SAP Renewal Optimization
Introduction: Why SAP Renewal Optimization Matters in 2025
SAP enterprise software is mission-critical but notoriously expensive. As maintenance fees climb and budgets tighten, CIOs and CFOs are scrutinizing SAP contract renewals for cost-saving opportunities.
One major lever is reducing SAP shelfware – paid licenses that sit idle or are underutilized. Studies show that 15–30% of SAP licenses in a typical company are shelfware.
Right-sizing your license portfolio and reducing this waste at renewal can significantly optimize SAP license renewal costs.
In 2025, with SAP pushing cloud migrations and new licensing models, it’s more important than ever to reclaim value from what you’ve already purchased.
By taking a proactive, data-driven approach, you can trim the fat from your SAP estate without compromising operations or compliance. Read our overview for SAP Contract Renewal & Optimization Strategies.
Assessing Current SAP License Utilization
The first step is to conduct a thorough SAP license utilization analysis. Use SAP’s own measurement tools – the System Measurement tool (USMM) in each system and the License Administration Workbench (LAW) – to gather accurate usage data.
These tools show how many named users of each type are actually active and measure engine usage (e.g., number of invoices processed vs. licensed).
The analysis often uncovers duplicate, inactive, or over-assigned user licenses.
For instance, you might find hundreds of Professional User licenses assigned, but only a fraction of those users logged in during the past year.
Augment SAP’s data with third-party Software Asset Management tools if available, as they can flag situations like one person holding multiple accounts or users assigned to higher license levels than their activity warrants.
Establishing this utilization baseline provides clear targets for license right-sizing and eliminating shelfware. It also reveals your effective license compliance position going into renewal – showing any areas of under-licensing to fix and over-licensing to cut.
Shelfware Reduction Strategies at Renewal
SAP shelfware refers to any licenses – whether user licenses or entire modules – that your organization purchased but isn’t actively using.
Common causes include overestimation of user counts, business changes that left some modules unused, or software purchased in bundles that were never implemented.
Software is a silent drain on budgets because SAP still charges annual maintenance (around 20% of the license price) on all active licenses, used or not. Fortunately, your contract renewal is a prime chance for SAP shelfware reduction.
Key strategies include:
- Terminate Unused Licenses: If analysis shows certain licenses or modules are completely unused, plan to drop them from your support agreement at renewal. Be sure to give SAP the required notice to remove these from maintenance. Make sure they are genuinely not needed (to avoid compliance issues), but any license delivering zero value should be eliminated. Cutting shelfware licenses immediately stops the ongoing maintenance bleed for those items.
- Negotiate Shelfware Credits/Swaps: SAP won’t refund unused licenses, but you can request to convert them into credit for new licenses or services. For example, you might trade 100 unused CRM user licenses for credit toward a new analytics module your business needs. SAP sometimes offers conversion programs (especially if migrating to S/4HANA or cloud solutions), but even if not advertised, bring it up. Repurposing shelfware in this way turns a wasted investment into a useful expenditure.
- Convert to Needed Licenses: In some cases, shelfware is due to misallocation – you have excess in one area but shortages in another. If, say, you have 50 unused HR module licenses but need more for SAP CRM, ask SAP to reallocate that entitlement. They may let you swap or “transplant” license counts from an unused product to one in higher demand as part of the renewal negotiation.
The key is shining a light on shelfware well before renewal talks. SAP reps often prefer “like-for-like” renewals (simply extending the status quo), but with hard data, you can push to optimize the SAP contract by shedding or repurposing what you don’t use.
Read how to use third-party support as leverage, Switching to SAP Third-Party Support: How to Negotiate Your Exit from SAP Maintenance.
License Right-Sizing: Reclassifying User Types
Not all SAP users need the same level of access, so why pay for the highest tier if they don’t use it? SAP offers multiple named user categories, and license right-sizing means ensuring each user has the appropriate (cheapest possible) license type for their actual usage.
