SAP Contract Renewal Playbook for Mixed Landscapes

SAP Contract Renewal Playbook for Mixed Landscapes

Renewing an SAP software contract is a strategic opportunity for CIOs and CTOs to optimize costs and align licenses with actual business needs.

This playbook guides you through determining the renewal scope – deciding which SAP licenses to renew, expand, or drop – based on careful analysis of current usage and future business roadmap.

A proactive, data-driven renewal approach ensures you only pay for what you need and sets the stage for favorable contract negotiations.

Perform a License Usage Audit

Begin by auditing your existing SAP license inventory and usage. Gather all current entitlements and utilization data across your SAP landscape.

For example, list each SAP product and license type (e.g. 500 SAP ERP Professional User licenses, 100 Limited User licenses, 1 SAP HANA engine, etc.) alongside how many are actually in use.

Use SAP’s tools (like License Administration Workbench or USMM/Law reports) to get accurate counts of active users and consumption of engine metrics.

The goal is to identify underused or unused licenses (“shelfware”). If you’re paying maintenance on 1000 user licenses but only 800 people actively use SAP, those extra 200 are prime candidates to cut.

Document these findings in a central workbook – concrete data (e.g. “Module X has 50 licenses but only 5 active users”) makes it easier to justify non-renewal of surplus licenses.

This audit lays the foundation for refining your renewal scope.

• Identify shelfware: Pinpoint licenses and modules that see little or no use. These drive up costs with no business value.
• Spot shortages: Also note any areas where usage exceeds entitlements or is projected to grow, indicating a need for additional licenses.
• Data-driven decisions: Use the audit data to clearly map what you truly need to renew versus what can be eliminated or reallocated.

Read SAP Contract Renewal Playbook: 120-Day Pre-Renewal Audit Strategy.

Align Licenses with the Business Roadmap

Next, factor in your organization’s upcoming business plans and strategy. The renewal should mirror your business roadmap for the next few years.

Engage business unit leaders and portfolio managers to understand changes that could impact SAP usage:

• Planned growth or projects: Are there new initiatives (e.g. expanding into new markets, launching a digital supply chain project) that will require more SAP users or new modules? For instance, an upcoming e-commerce launch might mean investing in SAP Commerce licenses.
• Downsizing or divestments: Conversely, if a division will be downsized or spun off, you may need fewer licenses (e.g. fewer HR module users if a business unit is being sold).
• Technology shifts: Major IT initiatives like migrating from SAP ECC to S/4HANA or moving to RISE with SAP (cloud subscription) will influence your renewal scope. If you plan to transition to cloud modules in 18 months, you might avoid extending long-term maintenance on legacy on-premise licenses that will be retired.
• Mergers or acquisitions: M&A activity can bring redundant systems or new user populations. Coordinate with those plans – you might drop overlapping licenses or need to include more users from an acquired entity.

By aligning licenses to the real business trajectory, you ensure you’re renewing the right things. Every license in the renewal should have a purpose tied to business value or strategy.

This prevents rubber-stamping last year’s contract and instead creates a forward-looking license portfolio optimized for what’s next.

Eliminate Unused Licenses (Drop or Trade Shelfware)

One of the most impactful steps is removing licenses that are not needed going forward. Unused licenses (shelfware) waste money through annual maintenance fees, so decide which can be safely dropped from the contract.

Use your usage audit data to target removals – for example, if an SAP module was deployed for a project that never went live and sits idle, plan to terminate its support.

Real-world example:

One enterprise found that out of a $4.5 million SAP license estate, roughly $1 million worth of software was not being used; this translated to about $220,000 per year in wasted maintenance fees (since SAP support is ~22% of license value annually). By retiring those unused licenses, they saved that $220k per year in support costs.

