Gartner has reported that SAP customers opting for private cloud have seen price increases of 10 percent or more on renewal proposals if they fail to negotiate a renewal price cap in the original deal.

SAP ramped up efforts to move customers to its latest software in the cloud on a subscription model nearly five years ago and has shifted its sales teams’ incentives to encourage sales of SAP Cloud ERP Private subscriptions, but a recent paper from the global IT researchers shows the move has not been without commercial challenges.

Meanwhile, SAP’s on-prem customers can still negotiate discounts, although this is becoming more challenging. Gartner said it expects SAP’s on-premises customers to face annual support price increases for the foreseeable future as the ERP vendor tries to persuade customers to move to the cloud.

In a situation that includes discounts and commercial penalties for cloud and on-prem customers, SAP has created “mixed signals for those considering” the upgrade from legacy ERP platform ECC to the latest S/4HANA solution, either in the cloud or on-prem.

Gartner has also given its strongest indication yet that it believes SAP will extend its support for ECC.

“By 2030, Gartner estimates that more than 40 percent of current SAP ECC6 customers will still use ECC 6 for key business areas, leading SAP to reconsider its maintenance end date and cloud migration strategy,” the paper says.

SAP has long maintained that running S/4HANA in the cloud – particularly the private cloud – is the best way to get its latest technology and so-called innovation, such as its AI agent offering, Joule.

For organisations wanting to keep their ERP system on-prem but upgrade to the latest software, there are limited options, Gartner says.

“Gartner has observed a steady decline in perpetual license discounting and expects this pattern to continue as SAP drives customers toward SAP Cloud ERP Private,” the paper says. “While it is still possible for customers with strong leverage to achieve competitive S/4HANA perpetual license discounting similar to levels previously seen, this will not be the case for all.”

The German software giant has also become less willing to offer price protections, exchange rights, and other terms and conditions that were routinely negotiated in past perpetual license deals, Gartner notes.

“If a customer can obtain compelling discounts now but will be charged a much higher price for any future purchases, this results in S/4HANA perpetual becoming difficult to budget for, plan for, and scale,” the paper adds. “In addition, SAP has introduced annual support increases for ECC 6 and S/4HANA customers since 2021, including a 5 percent increase in 2025. Gartner expects on-premises customers to face annual support price increases every year for the foreseeable future.”

With SAP Cloud ERP Private customers’ renewal proposals also hit with double-digit price increases, Gartner recommends customers “ensure that they negotiate flat subscription fees for the initial agreement period and renewal price caps while leverage is still high.”

Earlier this year, SAP introduced a Cloud ERP Private package to replace a package offered under RISE with SAP, its lift-shift-and-transform migration plan.

At the same time, it introduced a new Full Use Equivalent (FUE) license measure, which differs from on-prem and public cloud metrics. German-speaking user group DSAG argued the changes introduced complexity and threatened to delay projects for customers trying to define the commercial strategy for upgrading and/or moving to the cloud.

SaaS vendors are increasing prices faster than both inflation and the typical growth rate of corporate IT budgets, but Gartner VP analyst Jo Liversidge thinks that canny buyers can reduce their bills by anticipating price hikes and planning to negotiate hard.

Speaking at the analyst firm’s recent Symposium event in Australia, Liversidge said SaaS vendors have hiked prices by between 9 and 25 percent this year. While some price increases reflect exchange rate shifts or a vendor’s desire just to charge more for their wares, many come after SaaS companies change the metrics they use to set prices or repackage licenses in ways that make them more expensive.

“Hidden costs are not new in SaaS – Salesforce customers have dealt with storage costs for years,” Liversidge explained. “But we’re now seeing a proliferation of hidden costs, particularly around generative AI capabilities.”

Another way SaaS vendors increase costs is with “multipliers,” a scheme that includes credits customers can spend on services under their subscription. “Many of these vendors reserve the unilateral right to change that multiplier,” Liversidge said. A service that costs 10 credits can rise to 20 credits overnight, doubling the price. Users then burn through the credits in their subscriptions more quickly than anticipated and soon find themselves paying expensive excess usage fees.

Whatever technique a vendor uses to boost prices, Liversidge says SaaS slingers are increasing costs by considerably more than the 2.8 percent annual increase in corporate IT budgets Gartner detects when surveying its clients.

Liversidge advises fighting back with long-range planning that starts two years before a SaaS subscription renewal. That long horizon gives organisations the time needed to understand the full extent of SaaS use across their organisation, a necessary step because if you have separate licenses for MuleSoft and Slack – both owned by Salesforce – you’re missing the chance to bargain for a single subscription. Reviewing SaaS use can also reveal underused subscriptions, allowing you to see that some users could comfortably shift to a vendor’s lower subscription tiers without that move ending in tears.

Two years is also a good time frame in which to plan a migration, and letting a vendor know you’re considering that option can work wonders.

Long-range planning also leaves time for multiple rounds of negotiations, meaning you have more chances to secure a better deal.

Vendors’ licenses for AI software and services are in a state of “pandemonium,” according to Gartner VP analyst Jo Liversidge.

Speaking at the firm’s Symposium event in Australia, Liversidge said some major vendors are yet to include AI in their contracts – she told attendees AWS only addresses AI in clause 50 of its supplementary T&C documents – or include AI-specific language in linked documents. Buyers will therefore have to sift through many vendor policies and legal docs to understand exactly what they’re buying into.

That matters because vendors differ on matters that expose buyers to risk, such as who is liable if AI systems offer bad advice that a customer relies on to their detriment. Liversidge said contracts she’s reviewed “aren’t clear on this.”