The main user license types are:
- Professional User: The most powerful (and expensive) SAP user license, granting full access across modules. Intended for power users, developers, and administrators who require broad capabilities.
- Limited Professional User: A mid-tier license with restricted scope (specific modules or read-only in some areas), costing significantly less than a Professional. Suitable for staff who perform defined tasks in SAP without full system access.
- Employee Self-Service (ESS) User: A low-cost license for very limited usage, such as entering time/expenses or viewing personal data. Ideal for occasional or casual SAP users.
SAP user license reclassification is the process of downgrading or reassigning users to the correct category.
For example, if a user only runs basic reports or enters their own HR data, they could be downgraded from Professional to ESS without impacting their work. By reclassifying heavy versus light users into proper tiers, companies avoid paying Professional prices for non-professional usage.
Execute this by analyzing user activity logs and last login data: any user with minimal transactions or only self-service activities is a downgrade candidate. During renewal negotiations, present SAP with a plan (backed by usage data) to swap a certain number of Professional licenses for Limited Professional or ESS licenses.
This type of reclassification can yield significant savings in both licensing and maintenance costs. It’s also a strong negotiation tactic – demonstrating that you deeply understand your usage and will not overpay for oversized licenses.
Leveraging New SAP Licensing Models for Optimization
SAP’s licensing landscape is changing, and renewal time is a chance to capitalize on newer models. One major development is SAP’s move toward digital access licensing for indirect use.
Traditionally, suppose third-party systems or external users accessed SAP data indirectly. In that case, you might have allocated extra named user licenses to cover that (leading to shelfware accounts created solely for integration purposes).
With digital access, you license certain document types (e.g., Sales Orders, Invoices) generated by indirect activity instead of licensing each external user.
Optimizing your approach to indirect use can cut out unnecessary named users – for example, eliminating generic interface accounts if a document license can cover those interactions.
Be sure to analyze your indirect usage and discuss SAP’s digital access optimization options at renewal. Negotiate for reasonable document license bundles or an indirect usage conversion deal if switching to digital access, so you minimize any cost impact while staying compliant.
Another opportunity comes if you’re planning the jump to S/4HANA. SAP’s S/4HANA licensing often uses a unified metric like Full User Equivalents (FUE) that consolidates user types and simplifies licensing.
Moving to S/4HANA or signing up for RISE with SAP (SAP’s cloud subscription program) at renewal can let you reset your entitlements and eliminate legacy shelfware.
Essentially, you convert your old licenses into the new model and only pay for what you need going forward. This is a chance to retire entire unused modules rather than carrying them into the new contract.
However, ensure SAP provides credit for your existing investments when converting to a new model – you’ve already paid for those licenses. That value should offset the cost of the transition.
Leverage SAP’s eagerness to move customers to S/4HANA by negotiating incentives like free conversion ratios, bundle discounts, or included services as part of the deal.
By embracing new licensing models during your renewal, you modernize your SAP environment while shedding inefficiencies that used to inflate costs.
Negotiating SAP Contract Renewal for Cost Savings
Approach SAP renewal discussions with a clear strategy and supporting data. It’s important to convey that you are willing to take alternative steps if needed to achieve savings. Begin by quantifying your shelfware and right-sizing findings: for example, “We have identified $X in unused licenses to remove or repurpose.”
Use this analysis to justify a lower maintenance spend in the future.
The following negotiation points and SAP contract renewal optimization tactics can drive cost savings:
- Maintenance Cost Reduction: If you’ve been paying maintenance on a bloated license count, ask for a maintenance base reduction proportional to the shelfware you’re eliminating. SAP may resist directly cutting fees, but demonstrating that a significant portion of your maintenance spend currently covers zero-use licenses puts pressure on them to offer a concession or credit.
- True-Up and True-Down Flexibility: Negotiate a customer-friendly SAP true-up strategy. Secure the right to buy additional licenses later at the same discount rate if usage grows (so you don’t over-buy now). Also push for the ability to true-down (reduce license counts or fees) at certain intervals. While SAP’s standard policy forbids mid-term decreases, some savvy customers have managed to get true-down clauses in large agreements, allowing them to adjust costs if their user count drops.