Bold moves to cut shelfware can yield significant savings, but ensure you follow contract requirements:

• Notice periods: SAP typically requires written notice (often 90 days before renewal date) if you intend to drop any licenses or maintenance. Mark this deadline and communicate early to SAP if you plan to terminate certain licenses. Missing the notice window could lock you into paying another year.
• Contract clauses: Review your SAP agreement to see if partial termination of support is allowed. SAP’s standard policy is that the whole license set for a product must remain under the same support level, so they often claim you “cannot drop licenses.” In practice, if you formally retire a product or license type (stop using it entirely), you can negotiate removal from the support contract. Be prepared for SAP reps to push back, but many customers have successfully eliminated shelfware by insisting on paying only for active licenses.
• Swap for needed licenses: If outright termination is tricky, consider a license swap or conversion. SAP may agree to exchange your unused licenses for other licenses that you do need, at no or minimal cost, especially if your contract has a swap clause. For example, an organization might trade 200 unused HR user licenses for 200 licenses of a new analytics module aligned with current needs. This way, you’re not paying maintenance on dead weight, and you get something useful in return.

Read SAP Contract Renewal Playbook: Leveraging Competitive Alternatives for Negotiation.

Below is an example of renewal decisions based on usage and value:

Table: Sample license scope decisions – dropping shelfware yields maintenance savings, while adding needed licenses supports new business requirements.

By cutting out what you don’t need, you immediately reduce costs and simplify your SAP footprint.

Every license removed is one less line item incurring 22% annual support fees. Just be sure those licenses are truly not needed – coordinate with stakeholders to double-check no business unit will unexpectedly need that “shelfware” component in the near future.

Once dropped, if you later find you need it again, you would have to re-purchase the license (often at full price). So, retire licenses with confidence – but only when you have a solid understanding that they won’t be required moving forward.

Plan for Required Expansion and New Licenses

Renewal time is also when you add what’s missing to support growth and compliance. Based on your audit and business roadmap, identify any areas where you must expand:

• Cover compliance gaps: If your usage analysis revealed any license shortfalls (e.g. you have more HR users in reality than you have licenses for), plan to true-up by purchasing the needed licenses now. It’s better to proactively include them in the renewal (possibly negotiating a discount) than to be caught in an audit later and forced to buy at list price with back maintenance. Ensure the renewal scope includes all licenses required to stay compliant.
• New projects and modules: Incorporate licenses for upcoming projects. If your company is implementing a new SAP module (say, SAP SuccessFactors for HR, or Ariba for procurement), it might make sense to bundle those new licenses into the renewal negotiation. SAP sales teams are often more generous with discounts when you’re buying additional products or users as part of the deal. Leverage this by saying, “We will expand into Module X as part of this renewal, but only if we get favorable terms on the whole package.” This can secure better pricing.
• Upsizing user counts: For growth in existing systems, determine how many additional user licenses or capacity you need. For instance, if expanding operations will add 500 new SAP users, plan those in. You might opt for a higher-tier volume deal or consider shifting to newer license models (like moving some users to a concurrent use model or to cloud subscriptions) if it’s more cost-effective.
• Future-proofing: Anticipate needs 1-3 years out. While you don’t want to over-buy (which creates new shelfware), if you know a specific expansion is imminent within the year, it can be efficient to lock in pricing now. Also ensure your contract has flexibility for growth – e.g. predefined rates for adding users later or a scalable cloud subscription model – so you’re not locked into a fixed capacity that requires a fresh negotiation every time you expand.

Real-world tip:

If you plan a major migration or new SAP cloud adoption in the near future, discuss transitional licensing options. SAP sometimes offers conversion programs or credit for existing licenses when moving to cloud solutions (for example, crediting unused on-premise licenses toward a RISE with SAP subscription).

Align your renewal scope with those future moves – you might renew certain licenses only short-term or in smaller quantities if they will be replaced by the new platform.

The key is to avoid double-paying: don’t pay full price to renew old licenses for years if you intend to decommission them upon moving to a new SAP system next year.

Optimize Support Level and Terms

Determining renewal scope isn’t just about licenses; it’s also about the scope of support services you’ll pay for.

