Peter Sayer
Senior Editor

SAP’s new generative AI pricing: Neither transparent nor explainable yet

News Analysis
Oct 12, 20235 mins
Enterprise ApplicationsERP SystemsGenerative AI

The ERP vendor is adding a new pricing tier to its Rise with SAP offering with an opaque mix of bundled and usage-based pricing for generative AI functionality.

SAP sign
Credit: IDG

Enterprises subscribing to Rise with SAP, a bundle of services wrapped around the core S/4HANA Cloud ERP application, can now pay extra for Premium Plus, a package of some of SAP’s newest innovations.

Premium Plus includes access to sustainability insights derived from business processes’ carbon footprints and financial costs (SAP’s “green ledger”), new generative AI capabilities accessed through its Joule virtual assistant, improved forecasting, and the ability to create a portal for suppliers to simplify spend management.

The package costs less than the services bought individually, said Eric van Rossum, chief marketing and solutions officer for SAP Cloud ERP — but some of the generative AI services are also subject to additional usage-based charges in a new virtual currency van Rossum called “AI units.”

Different actions will consume varying numbers of these units. Premium Plus customers will receive a certain number of these units as part of their package — the bundled part of the pricing — but when these units have been consumed, customers will have to buy more.

That means enterprises wanting to estimate the return on investment for their use of SAP’s new AI features will need to know how often they expect to use them, how many AI units SAP will deduct for each use case, how much each additional unit costs, how many units are bundled in their Premium Plus subscription, and how much that costs. In other words, uncertainty abounds.

Chip Hanna, advisory practice leader for SAP at IT negotiation advisor UpperEdge, sees this complexity as a recurring feature of SAP’s pricing strategy.

“SAP customers struggle to unpack the cost and value for the basic components of Rise such as software subscription, support, and infrastructure,” Hanna said. “SAP has been loath to provide this transparency, which creates another hurdle to proving the true financial benefit of Rise in conjunction with proving — or refuting — SAP’s representations regarding the operational, technical, and business advantages of Rise.”

“With the addition of charging a premium for AI, this adds another layer of complexity to determine what the specific benefits are to using SAP’s AI solution,” he said.

With enterprise software vendors increasingly rolling out generative AI add-ons, and CIOs seeing the deployment of generative AI as a make-or-break moment for their careers, it can seem urgent to get on board.

“SAP is using the perceived or real urgency to have an AI strategy to force customers to make decisions and investments for capability they may have not defined for themselves, to solve use-case scenarios which may not exist, for a cost which is not transparent, nor predictable,” said Hanna.

Premium Plus features

One of the central features of the Premium Plus bundle is the ability for enterprises to build a portal for their suppliers on SAP Business Network. The portal enables SAP customers to exchange purchase orders and invoices digitally with suppliers in a common format, linked directly to their core ERP to automatically apply business rules to orders and payments.

There’s also access to green ledger features including Sustainability Footprint Management and Sustainability Control Tower.

For financial management, bundled features include SAP Analytics Cloud for planning, and S/4HANA Cloud for cash and receivables management.

The consequences of the new per-use charges for generative AI scenarios are more nuanced when it comes to Joule, SAP’s new generative AI copilot, according to Van Rossum.

“The basic part of Joule will be part of all the applications we sell. In S/4HANA it will just be there, whether you buy Rise, Rise Premium, or Rise Premium Plus,” he said. “There are, however, certain scenarios we’re going to bring to market [accessible through Joule] where we see demonstrable premium value to our customers. Those are the ones we’re going to be monetizing.”

One example of such a scenario or service, he said, is in receivables management, where Joule can identify relevant incoming emails about payments, link them to the appropriate customer account and, if necessary, even create a dispute case.

Another is automation of goods received, where SAP proposes using Joule to scan delivery documents to shorten handling times in truck logistics.

Unit costs

Each generative AI scenario will consume a certain number of AI units, and these units will be bundled with Rise Premium Plus and some other SAP products. The units can be applied to any of the generative AI services, not just one.

Van Rossum couldn’t say how many units would be consumed by each service, nor how many will be bundled with Premium Plus, nor how much additional units will cost — although because most of the pay-per-use capabilities will not be ready until next year, SAP still has time to thrash out the details.

UpperEdge’s Hanna is wary about how those details could bedevil enterprises trying to budget for the cost of their ERP.

“We know from past experience that SAP will find ways to monetize — or penalize — decisions made by customers who chose alternative solutions to their own, for example, Coupa vs. Ariba for supply chain,” he said. “Given the specific examples they’ve noted (invoice matching), there is absolutely a risk that SAP will create as-of-yet undefined costs to leverage their AI solutions which integrate with non-SAP products. Adding SAP’s introduction of ‘AI units,’ which they will apply in differing amounts for different scenarios, only compounds the cost/value risk for customers who are considering SAP AI and the Premium Plus package.”