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In an effort to expedite and simplify adoption of its cloud software, SAP today launched a new licensing policy by which customers can terminate existing on-premise licenses to adopt cloud ones.
In effect, customers can eliminate maintenance payments on the software they’re no longer using, and use that money instead to pay for cloud software.
While each customer scenario will be taken on a case-by-case basis, there aren’t any restrictions on how customers can apply the new policy, says Augusto Abbarchi, SAP’s head of maintenance go-to-market. It is open to any maintenance level or license type, and even potentially to shelfware.
But there is one caveat: The new subscriptions for cloud software, which include SAP’s homegrown software as well as Ariba and SuccessFactors, have to add up to more than the customer is paying in maintenance and support for the eliminated on-premise licenses. (This is SAP’s way of trying to ensure that while maintenance revenue shrinks, cloud revenue balances it out). And the policy is not retroactive.
“We are trying to make it simpler and faster for customers to adopt cloud solutions,” Abbarchi says. “We know our customers have invested heavily in the on-premise platform and are paying a maintenance fee to SAP, and this can prevent a customer from considering the move to the cloud.”
For several months now, SAP has promised that it will simplify its licensing terms. This new policy is a step in that direction, as partial license termination was something SAP has never allowed.
By making this a licensing policy, SAP is demonstrating that it is adapting to the new cloud realities—and doing something that’s not the norm in enterprise software. Oracle does periodically offer similar promotions that enable its existing customers to migrate to its cloud offerings, says Rob Addy, research VP at Gartner. That said, Addy expects Oracle to formalize these in light of SAP’s announcement.
SAP’s Abbarchi calls the policy a “win-win”: SAP expands its cloud footprint and protects its revenue stream, and customers benefit from the reduced total cost of ownership, easier access and less complexity afforded by the cloud.
The policy also allows for more than a one-and-done deal—customers can start eliminating on-premise licenses and buy respective cloud ones in steps according to their own pace and needs. In turn, SAP promised end-to-end support for customers’ systems, regardless of whether the software is on-premise or in the cloud.
The ability to eliminate and launch licenses on an incremental basis means that customers can make the transition at a pace that suits them, thereby lowering the migration risk and helping them make the change, Gartner’s Addy says.
That said, customers looking at this news as a means to lower their overall software spend with SAP are likely to be disappointed.
“We believe that the primary intention behind this move is to help drive SAP cloud service adoption at a net-neutral cost impact to SAP customers, whilst reducing migration risk,” Addy says.
More Resources on SAP Licensing
Download the SAP Licensing Guide here
Read More About SAP Indirect Licensing Costs