Seven year TCO modelling for RISE with SAP.

A RISE with SAP business case decided on a three year cost view is a business case that hides the part of the curve where the contract actually costs money. The first three years of any RISE deployment are subsidised by migration credits, ramp pricing, and the negotiated entry rate. The cost curve bends upward in years four through seven, driven by FUE drift, BTP overage, hyperscaler markup recovery, support and maintenance escalation, and the renewal calculation that the buyer has not yet seen. The seven year TCO model is the only honest comparison surface for a RISE decision, and it is the document the firm builds first in every engagement. This article documents the framework, the six cost categories, the benchmark sources, and the comparisons the model has to support.

The three year TCO view is the view SAP wants you to use

Every RISE with SAP business case the firm has seen, where the buyer side analysis stops at year three, has overstated the savings against brownfield S/4HANA by between forty and seventy percent. The reason is structural. The RISE contract is designed to put the entry cost at the front and the recovery cost at the back. Years one and two carry migration credits, FUE ramp pricing, and BTP credit allocations that consistently exceed actual consumption. Years three through five carry the bulk of the support and maintenance escalation, the FUE recategorisation, and the hyperscaler markup rebase. Years six and seven carry the renewal calculation that resets the contract baseline at a higher rate.

The account team presentation will frame the savings as the year one or year three comparison. The buyer side discipline is to refuse that frame. The seven year horizon is the right horizon because the RISE renewal cycle runs on five to seven years, and the cost curve flattens beyond year seven only because the renewal negotiation rather than the original contract becomes the dominant cost driver from that point. The seven year horizon also matches the depreciation horizon for the on premise comparison, which makes the brownfield S/4HANA option directly comparable without a horizon mismatch that distorts the numbers.

Across the firm engagement base, the seven year TCO model reframes the savings argument in every RISE conversation. In manufacturing, a deal that the SAP account team framed as a twenty four percent saving over three years emerged from the seven year model as a nine percent premium against brownfield. In financial services, a deal that the account team framed as a fifteen percent saving across the full bundle showed an eighteen percent premium once the BTP overage and the renewal calculation were included. The pattern is not coincidence. It is the structure of the RISE contract surfacing in the numbers.

The six cost categories the model has to capture

The seven year TCO model the firm builds for every client has six cost categories. Each category is sourced from independent benchmarks rather than from account team estimates. The categories are sized to align with the contract structure SAP uses, which makes the comparison auditable when SAP pushes back on the buyer side numbers.

The first category is compute and storage. This line is sized against the hyperscaler reserved capacity benchmarks for the named workload, with a three year and a five year reserved tier modelled separately. The bundled RISE hyperscaler price is compared to the open market reserved capacity rate, and the markup is documented as a separate line so the negotiation can target the markup directly. The second category is FUE entitlement. This line is sized against the role mapped user count, with separate bands for GA, Advanced, Core, and Self Service users, and a seven year drift schedule that captures both growth and recategorisation. The buyer side baseline routinely produces a fifteen to twenty five percent reduction against the SAP proposed FUE allocation.

The third category is application support. This line is sized against the existing SAP maintenance baseline for the brownfield case, and against the included RISE support coverage for the cloud case. The delta is documented so the negotiation can target the support coverage scope rather than the headline support price. The fourth category is BTP credit consumption. This line is sized against the funded integration portfolio rather than the maximum credible roadmap, with a separate model for the overage rate and the unused credit recovery mechanism. The fifth category is migration cost. This line is sized against the SI bid responses for the conversion approach selected, with a separate line for change management, training, and parallel run cost. The sixth category is exit cost. This line is sized against the proposed contract language for transition assistance, data extraction, and exit credits, with a present value calculation that captures the optional cost of leaving the contract early.

Independent benchmarks are the difference between a model and a narrative

A TCO model that uses account team supplied benchmarks is not a TCO model, it is a recitation of the SAP narrative in spreadsheet form. The firm has reviewed dozens of buyer side TCO models built inside client organisations that arrived at savings figures consistent with the SAP proposal because the model used the SAP supplied baselines for compute, FUE, BTP, and support. Each of those models was rebuilt on independent benchmarks during the engagement, and each produced a different answer.

The compute benchmark is sourced from the open hyperscaler price lists, with a three year and a five year reserved tier captured separately. AWS, Azure, and GCP all publish reserved capacity pricing for the workload sizes that match a typical SAP deployment, and the spread between the bundled RISE hyperscaler price and the open market rate is between eighteen and thirty two percent across the firm engagement base. The FUE benchmark is sourced from the firm benchmark library, which spans more than five hundred RISE deals and captures the actual closing band allocation against the role mapped user count. The benchmark is updated each quarter, and the seven year drift schedule is sourced from the post signature engagement work the firm has done across the same client base.

The BTP benchmark is sourced from the funded integration portfolio rather than from the SAP proposed credit allocation. The overage rate benchmark is sourced from the contract language at closing, with a market spread captured across the firm engagement base. The support benchmark is sourced from the existing SAP maintenance contracts and the published RISE support inclusions, with a delta calculation that captures both the in scope work and the out of scope work that will be billed separately. The migration benchmark is sourced from the SI bid responses or the internal staffing plan, with a separate line for the parallel run cost that most SAP supplied migration models omit. The exit benchmark is sourced from the proposed contract language, with a present value calculation that captures the optional cost of leaving the contract early at any point across the seven year term.