SAP offers different support levels and there are third-party alternatives – optimizing this can significantly cut costs while meeting your operational needs:

• Right-size SAP support: Evaluate if you truly need SAP’s premium support. SAP Enterprise Support is typically 22% of license fees annually and includes added services that some customers may not fully utilize. Standard Support (around 19% of license fees) is cheaper but with slightly reduced entitlements. If your organization hasn’t needed the advanced features of Enterprise Support (like enhanced SLAs or continuous improvement tools), consider downgrading to Standard Support for a lower fee. The savings (a few percentage points off a multimillion maintenance base) can be substantial. Ensure your contract allows this switch; it often can be done at renewal.
• Selective support vs. third-party: For older SAP products that are stable and less critical, some enterprises choose to cancel SAP support and use third-party support or self-support. Third-party support providers (such as Rimini Street, Spinnaker, etc.) typically charge about 50% of SAP’s maintenance fee and still provide break-fix support (but no new SAP upgrades). If you have legacy systems you plan to keep running without major upgrades, moving them off SAP support can free up budget. For example, if you’re paying $500,000/year for maintenance on an old ERP system that won’t be upgraded, a third-party support firm might support it for ~$250,000/year, saving you half. Be mindful of the trade-offs: you’ll forgo SAP updates and must ensure the provider can meet your needs.
• Contractual protections: When renewing support, negotiate terms that give you flexibility and cost predictability. Insist on a cap for support fee increases (e.g. “maintenance fees cannot increase more than 3% per year”); SAP has introduced inflation-linked hikes in recent years, so a cap protects you from large jumps. Also ensure you maintain the right to drop support entirely in future years with notice – it’s usually an annual decision for perpetual licenses, but clarify there are no hidden auto-renewals beyond your term. If you’re signing a multi-year cloud subscription, try to include an option to reduce users or terminate after each year with minimal penalty, in case your needs change.

In summary, define not only which licenses to renew, but also how you will support them cost-effectively. You might decide to keep core systems on SAP Enterprise Support while moving non-critical systems to a cheaper support model.

Or negotiate a support fee reduction in exchange for a multi-year commitment. These support scope decisions are key to aligning your SAP spend with business value.

Negotiating Scope Changes with SAP

After internal analysis, you’ll have a list of licenses to drop, add, or change. The final step is working with SAP to execute these scope changes in the renewal contract:

• Internal buy-in: Before approaching SAP, ensure senior leadership agrees with the plan. Dropping certain licenses or switching support can be a bold move – your CIO, CFO, and business stakeholders should be on board and aware of any risks (for example, if you’re truly prepared to go without SAP support on a system). Having this backing gives you leverage and credibility in negotiations.
• Communicate intentions early: Don’t surprise SAP at the last minute. Several months before renewal, inform your SAP account manager in writing of any licenses you intend not to renew. This serves the required notice and also opens the door for SAP to propose alternatives (they might come back with a swap offer or a discount to keep those licenses). By signaling your plans, you give SAP a chance to respond with creative solutions – but remain firm on your needs.
• Leverage expansion for concessions: Use any planned purchases of new licenses as a bargaining chip. For example, “We will add 50 more SAP Analytics Cloud users, but only if we can terminate support on the unused CRM module and get a X% discount on the net renewal.” This quid pro quo approach aligns with SAP’s desire to sell more while achieving your cost optimization.
• Be ready for pushback: As mentioned, SAP representatives might claim you cannot reduce your license counts or maintenance base. Stand your ground by referencing your data (usage stats) and business justification (“We have no users on that module, it provides zero value, thus it will be removed from our environment”). Often, if SAP sees that you are serious – for instance, you’ve uninstalled the software or you’re prepared to sign a letter certifying you will not use those licenses – they will negotiate terms to drop it. This could be an amendment to remove the licenses or a side agreement granting a credit.
• Document everything: As you negotiate these scope adjustments, get all agreements in writing. If SAP agrees verbally to let you drop 200 licenses with no penalty, ensure the contract renewal paperwork reflects that change explicitly. Likewise, include any new licenses, adjusted support fees, or special terms in the final agreement. Clarity here prevents disputes later and locks in your hard-won optimizations.

Finally, approach the renewal scope holistically. Sometimes SAP will be more amenable to concessions on scope if you also commit to other value from your side (like a longer term or purchasing a new cloud product).

Know your priorities – which licenses you must drop versus which additions are nice-to-have – so you can trade wisely during talks.

