4    Costs: How Much Will SAP S/4HANA Cloud Cost?

SAP S/4HANA Cloud is focused on driving maximum value to the market via a cost-competitive SaaS product. With quarterly innovations constantly improving the product, SAP S/4HANA Cloud is designed to drive one’s business towards a brighter future.

—Melissa Di Donato, chief revenue officer, SAP S/4HANA Cloud

In the previous chapter, we broke down the fundamental components and steps involved in how to set up SAP S/4HANA Cloud at a high level. Understanding the key factors involved in how to implement SAP S/4HANA Cloud provides a foundation for understanding what implementation costs.

In this chapter, we will explore key factors that impact the important questions of cost when implementing SAP S/4HANA Cloud. Key components such as service subscription, functionality, fit-to-standard mapping, and long-term support all drive price. There are methods to trim and even eliminate cost components within an SAP S/4HANA Cloud implementation, but it’s important to understand how cost saving decisions impact an SAP S/4HANA Cloud deployment. These factors and corresponding issues will be explored in this chapter.

While weighing direct costs, decision makers would also be advised to look at the financial and operational benefits of the SAP S/4HANA Cloud deployment. If the system can be deployed faster (in a matter of weeks instead of months/quarters), does not require own servers to run on, gets adopted faster due to the user-friendly interface, and upgraded on a quarterly cycle with no disruption to business, all these are advantages that should be considered along with calculations of the up-front deployment cost.

Behind the Curtain: “It Depends”

Questions related to cost are common. As with many consultant responses, the answer to how much SAP S/4HANA Cloud will cost is “it depends.” Various differentiating factors impact the best-guess cost. The purpose of this chapter is not to specifically dial in the exact cost for implementing SAP S/4HANA Cloud, but to provide a high-level estimate of the following:

  • What factors drive pricing?
  • What would a reasonable estimated cost be, based on those factors?
  • What are the long-term factors that define an organization’s SAP S/4HANA Cloud TCO?

4.1    Subscription Price Structure

Traditional SAP ERP licensing costs were based on metrics primarily driven by the number of users or other major business metrics, such as revenue throughput. With a foundation or starter base cost dependent upon many factors, customers would sometimes find themselves in a morass of SAP SKUs, deciphering foreign bills of materials associated with SAP products they might not even have understood. Also, SAP presents its SAP software pricing via a published list (similar to MSRP [Manufacturer’s Suggested Retail Pricing]). Often, the actual price that a customer purchases SAP software is discounted from the published list. This SAP pricing construct has created confusion and sometimes bred distrust.

Section Disclaimer

SAP controls all SAP software pricing and timing and the specifics of its revenue model. SAP can change licensing pricing and its model at any time. This section is meant to provide a clear picture of how SAP has constructed its SAP S/4HANA Cloud pricing model as of the time of writing, but any details herein are subject to change.

The following sections highlight several of the primary decision-making factors involved in the cost of implementing and supporting SAP S/4HANA Cloud. Although implementation and software costs are primary factors, post-go-live cost impact is equally important to consider.

4.1.1    Simplifying the SAP S/4HANA Cloud Licensing Model

To simplify the licensing costs specifically for SAP S/4HANA Cloud, SAP employed the industry-standard SaaS model of cost per user, per month. This cloud pricing strategy reduces the customer’s pricing confusion and provides a clear pricing definition.

However, several nuances of SAP S/4HANA Cloud subscription remain. The following are several key factors involved in SAP S/4HANA Cloud pricing:

4.1.2    Current Pricing

If a company wants to implement SAP S/4HANA Cloud, the annual cost would be calculated using the number of users, giving the cost of a license per user, per month. The license cost for SAP S/4HANA Cloud per month or per year would then be calculated using that number along with the cost of any additional add-ons.

The cost might be more than that for QuickBooks, but this it pays for a robust wall-to-wall ERP solution, enabling organizations to drive business value from core finance to sales and logistics to manufacturing. Independent of two-tiered models (i.e., SAP S/4HANA and SAP S/4HANA Cloud) or single ERP instances (i.e., only SAP S/4HANA), the SAP S/4HANA licensing pricing shouldn’t be an issue.