The comparison surfaces have to be defined before the model is built

A TCO model that compares RISE with SAP against an undefined alternative is a model that cannot resolve the decision. The firm defines the comparison surfaces before the model is built, with three options sized for direct comparison. The three options are RISE with SAP Cloud Private Edition, brownfield S/4HANA conversion on the buyer hyperscaler of choice, and a hybrid model with the core S/4HANA system on brownfield and selected modules in RISE.

The RISE option is modelled against the SAP proposal, with the bundled hyperscaler, the proposed FUE allocation, the proposed BTP credit volume, and the proposed support coverage. The brownfield option is modelled against the on premise S/4HANA conversion, with the buyer hyperscaler choice, the existing FUE or named user licence model, the existing BTP entitlement, and the existing SAP maintenance contract. The hybrid option is modelled against the partial RISE deployment, with the core S/4HANA on brownfield and the named modules in RISE, with separate FUE bands and BTP credits for each side of the boundary.

The three options share a common horizon, a common workload definition, a common user count baseline, and a common growth schedule. This is what makes the comparison auditable. The numbers shift when the options are right sized to a comparable scope. Across the firm engagement base, the seven year TCO comparison resolves in favour of brownfield in approximately thirty five percent of deals, in favour of RISE in approximately thirty percent of deals, and in favour of a hybrid model in approximately thirty five percent of deals. The decision turns on the workload composition, the user role mix, the BTP roadmap, and the hyperscaler choice, not on the headline price the account team has presented.

Sensitivity analysis is where the model earns its keep

A point estimate seven year TCO is a useful artefact for the business case. A sensitivity analysis is what makes the model usable for the negotiation. Every assumption inside the model has a range, and the range produces a band of outcomes that the negotiation has to address. The sensitivity work is the difference between a model that tells the CFO what the answer is and a model that tells the CFO what the answer depends on.

The sensitivity work the firm builds has six dimensions. User growth, modelled at zero, three, five, and eight percent annual growth across the seven year horizon. FUE recategorisation, modelled at zero, five, and ten percent annual upward drift inside the bands. BTP consumption, modelled at the funded portfolio, the funded portfolio plus thirty percent, and the funded portfolio plus seventy percent. Hyperscaler market rate, modelled against current rates, current rates plus ten percent, and current rates minus ten percent across the term. Support coverage scope, modelled at the in scope baseline, the in scope baseline plus ten percent out of scope, and the in scope baseline plus twenty five percent out of scope. Exit timing, modelled at year three, year five, and year seven exit, with the corresponding exit cost recovery.

The sensitivity bands across these six dimensions produce a range of outcomes that typically spans plus or minus eighteen to twenty four percent against the point estimate. The range is the negotiation surface. Each band corresponds to a contract surface that the buyer side leads can negotiate, and the negotiation work targets the bands directly. A wide FUE recategorisation band points the negotiation at the recategorisation clause. A wide BTP consumption band points the negotiation at the overage rate. A wide exit timing band points the negotiation at the exit credits and the transition assistance. The sensitivity analysis is the bridge between the model and the contract.

The model has to survive a board level conversation

The seven year TCO model that does not survive the boardroom conversation is a model that will not get signed off. The firm structures every model for the boardroom presentation, with a one page summary, a one page comparison table, and a one page sensitivity band, supported by the full working model in the back. The board level conversation is the conversation where the deal is approved or sent back, and the model has to carry the weight of that conversation without further explanation.

The one page summary captures the three options, the seven year total, the year by year curve, and the sensitivity band around each option. The one page comparison table captures the six cost categories, with the dollar amount for each category for each option, and the delta against the SAP proposed figure. The one page sensitivity band captures the high, low, and central case for each option, with the assumption that drives each band documented in the footnote. The full working model captures the assumption library, the benchmark sources, the calculation logic, and the audit trail that supports each line.

Across the firm engagement base, the boardroom version of the model has had to survive challenges from the CFO, the audit committee, the SAP account executive in joint session, the SI partner, and the internal finance team. Each of these stakeholders has a different question, and the model has to answer each question without a parallel document. The discipline of building the model to survive the board conversation is the discipline that makes the model usable in the negotiation, because the SAP account team will not sign concessions against a number that the buyer side leads cannot defend at the board table.

The model is updated until signature, not built once

A seven year TCO model that is built once and left static is a model that will be out of date by the second proposal revision. The firm updates the model at every negotiation round, with the latest SAP proposal, the latest hyperscaler quote, the latest SI bid, and the latest internal user growth forecast. The model is the artefact that travels with the negotiation, and the version control is part of the discipline.

The update cadence runs through the negotiation. After the first proposal, the model is rebuilt against the SAP numbers and the independent benchmarks, with the gap documented as the opening counter position. After each proposal revision, the model is rerun with the new numbers, with the cumulative compression documented against the first proposal. After the final round, the model is locked at signature, with a separate post signature optimisation model that captures the operating reality once the contract is in production.

The discipline of seven year TCO modelling is the discipline of working the numbers across the full term, against independent benchmarks, with the comparison options sized for direct contrast, with sensitivity bands that point the negotiation at the contract surfaces, and with a boardroom version that carries the conversation when the SAP account team is in the room. The model is the foundation of every RISE negotiation the firm runs. The negotiation that begins with the SAP supplied business case is a negotiation that closes at the SAP supplied price. The negotiation that begins with the independent seven year TCO model is a negotiation that closes at the buyer side number, which on average sits sixty eight percent below the first proposal across the engagement base. The model is the negotiation.