She also noted that Adobe’s AI legalese initially required its customers to assume responsibility for copyright infringements caused by its software and services. Buyer anger saw the company reverse that stance. Liversidge said buyers will have to fight to have vendors do the right thing by users.

“History has shown we have to force the issue,” she told the conference.

Two fields in which she thinks buyers might want to start applying pressure are inclusion of responsible AI principles in contracts – Liversidge thinks only one percent of vendors do this today – and compliance with the ISO 42001 standard on AI management systems.

VMware will lose a significant chunk of business over the next three years, according to Gartner research VP Julia Palmer.

Of course, some organisations have already abandoned VMware or are plotting partial or total migrations. Broadcom acquired the virtualisation business in November 2023 and made sweeping changes that alienated many customers. The biggest concerns have been higher costs driven by a shift from perpetual licenses to subscriptions and the bundling of products into fewer, more expensive SKUs and a reduction in the number of channel partners that are allowed to resell VMware technologies. The new VMware business model favour large organisations, forcing many small- to medium-sized businesses to explore alternatives.

However, the wave of departures that Palmer spoke of today at Gartner’s IT Symposium in Gold Coast, Australia, comes from customers who use VMware technology through hyperscalers, like Amazon Web Services (AWS), as reported by The Register. Soon after its acquisition, Broadcom made it so that hyperscalers are unable to resell VMware subscriptions to customers using hyperscaler cloud services that rely on VMware. Because of this change, 35 percent of VMware workloads will migrate elsewhere by 2028, Palmer predicted, noting that hyperscalers will push their customers to the public cloud.

In a June 2024 blog post, VMware said the changes around selling VMware licenses for hyperscaler cloud environments are about ensuring consistency and driving customer “flexibility and choice.” The move also pushed more customers to buy VMware from Broadcom directly, giving Broadcom a bigger piece of the deal.

During Gartner’s event, Palmer posited that Broadcom’s VMware doesn’t view hyperscalers as strategic partners and vice versa. AWS took issue with Broadcom disallowing AWS and its channel partners to resell VMware Cloud on AWS, telling CRN in May 2024 that it was “disappointed” by the news. Still, hyperscalers, including AWS, have remained interested in doing business with VMware end users “because they know over time they will convert you to ‘proper cloud,'” Palmer said.

Palmer also offered opinions on VMware migrations, which companies have described as being costly and time-consuming, especially for organisations that have limited manpower or are managing other big IT projects. Considering the lack of true VMware competitors, Palmer recommended partial migrations, which she said should take less time (up to a year) than total migrations, (which she pegged as taking at least three years).

“We are all addicted to hypervisors, and that needs to change,” Palmer said.

Despite losing customers, VMware is driving revenue for Broadcom, thanks to the company’s new focus on subscriptions, bundles, and higher prices. In its most recent earnings report, Broadcom reported that infrastructure software revenue, which is mostly driven by VMware, grew 25 percent year over year to $6.6 billion.

All work in IT departments will be done with the help of AI by 2030, according to analyst firm Gartner, which thinks massive job losses won’t result.

Speaking during the keynote address of the firm’s Symposium event in Australia, VP analyst Alicia Mullery said 81 percent of work is currently done by humans acting alone without AI assistance. Five years from now Gartner believes 75 percent of IT work will be human activity augmented by AI, with the remainder performed by bots alone.

Distinguished VP analyst Daryl Plummer said this shift will mean IT departments gain labour capacity and will need to show they deserve to keep it. “You never want to look like you have too many people,” he advised, before suggesting technology leaders consult with peers elsewhere in a business to identify value-adding opportunities IT departments can execute.

Plummer said Gartner doesn’t foresee an “AI jobs bloodbath” in IT or other industries for at least five years, adding that just one percent of job losses today are attributable to AI. He and Mullery did predict a reduction in entry-level jobs, as AI lets senior staff tackle work they would once have assigned to juniors.

The two analysts also forecast that businesses will struggle to implement AI effectively, because the costs of running AI workloads balloon. ERP, Plummer said, has straightforward up-front costs: You pay to license and implement it, then to train people so they can use it.

AI needs that same initial investment but few organisations can keep up with AI vendors’ pace of innovation. Adopting AI therefore creates a requirement for near-constant exploration of use cases and subsequent retraining.

Plummer said orgs that adopt AI should expect to uncover 10 unanticipated ancillary costs, among them the need to acquire new datasets, and the costs of managing multiple models.

The need to use one AI model to check the output of others – a necessary step to verify accuracy – is another cost to consider.

AI’s hidden costs mean Gartner believes 65 percent of CIOs aren’t breaking even on AI investments.

Plummer and Mullery nonetheless suggested IT execs pursue AI, and recommended the big four hyperscalers – AWS, Microsoft, Google and Alibaba – as key suppliers because they are the equivalent of geopolitical superpowers in terms of their ability to marshal resources and talent. They labelled OpenAI, Meta, Anthropic, DeepSeek and XAI “wildcard vendors” and said all are “not enterprise ready.”

Plummer said that OpenAI just hasn’t done the work to create licenses that cautious enterprise buyers need. He said the company has done too little to integrate its offerings with common enterprise software like Microsoft 365, even though that suite’s Copilot AI components rely on OpenAI technology.

The pair also advised IT execs to quickly move past AI-powered chatbots, and instead adopt interactive agents capable of doing things like autonomously conducting negotiations with suppliers.