future needs.
- Business Case: Prepare a summary of why certain licenses can be given up (for example, a system was decommissioned or a division was sold).
- Plan Your Leverage: Decide what you might offer to SAP in exchange (new purchases, longer commitments) and what you’ll do if SAP refuses. Knowing your best alternative (e.g., third-party support) gives you a fallback.
5 Insights About SAP True-Downs Every Customer Should Know
- SAP won’t offer a true-down – you must initiate the request and justify it. Don’t expect SAP to voluntarily suggest reducing your licenses; it’s up to you to bring up the topic and support it with reasons and data.
- Timing is critical: align true-down requests with renewal or restructuring events. You’ll have the most leverage at contract renewal or during major business changes. Mid-term reductions are usually off the table.
- Maintenance savings aren’t automatic – they require explicit agreement. Simply using fewer licenses doesn’t lower your fees; only a negotiated contract change will. Never assume your support costs will drop without a formal true-down deal.
- True-downs often come with strings attached (new spend or cloud moves). In practice, SAP might only agree to a reduction if you’re compensating them elsewhere – for example, by purchasing new products or transitioning to the cloud.
- Always get documentation for any license reduction or transfer. If SAP agrees to a true-down, make sure it’s captured in writing. Updated contracts and invoices are your proof that those licenses are off the books and you’re no longer charged for them.
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