- License Swap Rights: Insist on flexibility to reallocate or swap license types as your organization evolves. Rather than being stuck with SAP’s “like-for-like” renewal (the same mix of licenses perpetually), negotiate rights to convert some licenses from one type to another or even to different SAP products. This ensures you can continuously optimize license assignments without waiting years for the next contract cycle.
- Indirect Use Safeguards: Address indirect access explicitly so you don’t get blindsided by hidden usage fees. If you haven’t adopted SAP’s digital access model yet, negotiate clarity or caps on any indirect usage charges in the agreement. If you are moving to digital access, ensure the contract defines how document usage will be counted and includes a grace period or audit limitations – this keeps you safe on SAP license compliance at renewal and beyond.
- No-Penalty Shelfware Removal: Put in writing that you will drop certain license quantities at renewal with no penalties or “termination fees.” SAP often initially insists you maintain the same license volume or spend the equivalent budget elsewhere to compensate for reductions. Push back on those terms – if you’re continuing to pay SAP for what you do use, you shouldn’t be penalized for discarding shelfware. The end state should be a lean license portfolio aligned to actual needs, without extra charges for rightsizing.
Throughout these negotiations, maintain executive support on your side. SAP sales teams may escalate internally, so having your CFO or CIO reinforce the cost-optimization mandate will strengthen your position.
Be prepared with alternatives (like third-party support or delaying certain projects) to show SAP you have options. In the end, a data-driven, assertive approach to renewal will reduce your SAP run-rate costs while keeping you in compliance.
SAP Support Renewal vs Third-Party Support vs RISE Exit
Renewing your SAP contract on SAP’s terms is not the only path. Some organizations save dramatically by changing how they source support or by transforming their SAP licensing model.
Below is a comparison of continuing with SAP’s standard support, moving to a third-party support provider, or exiting the traditional model via RISE with SAP (a cloud subscription solution):
| Option | Pros | Cons |
|---|---|---|
| Renew SAP Support (Status Quo) | – Direct support and regular updates from SAP. – Guaranteed access to patches, legal changes, and latest releases. – Maintains full compliance and a smooth relationship with SAP. | – Highest cost (full SAP maintenance fees on all licenses). – Paying for shelfware licenses you don’t actually use. – Little flexibility; SAP often locks you into existing license counts. |
| Third-Party Support (Non-SAP) | – Immediate maintenance cost reduction (often ~50% savings). – Support can be more personalized for your legacy SAP systems. – Can extend the life of stable systems without costly upgrades. | – No access to new SAP updates or innovations (you’re frozen on current versions). – Potential fees or complexities if you return to SAP support later for an upgrade. – Perceived risk if SAP changes policies for customers off its support. |
| RISE with SAP (Cloud Subscription) | – Transitions to a subscription model (includes support and cloud infra). – Opportunity to swap and right-size licenses during migration (shed the shelfware in your contract). – Modernizes your ERP to S/4HANA with SAP guiding the process. | – Can be as expensive as traditional licensing if not negotiated well. – Requires a migration project and cloud readiness (not just a commercial change). – Long-term lock-in with SAP (less flexibility to switch away once on RISE). |
Each option has trade-offs. Third-party support is attractive if your SAP environment is stable and you need immediate budget relief – but plan how you’ll handle future upgrades since you won’t get new patches from SAP during the off-support period.
RISE with SAP is essentially an exit from the old on-premise licensing model, letting you renegotiate from scratch and potentially eliminate shelfware. Still, you must be prepared for the S/4HANA migration and new terms that come with it.
Some companies even pursue a hybrid approach (for example, keeping critical systems on SAP support while moving less critical ones to third-party support) to balance risk and savings.
The right choice depends on your business roadmap, risk tolerance, and leverage. The important thing is to evaluate these alternatives instead of assuming you must accept SAP’s first renewal offer.