The outcome should be a right-sized SAP contract: one that meets your upcoming business needs without excess, and at a cost that reflects only the value you’re actually getting.

Recommendations

• Start early (6-12 months ahead): Give yourself ample time to analyze usage and inform SAP of any reductions. Early planning avoids rushed decisions and preserves your leverage.
• Audit your SAP usage thoroughly: Build a detailed inventory of licenses and their utilization. Base renewal decisions on data – renew what’s used, cut what’s not.
• Align with business strategy: Cross-check every license against the business roadmap. Drop licenses tied to initiatives that ended or systems to be retired; add licenses needed for upcoming projects.
• Eliminate shelfware aggressively: Don’t pay maintenance on unused SAP modules or users. Negotiate to remove or swap them. Even if SAP resists, push for termination of truly unused licenses to save costs.
• Give required notice for reductions: Check contract terms for notice periods (often ~90 days) and formally notify SAP in writing of any licenses or support you won’t renew. Missing this can forfeit your right to drop them.
• Leverage expansion in negotiation: If you need new SAP licenses, use that as bargaining power. Bundle new purchases with renewal – secure discounts or contract improvements in exchange for the additional spend.
• Optimize support commitments: Evaluate support level and consider alternatives. Downgrade overly expensive support packages or use third-party support for non-critical systems to reduce annual fees.
• Secure flexible terms: In the renewal contract, include provisions like caps on maintenance increases, rights to adjust license counts in future, and escape clauses in multi-year deals. This protects you if your needs change.
• Collaborate with stakeholders: Involve IT, finance, procurement, and business owners in renewal scope decisions. Ensure everyone understands which licenses will be cut or added to avoid surprises post-renewal.
• Have a Plan B: Be prepared with alternatives (e.g. third-party support, alternate solutions) if SAP refuses to accommodate critical scope changes. Showing you have other options makes your position stronger.

FAQ

Q1: How far in advance should we start planning an SAP contract renewal?
A: Ideally start 6-12 months before the renewal date. Early planning gives you time to audit usage, decide on scope changes, and engage SAP in negotiations without last-minute pressure. Large enterprises with complex SAP environments often kick off renewal planning a full year in advance to ensure every license decision aligns with business needs.

Q2: Can we drop certain SAP licenses or subscriptions at renewal to save costs?
A: Yes. Renewal is your chance to drop unused or unneeded licenses – but you must follow the contract terms. Identify which licenses you no longer require and provide SAP with timely notice (commonly 3 months prior to renewal). Expect resistance from SAP (they prefer you keep everything), but if you’ve decided to retire a product or reduce user counts, you can negotiate removal or partial termination. Ensure the change is documented in the renewed contract so you are no longer billed for those licenses.

Q3: What if we discover we’re using more licenses than we purchased (i.e., we’re out of compliance)?
A: If you find a shortfall, plan to address it in the renewal. This might involve purchasing additional licenses or subscriptions to cover the overuse. It’s better to proactively true-up during renewal (when you can negotiate pricing) than to wait for an SAP audit which could impose list prices plus back-maintenance fees. Include the necessary extra licenses in your renewal scope and use the opportunity to possibly negotiate a discount or a migration to a more suitable license model to prevent future overuse.

Q4: How do we decide which new SAP licenses to add during renewal?
A: Base it on your business roadmap and any technology plans. Add new licenses for confirmed projects or growth areas that will materialize in the renewal period. Also consider future-proofing – if you know you’ll need a certain SAP module or more users in the next 12 months, adding them at renewal (often at a better rate) can be smart. Just avoid speculative over-purchasing; stay aligned to concrete plans. It’s a balancing act between ensuring capacity for growth and not buying far ahead of demand.

Q5: SAP says we can’t reduce our maintenance base or drop licenses – is that true?
A: Not entirely. SAP’s standard stance is that you cannot partially terminate support on active licenses, and they often discourage reductions. In reality, if you are eliminating a component from use (so it’s no longer active), you can negotiate its removal. Many customers have done this by firmly stating that those licenses will not be used going forward. While SAP might not advertise it, they have mechanisms (contract amendments, swaps, credits) to adjust your license counts. It requires determination and negotiation on your part, but you can reduce your footprint – especially when you have data to justify it.

