City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: IT Department
Meeting Date: June 15, 2026
Report #:2605-6393
TITLE
Approval of Amendment Number 1 to Purchase Order C26195416 with Carahsoft in the Amount of $375,246 for Additional SAP Business Data Cloud Capacity Units and Related Non- Productive Memory Extension; CEQA Status - Not a Project
RECOMMENDATION
Staff recommends that the City Council approve and authorize the City Manager or designee to execute Amendment No. 1 to Purchase Order C26195416 with Carahsoft for additional SAP Business Data Cloud capacity and related non-productive memory extension in an amount not to exceed $375,246 for the Enterprise Resource Planning Upgrade 2026 Project, Capital Improvement Program Project TE-19000. This amendment results in a revised total purchase order not-to-exceed amount of $7,011,075 over a five-year term.
BACKGROUND
On September 16, 2025, the Finance Committee reviewed staff’s recommendation to approve Purchase Order C26195416 with Carahsoft, using GSA Blanket Purchase Agreement Contract No. 47QSWA18D008F1, for SAP S/4HANA software and hosting services for a 5-year term in an amount not to exceed $6,640,429, together with a $1,660,000 FY 2026 Technology Fund appropriation for the Enterprise Resource Planning Upgrade 2026 Project (TE-19000). The Finance Committee unanimously recommended City Council approval, acknowledging the importance of remaining on a fully supported platform and acting before the end of September to secure a transformation incentive credit to support City’s migration to SAP Cloud Services2.
On September 29, 2025, the City Council approved Purchase Order C26195416 for the 5-year term ending December 31, 2030. City has used SAP as its core ERP system since 2003 to support 1 GSA Contract 47QSWA18D008F:
https://www.gsaadvantage.gov/ref_text/47QSWA18D008F/100V5C.3VR800_47QSWA18D008F_47QSWA18D008F 11-24-2024-565316.PDF
2 September 16, 2025 Finance Committee Staff Report:
https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=64844&dbid=0&repo=PaloAlto&cr=1
Finance, Human Resources, Payroll, Procurement, Budgeting, and Utilities, and previously upgraded the platform in 2021. Because SAP support for the City’s current ERP platform ends on January 1, 2028, City initiated this modernization effort to transition to SAP S/4HANA and related cloud services5.
ANALYSIS
This amendment approval will allow the City to procure additional SAP Business Data Cloud capacity and related non-productive memory extension needed to support the SAP Business Warehouse environment as part of the City’s ERP migration. The original September 2025 purchase included 31,762 SAP Business Data Cloud core capacity units annually to acquire the necessary server, memory, and disk capacity for the SAP Business Warehouse (SAP BW) environment required to successfully upgrade to SAP S/4HANA. Following additional solution refinement and implementation planning, staff determined that more capacity is needed to align the target environment with projected operational and performance requirements. The new Carahsoft quote therefore adds 6,956 SAP Business Data Cloud core capacity units and non-productive memory extension beginning August 1, 2026, at an annual cost of $84,983, with a partial first-year amount of $35,314.
Table #1: Cost Summary (December 31, 2025 – December 30, 2030) Year
Annual Cost
Previously
Approved by
City Council
Annual Cost of
Additional SAP Cloud
Services From
August 1, 2026 Subtotal
1 $1,643,281 $35,314 $1,678,595
2 $1,643,899 $84,983 $1,728,882
3 $1,643,899 $84,983 $1,728,882
4 $1,643,899 $84,983 $1,728,882
5 $1,643,899 $84,983 $1,728,882
5-Yr Total $8,218,878 $375,245 $8,594,124
Cloud Credit/Transformation Incentive $1,583,053 $1,583,053 Total After Cloud Credit $6,635,825 $7,011,070
Capacity units are SAP’s measure for allocable infrastructure resources supporting the SAP BW environment, including computing, memory, storage, and related system capacity. This additional capacity is needed to provide adequate scalability, stability, and long-term supportability and to reduce delivery and operational risk as migration progresses. Without added capacity, the City would risk constraints in transitioning the SAP BW environment fully into the target SAP cloud environment. This recommendation is consistent with the City’s previously approved ERP modernization strategy, which is intended to move the City off its 5 September 29, 2025 City Council Staff Report: https://www.paloalto.gov/files/assets/public/v/1/administrative- services/budget-adjustments-and-monitoring/fy26-budget-adjustments/cmr-2509-5240-aa1-9.29.25.pdf current SAP platform before vendor support ends on January 1, 2028 and to maintain a secure, supported, modern enterprise platform.
FISCAL/RESOURCE IMPACT
Funding for Year 1 in the amount of $35,314 has already been appropriated through the City’s annual budget process in the Technology Fund (Enterprise Resource Planning Upgrade 2026 Project (TE-19000).
STAKEHOLDER ENGAGEMENT
The services were coordinated with internal stakeholders and the service provider.
ENVIRONMENTAL REVIEW
The approval of these contracts is exempt from review under the California Environmental Quality Act (CEQA) under CEQA Guidelines section 15061(b)(3) because it can be seen that there is no possibility that the activity in question may have a significant effect on the environment.
ATTACHMENTS
Attachment A: SAP Cloud Capacity via Carahsoft Quote no. 64694612 APPROVED BY:
Darren Numoto, Chief Information Officer; Lisa Bolger, Assistant Director Information Technology/CTO