A Comprehensive Guide for Estimating your Budget to Choose The Perfect SAP Service for Your Business
SAP has very well adapted to the changing market needs of enterprises and conceived comprehensive software suites. The differential pricing and license models offered by SAP have to be taken into consideration while picking the best solution for your business. I will be highlighting some of the popular business solutions offered by SAP along with their pricing model. Also, you will find a list of important things to be considered while planning for such implementations in your business.
Since its inception on 6th July 1992, SAP has been instrumental in transforming the enterprise resource planning scenario. Starting with ready-to-deploy applications and moving on to the SAP cloud solutions, it has proved to be an all-inclusive package for enterprises.
SAP Pricing Model – The Basics
SAP has a flexible pricing model that justifies the capital and operating structure needs of small and medium businesses. The “run your business” products have gained popularity in recent times. For example, SAP Business Suite is an integrated and diverse set of software modules that can suit businesses of any size.
SAP solutions have a base ERP foundation that can be extended through various application extensions depending on the industry vertical. The third-party products are considered as SAP applications with different maintenance and support modules. Named user licenses and Package licenses constitute an SAP license. Therefore, the SAP pricing model is built around per application licensing costs and per-user licensing costs.
Before we go any further to list out the factors involved in deciding your budget for SAP solutions, I would like to explain the pricing models of two popular SAP solutions – SAP Business Suite and SAP Cloud Platform.
SAP Business Suite
The installation of this suite requires two licenses that are offered separately. The license varies according to the modules installed and the type of hardware the company is currently using. Apart from this, the support and maintenance services are charged a recurring fee.
SAP Cloud Platform
It uses a consumption-based commercial model based on the Cloud Platform Enterprise Agreement (CPEA). Customers can purchase the so-called Cloud Credits for availing any of the cloud services offered by SAP.
This pricing model gives you access to all available SAP Cloud Platform services via one SKU (Stock Keeping Unit). Also, you get a transparent overview of service usage and can add more services as per the requirements.
SAP S/4 HANA is a popular cloud platform that is built on SAP’s proprietary operational database system and in-memory computing platform.
There is also a subscription-based pricing model followed by SAP that charges a fixed price for a given cloud service and for a stipulated time duration.
I am summarizing the differences between these two models in the table below:
|Contract Period||Consumption period (12+ months)||Subscription period (can be 12 months or more)|
|Available SAP Cloud Platform services||Use all eligible SAP Cloud Platform services. No additional contract is required for changes in usage.||Use the services that are specified in your contract. Additional services require contract modifications.|
|Price / Cost||You prepay for cloud credits, which are then balanced against the consumption of services.||The cost is fixed for the duration of the subscription period, irrespective of consumption.|
|Payment||In advance, and again when cloud credits are used up (can be multiple times during consumption period)||In advance, at the start of the contract period.|
|Renewal||At the end of the consumption period.||At the end of the subscription period.|
SAP ERP Pricing for the Digital Age
On April 10, 2018, SAP announced a new outcome-based ERP pricing model that is more transparent and predictable.
The new pricing approach focuses on business outcomes and provides an objective measure for the use of the Digital Core (i.e., SAP ERP, SAP S/4HANA, and SAP S/4HANA Cloud)
Planning the Best Budget for SAP Implementation
As a business owner, allocating a financial budget that works in your favor is a matter that has to be given considerable thought. There are multiple factors involved while implementing such ERP solutions. It is immaterial whether you are a small or medium-sized business. What ultimately matters is how you are able to strike a balance between the licensing (and other) costs and your budget, and still fetch a good Return on Investment (ROI) from it.
So, let’s take a look at what these cost estimation factors are –
You might have expected that this will be the first one on my list.
Well, it should be!
As I have mentioned earlier, SAP has tailored its offerings to suit every size of business. Business size is mainly determined on the basis of employee strength. For the sake of this article, let’s consider the example of SAP Business All-in-One. It is a packaged set of software modules pre-configured for small and medium-sized businesses with about 450 employees. There are two types of licenses offered – professional and limited. The professional license is meant for C-level employees who can access each of the business functions. On the contrary, the limited license is for the employees of a specific department within an organization. And these licenses are permanent in nature i.e. they don’t need to be renewed periodically.
The functional requirement means the requirements specific to the nature of your business. While looking for ERP solutions, you should list down your needs and then filter out the solutions available in the market. It should not be the other way round!
This approach will help you to restrict the overall budget of implementation while fulfilling your genuine business needs.
SAP solutions must be chosen based on the flexibility that an organization desires from them. There might be certain modules in a software package that are not required at the moment. So, they don’t need to be selected and the package can be customized to bring down the licensing costs.
However, not all SAP offerings are flexible. Take SAP B1 for example. It does not give users any choice to drop out any of the modules, except the CRM one.
Thus, flexibility is an important factor that constitutes your budget allocation process.
In today’s age of cloud computing, SAP is leading the competition when it comes to rapid deployment of ERP platforms on the cloud.
Technically speaking, SAP offers its users three options for deployment: On-premise, Cloud, and Hybrid.
For explaining these modes of deployment, let’s consider SAP HANA. This service can be deployed in all three options.
Let’s discuss each of them in brief:
Businesses can select the necessary components from SAP-certified hardware partners and also choose the best pre-configured HANA appliance. Moreover, SAP HANA Tailored Data Center Integration (TDI) gives you maximum control over your business processes.
Cloud deployment is a perfect fit for the Bring Your Own License service model. It can also be deployed as a fully Managed Service (both public and private cloud) and in hybrid scenarios. Some of the supported platforms include AWS, Microsoft Azure, IBM Cloud, etc.
Hybrid mode offers the utmost flexibility in terms of implementation. It facilitates on-premise, cloud, and third-party deployment scenarios. And each of these platforms can be integrated with each other for a seamless experience. The workloads can be adjusted with the fluctuating business costs and requirements.
Now, if we compare these then each option has its own advantage for the end user. You should pick the option wisely while focussing on the scalability of your business.
A Final Word
With increasing operational costs, businesses should think twice before opting for an ERP solution. SAP consultancy companies can help enterprises to weigh the pros and cons of such solutions, and draw a strategic blueprint for attaining success in the long run.