U.S. Manufacturing Company Avoids Costly Shelfware and Secures 35% Savings on RISE with SAP

Client Background: Mixed User Profile in Manufacturing Operations

This U.S. manufacturing company operates a classic dual-user environment: 500 corporate and ERP power users at headquarters and one pilot facility, paired with 3,000+ shop-floor operators requiring minimal system access. The company had been running legacy SAP ECC for over a decade and decided to modernize with S/4HANA via SAP's RISE offering. SAP's initial proposal quoted $8 million over three years, which raised immediate concerns about cost structure and user classification accuracy.

The organization's IT and procurement teams recognized that the SAP quote likely reflected inflated functional user equivalents (FUEs) driven by:shop-floor workers being classified as heavy users when they needed only occasional terminal access, unused modules bundled into the standard offering, and insufficient clarity on what was included in RISE versus standalone contracts. The company engaged Redress Compliance to audit the quote and identify optimization opportunities before contract execution.

The company's business model made it particularly vulnerable to licensing misalignment. Unlike a pure corporate environment where all users access the ERP regularly, manufacturing operations demand a more nuanced approach. Corporate users—finance, supply chain, production planning, quality assurance—required full ERP access daily, with complex transactional requirements. Shop-floor operators, by contrast, needed read-only visibility into work orders, material schedules, and quality specifications, plus the ability to log hours and confirm material receipts via handheld terminals or wall-mounted kiosks. These two populations required fundamentally different licensing models, yet SAP's initial quote treated them uniformly as FUEs, inflating the baseline cost significantly.

The Shelfware Problem: Identifying Unused Modules

During our shelfware audit, we conducted a comprehensive module utilization review across both the legacy ECC environment and planned S/4HANA footprint. The analysis revealed several unused or marginally-used modules that the initial SAP quote had carried over as standard inclusions:

• IS-Mill (SAP Industry Solution for Mill Products) – Designed for pulp, paper, and steel processing. The client had no plant operations requiring this specialized functionality.
• IS-Auto (SAP Industry Solution for Automotive) – While the company manufactured components, it did not require automotive-specific production planning features.
• Advanced Planning & Scheduling (PP/DS) – The organization used basic production planning and did not need the advanced constraint-based scheduling module.
• Integrated Business Planning (IBP) – High-end demand forecasting and supply chain optimization, beyond the company's current maturity level and use case.

Each of these modules carries significant licensing and support costs. In manufacturing environments, industry-specific solutions and advanced planning tools alone can add 20-35% to an ERP license fee. By negotiating their removal, we created immediate savings and prevented years of shelfware expenses.

FUE Reclassification: From 600 to 420 Functional Users

The original SAP quote reflected approximately 600 functional users. Upon deep-dive analysis, we reclassified the user population using SAP's own licensing guidelines:

Shop-Floor and Self-Service Users

The 3,000+ shop-floor operators fell into a misclassified category. Most performed limited tasks—clocking production hours, confirming material receipt, viewing work orders—that do not require full ERP user licensing. SAP's Digital Document Licence Count (DDLC) model applies here: manufacturing IoT sensors, barcode scanners, and Mobile Workplace transactions tied to MES (Manufacturing Execution Systems) integrations generate DDLC events rather than traditional FUE counts. This distinction is critical because DDLC is consumption-based and lower-cost than fixed FUE licensing.

To understand the cost impact, consider this example: a named ERP user license typically runs $1,500-$3,000 per year under RISE (varying by contract size and multi-year commitments). If 180 shop-floor operators were incorrectly classified as FUEs, that alone represented $270,000-$540,000 annually, or $810,000-$1,620,000 over three years—before accounting for the 22% annual support cost.

In contrast, DDLC pricing is typically tied to transaction volume. A plant with 3,000 workers and moderate transaction patterns—roughly 8-12 document events per shift (work order confirmations, material receipts, quality notes, hour logs)—would generate approximately 24,000-36,000 DDLC events per month. At standard DDLC rates, this translates to $8,000-$15,000 monthly, or $96,000-$180,000 annually—a 70-80% cost reduction compared to FUE licensing for those same 3,000 users.

We recommended migrating shop-floor access to a DDLC + MES integration model, where the company would pay per transaction rather than per named user. This shift alone reduced the FUE-equivalent count by 180 users and created one of the largest savings opportunities in the overall negotiation.

Corporate and Pilot Plant Users

The remaining 420 users—corporate finance, supply chain, manufacturing engineers, and pilot facility operators—were classified as true functional users requiring daily, multi-transactional ERP access. This group rightfully remained as FUE-licensed seats.