Step-by-Step SAP Exit Strategy Checklist
If you decide to pivot away from SAP’s default renewal path – whether by dropping unused licenses, switching to third-party support, or embarking on a RISE migration – careful planning is essential.
Use this checklist to guide your SAP exit strategy and renewal optimization:
- Assess License Usage and Needs: Inventory all SAP software and run a utilization analysis (LAW/USMM) to pinpoint what’s truly used versus what’s shelfware. Establish the facts about your current usage.
- Define Your Future SAP Roadmap: Determine which SAP systems and modules you plan to keep long-term and which can be retired or replaced. Clarify if you intend to migrate to S/4HANA soon or maintain ECC for several years.
- Identify Cost-Saving Targets: List specific licenses, modules, or support costs to cut. For example, unused user licenses to drop, entire modules to drop from maintenance, or systems to move to third-party support.
- Evaluate Third-Party Support Options: Research reputable third-party support providers and obtain quotes. Ensure they can fully support your SAP version and note any limitations (e.g., no new upgrade patches). This gives you a baseline alternative to compare against SAP’s renewal offer.
- Engage SAP Early: Initiate discussions with SAP well before the renewal deadline. Present your shelfware findings and outline desired changes (license drops, swaps, or a shift to RISE). Signal that you are prepared to consider non-traditional options if SAP doesn’t propose a compelling cost-saving deal.
- Negotiate Contract Terms in Detail: Push for a written agreement on any license reductions, swap credits, or flexible terms (like the right to adjust license counts later). If moving to RISE, negotiate transition terms upfront (credit for unused licenses, protections if returning to on-premise). Likewise, if considering third-party support, understand re-entry terms should you later return to SAP support and try to waive any penalties.
- Secure Executive Buy-In: Keep your C-level executives and legal team in the loop. An SAP exit or major contract change is significant – strong executive backing ensures alignment and clouts you. Leadership support also prepares the organization in case tough stances (like walking away from a deal) are needed.
- Plan the Transition: If changing support or licensing models, map out the timeline and tasks early. For third-party support, schedule the support cutover and knowledge transfer well in advance of your SAP support expiration. For a RISE move, define the migration project phases aligned with contract end dates. Careful planning will prevent any lapse in support or compliance during the switchover.
By following these steps, you can approach renewal with confidence and a clear strategy. The goal is to either secure a much better deal from SAP or confidently execute an alternative strategy that meets your needs at a lower cost.
FAQ: SAP License Optimization at Renewal
Q1: What is SAP shelfware?
A1: SAP licenses that have been paid for but remain unused or underutilized – often 15–30% of a company’s total SAP licenses.
Q2: Can I drop unused SAP licenses at renewal?
A2: Yes. You can request to remove genuinely unused licenses from your maintenance, though SAP may push back. Present clear usage evidence and give proper notice.
Q3: How do I reclassify SAP user licenses to cheaper types?
A3: Run SAP’s usage reports (LAW/USMM) to find light users. Then negotiate with SAP to swap those users’ Professional licenses for lower-cost Limited or ESS licenses.
Q4: Does SAP offer license swap or conversion programs?
A4: Sometimes. SAP may allow converting unused licenses into other products or cloud credits, especially if you’re adopting new SAP solutions. Always ask and negotiate the terms.
Q5: How does digital access licensing impact shelfware?
A5: Digital access (document-based licensing for indirect use) can replace some named user licenses. By licensing documents instead, you can eliminate user accounts that were just used for interfaces.
Q6: When should we start license optimization before renewal?
A6: Start at least 12–18 months before your renewal date. Early analysis, cleanup, and internal alignment give you time to correct issues and strengthen your negotiating position.
Q7: Can I negotiate a true-down clause to reduce licenses later?
A7: It’s difficult but not unheard of. A few customers have negotiated rights to reduce license counts mid-term if usage drops, but SAP generally resists such clauses.
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