Customers Adopt Innovation Faster

Luka Mucic, Member of the Global Managing Board of SAP AG and Head of Global Finance. (Photo: SAP)

SAP’s recently-announced cloud extension model allows customers to reallocate elements of their installed on-premise solutions to the cloud by replacing the corresponding on-premise license and maintenance with a cloud subscription. SAP is now following up by allowing customers to replace their on-premise licenses and maintenance with selected solutions from SAP’s innovative on-premise portfolio. In this exclusive interview with, Luka Mucic, Member of the Global Managing Board of SAP AG and Head of Global Finance, shares what these pioneering changes mean not just for SAP and its customers, but also the entire software industry. How do SAP’s latest licensing and maintenance policy changes impact customers?

Luka Mucic: Both of these programs offer customers increased flexibility and choice. If they want to migrate selected on-premise solutions to the cloud, they now have a more cost-effective, easy path because they can convert their existing on-premise licenses and maintenance to a cloud subscription. Customers can also evolve their on-premise installations by replacing solutions they no longer intend to use with innovations such as SAP HANA or the SAP Mobile Platform.

What inspired SAP to make these licensing and maintenance changes now?

Mucic: We are continually engaged in a valuable dialog with customers and our user groups worldwide. They’ve told us that they love our innovations around Big Data, in-memory computing, mobile, social, and cloud. In fact, they count on our creative power, and are committed to investing in a strategic technology road map with SAP. But they need a streamlined, more affordable path to modernization. With our shared commitment to growth fueled by innovations, it makes sense to offer this unique opportunity to our customers. We’re providing increased flexibility to retire licenses and maintenance for those parts of the SAP technology landscape that customers want to migrate to our innovative solutions.

Next page: Customer scenarios

Can you provide some scenarios of how these new options will play out for customers?

Mucic: Every customer’s situation is unique, from their SAP technology landscape to the road maps that support the realization of their company vision. We’ll work with each customer to help them figure out the best modernization plan, including potential license migrations and relevant solutions for optimal results.

Let me provide an example of how this will work. Suppose a customer in the manufacturing industry has licensed the SAP Business Suite as well as the SAP Manufacturing Integration and Intelligence, SAP Environment, Health, and Safety Management and SAP Credit Management engines, one of which has not been deployed. The customer has also introduced SAP’s on-premise SAP ERP Human Capital Management solution to one of its four divisions. The customer is interested in adopting SuccessFactors Employee Central as a corporate-wide cloud solution for its human resources processes and in using SAP HANA as its database platform of record. Since the investment in the SuccessFactors solution for the entire company will exceed the existing SAP ERP HCM on-premise maintenance investment, the customer can partially terminate its SAP Business Suite on-premise licenses and associated maintenance relating to the usage of SAP ERP HCM upon migration to the SuccessFactors cloud solution. In addition, the customer can partially terminate the unused engine and associated maintenance, if SAP HANA is licensed with new maintenance that at least matches the maintenance that is terminated.

How will you measure the success of these programs?

Mucic: Early feedback indicates that customers, user groups, and industry analysts are very excited about the new opportunities that these announcements offer. We will continue to invite their feedback by working closely with SAP user groups, conducting regular surveys, and engaging in ongoing dialog. We’ll know that we’re successful when customers tell us they’re experiencing greater flexibility and choice, and are adopting innovation faster for greater business outcomes.  We expect to see these programs further contributing to our already strong revenue growth from our innovation portfolio.

Do these changes signal a fundamental shift in business models for every software company?

Mucic: SAP has always built its business model around customer-centricity and innovation. It’s long been the best recipe for sustainable success.  This has not shifted at all. What has changed is our customer’s appetite to adopt hybrid landscapes. Whether cloud or on-premise, customers increasingly want to adopt innovative solutions at a much faster pace with quicker return on investment. We believe that our new Cloud and On-Premise Extension Programs are a natural fit with this trend, and we take pride in pioneering this flexible route to innovation adoption for our customers.