Understanding RISE with SAP and What's Actually Included

A common misconception is that RISE with SAP includes all modules and functionality. It does not. RISE is SAP's subscription model for cloud migration, and it covers:

• S/4HANA core licensing (cloud-based ERP)
• Standard infrastructure (cloud hosting, backups, updates)
• Annual support at approximately 22% of net license value
• Implementation services and change management support
• Transition from on-premise ECC systems

Not included by default: Industry-specific modules (IS-Mill, IS-Auto), advanced planning functionality (PP/DS, IBP), third-party MES integration, or premium add-ons like analytics accelerators. Many organizations discover this gap at contract review, leading to scope creep and unexpected costs.

This distinction is particularly important in manufacturing environments. Enterprises often assume that moving to RISE means gaining access to the full suite of SAP's manufacturing solutions. In reality, they're getting S/4HANA core (financials, HR, basic supply chain, materials management) but not the specialized production planning, demand sensing, or industry-specific functionality that drives real manufacturing value. The confusion arises because SAP's sales team may discuss these modules as "available" as part of the RISE ecosystem, without clearly separating baseline inclusions from optional add-ons.

By removing IS-Mill, IS-Auto, PP/DS, and IBP from the baseline RISE quote, we eliminated approximately $1.2M in module licensing and associated support costs (since SAP support is roughly 22% of net license value, removing modules also reduces annual support obligations). Critically, this wasn't a matter of "you can have them later if you want"—it was a structured decision to exclude them from the three-year contract term, preventing automatic renewals and giving the company flexibility to reassess after phase 1 implementation.

The shelfware audit process itself is instructive. We reviewed:

• Legacy ECC Transaction History: Analyzed 18 months of user activity logs to identify which modules and transactions were actually executed. This revealed that 60+ transactions in the PP/DS and IBP modules had been configured but never invoked in a production context.
• IS-Solution Footprint: Reviewed all material masters, recipes, and production orders to determine whether automotive or mill-specific data structures existed. None were found.
• Procurement & Implementation Plans: Examined the company's detailed SAP implementation roadmap, which contained no mention of IS-Mill, IS-Auto, PP/DS, or IBP in phases 1-3. These modules had been included in the default RISE bundle without the customer explicitly requesting them.
• User Training & Change Management: Review of planned training curricula showed zero hours allocated to the identified shelfware modules, further confirming they would not be used.

This forensic approach provides SAP with irrefutable evidence that the modules in question are genuinely unused, not merely underutilized. It also protects your negotiating position: if SAP later claims the modules might be useful "down the road," you can reference the explicit decision not to include them, making future add-on requests a separate contract event rather than an automatic baseline assumption.

S/4HANA Migration and FUE Baseline Conversion

When migrating from legacy ECC to S/4HANA, SAP recalculates the FUE baseline. ECC self-service users (employees who used the system sporadically or through portals) often need to be reclassified in S/4HANA's more granular user model. This was another optimization point: the company had roughly 80 ECC portal users who became "named users" under legacy contracts but could be migrated to transactional DDLC licensing under the new architecture.

The migration itself provides a legitimate reset opportunity that many organizations miss. Under ECC, portal users are often counted as one-time costs—the license was purchased years ago and renewed annually as a line item. In contrast, S/4HANA's licensing model is more structured: you must explicitly declare your FUE count at contract inception, with clear escalation costs for adding users mid-contract. This creates a natural checkoint to scrutinize legacy user counts and eliminate "inactive" or "convenience" licenses that were carried forward from previous contracts without revalidation.

We identified 80 portal users in the legacy ECC environment who logged in fewer than 5 times per quarter—essentially dormant accounts kept active "just in case." Under S/4HANA, these users would be reclassified as either active FUEs (costing $1,500-$3,000 annually each) or as DDLC / read-only portal users (costing far less). By formally excluding them from the FUE count and creating a "portal-only" category with DDLC pricing, we saved an additional $120,000-$240,000 over three years.

SAP also leverages the December 31 fiscal year-end as a negotiation touchstone. Most enterprise contracts renew in Q4, and SAP offers volume discounts and multi-year deal incentives if customers commit before year-end. In this case, the company negotiated their RISE quote in late October, giving them a 90-day closing window before Q4 discounts expired—a subtle but significant negotiating advantage. We used this timing to press for additional concessions, noting that deferring the deal into Q1 would forfeit the Q4 discount window and potentially reset baseline pricing.

The Negotiation Strategy and Phased Migration Model

Rather than a big-bang implementation across all facilities, we structured the SAP RISE engagement as a three-phase rollout:

• Phase 1 (Months 1-6): Corporate headquarters and pilot manufacturing plant (420 FUEs, DDLC for pilot shop-floor operators).
• Phase 2 (Months 7-12): Second and third plants, with additional shop-floor DDLC and incremental FUEs as needed.
• Phase 3 (Year 2+): Remaining facilities, with consumption-based DDLC scaling and optional FUE additions.

