Expert Insights on SAP S/4HANA Cloud

What is S/4 HANA cloud?

With the concept of cloud computing emerged in early 2010 s, many software businesses began to focus more on cloud-based solutions where the customers can benefit from IT resources on demand with greater cost effectiveness and lower time to value. This article offers guidance for navigating your journey through cloud transformation with SAP S/4HANA.

SAP already has many cloud solutions such as S/4 HANA cloud, SAP Analytics cloud, SAP Ariba, SAP Fieldglass, SAP Integrated business planning, SAP Digital manufacturing cloud, and many more.

S/4 HANA cloud is a software as a service (SAAS), or private cloud offered by SAP for SAP S/4 HANA as a next-generation intelligent ERP which enables companies to achieve digital transformation. The technologies that bring “intelligence” into S/4 HANA includes machine learning, virtual and augmented reality and blockchain.

S/4 HANA cloud runs on SAP HANA in memory database, which means faster data access in real time with accelerated processes.

What is the difference between SAP S/4 HANA on premise and S/4 HANA Cloud?

The first release of SAP S4 HANA On Premise is SAP S4 HANA 1511 in year 2015. Thereafter SAP released SAP S4 HANA 1610, SAP S4 HANA 1709, SAP S4 HANA 1809, SAP S4 HANA 1909 , SAP S4 HANA 2020, SAP S4 HANA 2021 and SAP S4 HANA 2022 in following years.

Customers host and maintain SAP S/4 HANA on-premise edition on their servers using internal IT staff. Customer servers can be on premise or customer can choose to go for IAAS (Infrastructure as a service) to host their servers on a cloud (eg: Amazon, Azure, Google, Huawei etc) with SAP S/4 HANA on premise edition.

Customer should implement and test annual SAP upgrades. It is customers’ full responsibility in the infrastructure and the maintenance including security and disaster risk.

On premise offers higher flexibility in terms of the business requirements and the customizations. The customer is using a traditional licensing model where they purchase the product, resulting in a CAPEX expenditure.

In 2021, S/4 HANA cloud edition was released with public and private cloud deployment options. For the S/4 HANA cloud edition, the infrastructure and maintenance are under control by SAP. Customers do not need to invest in internal IT staff due to the lack of infrastructure support requirement for the ERP. latest innovation upgrades happen without customers’ participation.

Cloud mostly offers predefined best practices configuration with limited customization and the deployment is typically faster than on premise. Subscription licensing method is being used, which means that customer is buying a service which is an OPEX expenditure. The total cost of ownership (TCO) is lower in S/4 HANA cloud edition than the on-premise edition.

Deployment options for SAP S/4 HANA cloud

A S/4 HANA cloud deployment model defines how a cloud service is made available to customers. There are 2 options namely public cloud and the private cloud.

1. S/4 HANA Public cloud

S/4 HANA Cloud Public edition is a preconfigured solution based on industry best practices which can be configured based on the business requirement following fit to standard analysis. This means faster guided implementation while being open and flexible to new requirements and extensible with ready to go APIs supporting integration with customers’ partners.

SAP ensures semi-annual automatic continual updates in a predefined schedule, security compliance and scalability without the need for customer’s IT resources.

Continuous innovation adds latest technology with the help of in-built artificial intelligence (AI), machine learning (ML), robotic process automation (RPA), and analytics.

The business needs to follow a transformational approach to move into S/4 HANA public cloud since the existing processes need to be changed to match with the industry best practices adopt by SAP S/4. Therefore this is more suited for green field approach of implementation.

S/4 HANA public cloud offers efficiency and affordability and often multi-tenant, which means it is SAAS in a shared environment. With the S/4 HANA public cloud, services are delivered to a customer over a network that is open for public usage. RISE with SAP S/4HANA Cloud is offered as S/4 HANA public cloud solution.

S/4 HANA Public cloud is more suited for organizations driven by standardization and cost reduction, often small and mid-size enterprises. Customers with financial led ERP scenarios with limited complexity in logistical processes will opt for S/4 HANA public cloud.

SAP S4 Hana Public cloud is the Ready-to-run cloud ERP that delivers the latest industry best practices and continuous innovation. 

This fits best for Net New Names, Greenfield Customers, and Two Tier Scenarios (installed base)

2. S/4 HANA Private Cloud

In the S/4 HANA Private Cloud the businesses can decide on the cloud infrastructure, which can be SAP data centers, SAP partners such as Microsoft (Azure), Amazon (AWS), Google and Alibaba, or customer’s own data centers. Same as the S/4 HANA public cloud SAP will take care of the software and the hardware.

