Legacy system decommissioning: Unlock hidden value in your SAP licences

Author: Priyasha Purkayastha, Global Content Manager, TJC Group | Co-author: TJC Americas team, TJC Group

Many organisations underestimate the complexity and cost risks hidden within their SAP licences, particularly when preparing for legacy system decommissioning projects, system transformations, or RISE with SAP migrations. Understanding how to identify over-licensing, avoid unnecessary spend, and build an optimised licensing strategy is essential for a cost-efficient transition to S/4HANA.

Introduction

As organisations embark on their journey to SAP S/4HANA, the focus tends to fall on migration paths, data quality, and system architecture. However, one critical area that is frequently overlooked but can have a significant financial impact is SAP licence management.

The reality is that many organisations are sitting on a tangled web of unused, misclassified, or redundant SAP licences. When combined with the complexities of decommissioning legacy systems and transitioning to RISE with SAP, these licensing inefficiencies can translate into substantial unnecessary costs and compliance risks.

In this article, explore how organisations can unlock hidden value in their SAP licences before decommissioning, offering practical guidance for IT leaders, financial managers, and project teams preparing for S/4HANA transformation.

Why SAP licence management matters before decommissioning

Before legacy system decommissioning, organisations must have a clear and accurate picture of their current licence landscape. Without this visibility, there is a real risk of carrying forward unnecessary licence costs into the new environment, compliance requirements during or after the transition, and more.

Effective licence management at this stage serves multiple purposes. It helps identify cost-saving opportunities that can be redirected into transformation initiatives. It ensures compliance with SAP’s licensing terms, reducing the risk of costly audits, providing a solid foundation for negotiating new licence agreements under RISE with SAP or S/4HANA subscription models.

As a matter of fact, research consistently shows that organisations that address licensing proactively achieve significantly better financial outcomes from their SAP transformation projects. Given that 76% of ERP transformation projects fail to deliver expected business outcomes, every advantage counts.

The hidden complexity of SAP licensing

SAP licensing is quite complex. Over the years, organisations accumulate a patchwork of licence types, namely user licences, engine-based licences, and various subscription models – which are often spread across multiple systems and contracts. This complexity is compounded by mergers, acquisitions, and organic growth, which can leave licence inventories in a state of disarray.

In our webinar with VOQUZ Labs, they suggested that approximately 60% of organisations are over-licensed, 30% are under-licensed, and only 10% have their licensing fully under control. This means the vast majority of organisations are either paying too much or exposed to compliance risk, or often both.

The challenge is further intensified when organisations operate multiple SAP systems simultaneously. Legacy ECC systems, development environments, testing landscapes, and production systems each carry their own licensing requirements. When preparing for legacy system decommissioning, understanding which licences are tied to which systems, and which can be released, reclassified, or traded in, is essential.

Common pitfalls in SAP licence management

Several recurring pitfalls trap organisations when it comes to SAP licences, particularly in the context of decommissioning and S/4HANA migration:

Over-licensing and shelfware

One of the most common issues is over-licensing i.e., paying for more licences than the organisation actually needs. This often occurs when user counts are estimated rather than measured, or when licences are purchased for projects that never fully materialise. The result is “shelfware”: licences that sit unused but continue to incur costs.

Incorrect user classification

SAP licences are categorised by user type, and each type carries a different cost. In S/4HANA, for example, licence types include Professional Use, Productivity Use, and Functional Use. When users are incorrectly classified, for instance, assigned a Professional Use licence when their actual usage only warrants a Functional Use licence – the organisation overpays significantly. Studies suggest that optimising user classification alone can reduce licence costs by over 30%.

Watch our webinar with VOQUZ Labs for more significant insights:

Failing to account for indirect access

Indirect or digital access, where third-party systems or applications access SAP data, has been a significant area of compliance risk. Many organisations are unaware of the full extent of their indirect access, which can trigger unexpected licence fees during audits. This is particularly relevant when decommissioning legacy systems that previously served as intermediaries for data access.

How licence optimisation connects with decommissioning

Licence optimisation and legacy system decommissioning are two sides of the same coin. When an organisation decommissions an obsolete system, the licences associated with that system should, in theory, be released. However, without proper tracking and management, these licence savings can easily slip through the cracks.

A structured approach involves several steps. First, organisations should conduct a comprehensive licence audit to understand exactly what they own, what is in use, and what is surplus. Second, they should map licences to specific systems and users, identifying which licences will be freed up through decommissioning. Third, these freed licences should be either reallocated to the new S/4HANA environment, traded in as part of a RISE agreement, or formally retired to eliminate ongoing costs.

The financial impact can be substantial. Organisations that align their licence strategy with their decommissioning roadmap typically achieve significant savings that can be reinvested into the transformation program itself.

How ELSA by TJC Group supports the transition?

While SAP licence optimisation addresses the commercial side of the equation, the practical challenge of retaining access to legacy data after decommissioning is equally important. This is where TJC Group’s Enterprise Legacy System Application (ELSA) comes in.

ELSA is an SAP-certified application built on SAP Business Technology Platform (BTP) that enables organisations to decommission both SAP and non-SAP legacy systems whilst retaining full access to historical data, documents, and reports. Authorised users can re-access legacy data before and after migrating to S/4HANA, ensuring continuity for tax, audit, and business reporting purposes.

Critically, ELSA ensures that the decommissioned data qualifies as a tax archive, meeting compliance requirements across jurisdictions. This is vital because auditors may request access to the original legacy data, and simply migrating data into a new system is not sufficient to prove its integrity and non-modification.

By combining licence optimisation with ELSA-powered legacy system decommissioning, organisations can achieve a clean, cost-efficient transition to S/4HANA. Moreover, it also helps eliminating unnecessary licence costs, reducing infrastructure overhead, and maintaining full compliance.

Key takeaways

• Audit your licences early: Conduct a thorough SAP licence audit well before decommissioning or migrating to RISE with SAP. Understanding your current licence inventory is the foundation for cost optimisation.
• Address over-licensing proactively: With the majority of organisations over-licensed, there are significant savings to be unlocked through proper user classification and licence rationalisation.
• Leverage specialised tools: Invest in solutions that can automate licence management, reduce manual effort by up to 80%, and ensure ongoing compliance.
• Combine licence optimisation with decommissioning: Use a solution like ELSA by TJC Group to decommission legacy systems while preserving data access.

Contact us today for more information!