Q6: How does moving to S/4HANA or cloud subscriptions (like RISE with SAP) affect renewal decisions?
A: Significantly. If you plan to migrate to S/4HANA or a cloud version of SAP soon, factor that in. You might opt for shorter renewal terms or smaller quantities for legacy licenses, just to bridge you until the migration (to avoid being stuck with long commitments you won’t use). SAP often provides conversion programs – e.g. converting unused traditional licenses into cloud credits – which you should leverage. Essentially, don’t renew a large chunk of old licenses for 5 years if you aim to be on a new platform in 2 years. Align renewal scope and duration with your transition timeline, and negotiate migration-friendly terms (like credits or flexible cancellation if you move to SAP’s cloud offerings).

Q7: Should we consider third-party support instead of renewing SAP support?
A: It’s an option worth evaluating for certain scenarios. Third-party support can cut annual support costs by 50% or more, which is attractive if budget reduction is a priority. It’s best suited for stable, mature SAP systems that you don’t plan to upgrade (since third-party providers cannot deliver SAP’s new updates). If you go this route, you would not renew SAP’s maintenance for those systems, and instead pay a third-party for support services. The upside is big savings; the downsides include losing direct SAP support, no access to new patches/upgrades, and potential compliance considerations if you later return to SAP support (SAP might charge reinstatement fees). Many CIOs use a quote from third-party support as leverage in negotiations with SAP – even if you don’t ultimately switch, showing SAP you have that alternative can help secure a better discount on SAP’s maintenance.

Q8: We’re on SAP Enterprise Support (22% fee). Can we switch to Standard Support (19%) to save money?
A: Possibly, yes. SAP offers different support tiers. Standard Support costs less (usually 19% of license price) but comes with slightly lower service levels than Enterprise Support. If your organization hasn’t heavily utilized the extra benefits of Enterprise Support (like SAP’s enhanced advisory services or high-touch incident support), you could negotiate to downgrade to Standard Support at renewal. This would immediately reduce your annual support costs by a few percentage points of your maintenance base. Check your current contract and discuss with SAP – they may agree to the change, especially if you position it as an alternative to considering third-party support.

Q9: What are the risks of not renewing certain licenses or support?
A: The primary risk is that if you later need what you dropped, you’ll have to re-buy it, potentially at full cost. For perpetual licenses, if you cancel support, you still can legally use the software in its current state, but you lose access to upgrades, fixes, and SAP help – and rejoining support later can be expensive (SAP might require back payments). If you drop a cloud subscription, you lose the functionality entirely after contract end, which could disrupt any dependent processes. So, only drop licenses you are confident are not required. Mitigate risks by thoroughly validating with business owners that a license or module is truly unused and not planned for use. It’s also wise to maintain an open dialogue with SAP – sometimes you can negotiate a grace period or an ability to reinstate a license later at a similar discount if circumstances change. But in general, once a license or support is gone, assume it’s gone, and proceed with that understanding.

Q10: How can we negotiate better pricing or terms on the licenses we do renew?
A: Use every lever at your disposal. First, arm yourself with market knowledge – know typical discount ranges and what other enterprises pay (if possible). Start discussions well before the deadline so you aren’t cornered. Then, highlight your total SAP investment and future plans: if SAP sees you as a long-term customer or one that might expand, they have incentive to keep you happy. Bundle your requests: for instance, ask for a discount and a cap on annual increases and maybe some free training days – you won’t get everything, but it gives SAP multiple ways to satisfy you. Also consider timing your negotiations around SAP’s quarter or year-end, when they are keen to close deals (they may offer last-minute incentives). And importantly, be willing to walk away from pieces of the deal if needed – for example, be ready to drop a non-critical product or use third-party support if SAP’s offer isn’t acceptable. Demonstrating this resolve often encourages SAP to come back with a better offer. In short, preparation, data, and a bit of strategic bluff (backed by real alternatives) can lead to more favorable renewal pricing and terms.

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