NTT Data Business Solutions, a global consultancy and systems integrator, has committed to buy back legacy and on-prem SAP ERP licenses from customers to ease the cloud migrations many find difficult to justify financially.
The scheme promises to buy back existing perpetual licenses for the legacy ECC platform – support for which runs out in 2027 – and on-prem versions of S/4HANA.
Speaking to The Register at the Japanese-owned SI’s annual conference in London, executive vice president for western Europe and UK MD Justin Brading said NTT would calculate the original value of the licences and offer that as a “trade-in against the new cloud contract and implementation associated with any underpinning [support] agreement.”
While details would vary, and NTT has to “work through the mechanics” with customers, Brading said the aim is to get investment decisions over the line when committing to cloud migration. A number of surveys have shown lower levels of cloud migrations among customers than SAP might have hoped for and it has also struggled to get users to move to S/4HANA, its latest ERP platform.
Some organizations are struggling to get started on cloud migration projects with ERP because senior management only sees the costs, Brading said.
“A modern ERP platform inevitably has to be cloud-based. There are going to be investment costs, but the optics at the moment are not allowing a balanced conversation to be had with boards of companies because they just see that it’s a load of money. We’ve got commercial levers we can pull in terms of acting as the product supply route for SAP, so we can package and format agreements in ways that vendors can’t. Also, we’re the deployment [partner] for programs… so we’ve got all those levers to pull while SAP is desperately eager to be creative and flexible.”
Brading argued the buyback scheme would help businesses realize the value of perpetual licenses. “If you’ve got an asset written off on your balance sheet – perpetual licences normally are – [the buyback] could be potentially very helpful to companies because it’s an injection in their P&L straightaway,” he said.
Deals would be contingent on an NTT Data Business Solutions contract of at least five years and a commitment to move to the cloud with RISE with SAP, the German vendor’s preferred method, in which NTT is a partner.
Customers would be able to use the licenses as their own while the transition takes place, Brading said.
SAP is striving to shift these customers to the cloud as part of its corporate transition to become a SaaS provider. It has its own way of recognizing the value of existing perpetual licenses when encouraging users to move to the cloud and software-as-a-service.
Speaking to The Register, Celine Cazali, SAP chief partner officer, said the company offered a Cloud Extension scheme as part of RISE with SAP.
“I haven’t seen the detail of what NTT is announcing, but it sounds exciting,” she said. “We understand our customers’ budgetary challenges, so hopefully the combination of what NTT is doing and what SAP is doing will help them get on the right journey.”
Separately, SAP is ending a licensing scheme that allowed ECC customers to buy S/4HANA Enterprise Management for ERP customers, a flat fee agreement, said Stephen Jerram, business development solution director at NTT.
“Prior to July this year, as an ECC customer, you could buy a thing called S/4HANA Enterprise Management for ERP customers that gave you digital product rights, and your license estate was state valid. That is no longer an option. SAP no longer supports that: a contract conversion, regardless of your destination, will be required. You need to move into the Full User Equivalent Licence Model, digital access and the S/4 equivalent products, rather than the ERP products.”
However, SAP was scaling back the value customers could accrue in that conversion from their existing licences. “SAP are now reducing the value of your current license estate so it’s now only worth 80 percent rather than the earlier 90 percent of its value when you carry out that conversion,” Jerram said. “And every year that value will diminish by 10 percentage points. Next year will be worth 70 percent. SAP is trying to incentivize customers to make that transition to S/4.”
But the conversion only applies to licences; customers would be able to make the software migration at a time that was right for them.
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