This phased approach provided three critical benefits:

1. Lower Upfront Costs: Rather than committing to $8M upfront, the company's year 1 outlay was $2.4M—a capital budget improvement that didn't require a three-year cash commitment immediately. This reduces procurement friction and makes board-level approval easier.
2. Proof of Concept Before Full Commitment: The pilot plant allowed real-world validation of DDLC consumption assumptions. If actual transaction volume turned out to be 20% higher or lower than estimated, the company could adjust phase 2 pricing before committing additional facilities. This alone justified the phased structure.
3. Renegotiation and Market-Reset Opportunities: By structuring the deal as three separate purchase orders with optional renewal clauses, the company preserved flexibility to renegotiate phase 2 and 3 terms based on actual usage data from phase 1. If SAP raised pricing in year 2, the company could incorporate competing bids from Oracle Cloud ERP or Microsoft Dynamics 365 into negotiations.

From a negotiating standpoint, SAP prefers large, multi-year commitments because they lock in revenue and reduce customer churn risk. However, a phased structure that preserves optionality often achieves better pricing than a single monolithic contract, because the customer retains competitive leverage throughout the term.

Discuss Your SAP RISE Strategy

Outcomes: $2.8M Savings and Right-Sized Licensing

The final SAP RISE proposal reflected these changes:

• FUE Count: Reduced from 600 to 420 (30% reduction)
• Module Removal: IS-Mill, IS-Auto, PP/DS, IBP eliminated from baseline RISE
• Shop-Floor Access: 3,000+ operators migrated to DDLC + MES integration model
• Phased Contract: Year 1 ($2.4M) for Phase 1 only, with phase 2-3 options
• Support Adjustment: 22% annual support rate applied only to active modules, reducing year-over-year renewal costs
• Total 3-Year Savings: $2.8M (35% reduction from initial $8M quote)

The company now has a right-sized SAP RISE contract aligned with actual business operations, eliminating unnecessary licensing and future shelfware costs. The phased migration provides a practical roadmap and built-in checkpoints for validating assumptions before expanding to additional plants.

Key Lessons for Manufacturing ERP Migrations

This case study illustrates several principles that apply broadly to manufacturing companies evaluating SAP RISE or similar cloud ERP models:

1. Conduct Rigorous User Classification Audits

Shop-floor and self-service users are frequently over-licensed as FUEs. Review your actual user populations and transaction patterns before signing; DDLC and MES-based licensing can dramatically reduce costs for manufacturing operations.

2. Identify and Remove Shelfware

Industry solutions and advanced modules are expensive. Audit your legacy system to determine which modules are actually used, and resist bundling them into RISE if adoption will be low. A 15-30 minute module utilization review often uncovers 15-25% in removable costs.

3. Understand What RISE Actually Includes

RISE with SAP is not an all-you-can-eat licensing buffet. Clarify inclusions and exclusions upfront, particularly for manufacturing-specific functionality like PP/DS, IBP, and industry solutions. This prevents surprise costs during implementation.

4. Leverage S/4HANA Migration as a Reclassification Opportunity

Moving to S/4HANA is your best moment to reclassify users and eliminate legacy licensing inefficiencies. ECC portal users and occasional users can often shift to lower-cost licensing models under S/4HANA's architecture.

5. Use Phased Contracts for Flexibility

Breaking a single contract into phases creates negotiation leverage for later tranches, allows you to validate assumptions, and reduces upfront financial risk. SAP is typically willing to accept phased structures if it secures the initial commitment.

6. Negotiate in Q4 Around Fiscal Year-End

SAP's fiscal year ends December 31. Deals signed in October-November often receive volume discounts, extended payment terms, or multi-year rate locks as SAP pushes to close the year. Timing matters.

Conclusion: Right-Sizing Prevents Future Regret

This manufacturing company's 35% savings—$2.8M across three years—was not the result of aggressive negotiating tactics or vendor manipulation. It came from disciplined analysis: removing shelfware, reclassifying users correctly, understanding what RISE actually covers, and structuring the contract to preserve flexibility. The company avoided paying for functionality it would never use and created a sustainable, scalable licensing model as it expands to additional plants and regions.

For manufacturing enterprises evaluating RISE with SAP, the lesson is clear: initial vendor quotes are starting points, not final agreements. A thorough licensing audit and phased approach can unlock substantial savings while ensuring the organization gets exactly the functionality it needs—nothing more, nothing less.