With the S/4 HANA private cloud, the services are maintained on a private network protected by a firewall. Private cloud is a single tenant environment where the provider runs our services in a dedicated environment.

RISE with SAP S/4HANA Cloud private edition and SAP S/4HANA Cloud extended edition is offered as private cloud solutions. Extended editions provide more configurations and extension capabilities for the customers with specific requirements in a dedicated cloud environment. Customers who have defined specific requirements which require more customizations while retaining innovation and cloud value will opt for S/4 HANA private edition.

With the S/4 HANA private cloud, customers will have the ability to do customizations and integrations including changes to SAP source code and have full access to configuration. Unlike S/4 HANA Public cloud, the access to SAP GUI is possible as S/4 HANA on premise edition.

SAP releases annual upgrades with latest innovation while allowing customers to mange the pace of change on their own timeline.

New clients with well-established business requirements that demand greater customization freedom will choose S/4 HANA Private Cloud.Current SAP customers who do not want a full process design and who wish to retain their current investment in their SAP ERP system will choose S/4 HANA Private Cloud. If customers already using S/4 HANA, switching to S/4 HANA private edition requires just a lift and shift.

S/4 HANA Private cloud supports Brown field, selective data transition and green field approach in implementation. Total cost of implementation of SAP S4 HANA private cloud is higher than the public cloud.

SAP S4 HANA Cloud Private Edition is the tailored fit cloud ERP that adapts to your organization’s unique transformation. This fits best for complex installed base.

Comparison in Summary

SAP S4 Hana Cloud- Differences

  • Licensing Model

SAP offers two licensing models: perpetual and subscription. On-premise deployments typically use perpetual licenses. Initial fees depend on the selected products and authorized user count. Annual fees, covering maintenance and support, remain unchanged unless software or user numbers change.

SAP S/4HANA Cloud uses a subscription license model, requiring customers to pay an annual fee for access. The duration usually ranges from one to three years, with fees based on various business metrics like user count, document processing, or storage/bandwidth volume. Customers can choose the number of users and subscription term, with the option to renew annually.

  • S/4 HANA Cloud solution relieves the burden of maintaining IT infrastructure and security aspects. This allows customers to focus more on core business rather than managing the back end. Cloud customers can benefit from lower time to value than on premise approach. S/4 HANA Cloud solution comes with low cost with lower initial solution and deployment fees. S/4 HANA Cloud solution is scalable without the customer having to insure high investment cost. Also, no maintenance and upgrade cost involved.
  • On premise customers have more flexibility for doing customizations. The main challenge of a cloud solution is that it limits the amount of customization the customers can do to the software. This can be more challenging to customers who require a high level of flexibility that only On-premises solution can provide.
  • One challenge for SAP S4 HANA Cloud customers is that customers need transformational change to adapt to best practices which can be costly. Also, with the software updates which come on fixed basis, the customers need to adapt to changes.

Reasons to move to the SAP S4 Hana Cloud

The COVID-19 pandemic has accelerated the adoption of remote work. Businesses need to incorporate robust business applications to enable secure remote access. Cloud-based solutions offer cost-effective models, enhanced access, and improved security. Their flexibility and scalability make them essential for modern businesses, particularly SMEs and startups.

Conversely, SAP announced latest innovations and capabilities of SAP will only be delivered in SAP public cloud and SAP private cloud, with RISE with SAP as the enabler. New innovations (AI innovations, sustainability and carbon accountings solutions etc.)  will not be available for on-premise or hosted on-premise ERP customers on hyperscalers. You can seamlessly integrate emerging technologies like machine learning (ML) and artificial intelligence (AI) into the cloud-based solution. Embracing a cloud transformation journey is imperative to maintain competitiveness in the evolving landscape of the future.

How we can help ?

When crafting a strategic plan for your business transformation, the crucial first step is to carefully choose the right path for transformation. Every choice you make should be in harmony with your company’s objectives and should cater to its specific needs and demands. As a result, it becomes imperative to conduct a comprehensive assessment of every available option and their potential outcomes before settling on the most suitable course of action for your organization.

At Intellect Consulting, we work closely with your organization to assess your current processes and infrastructure. Our goal is to help you develop a strategic plan, architecture, and roadmap for the seamless adoption or migration of SAP solutions to the cloud. With our specialized knowledge, we ensure a customized approach that perfectly aligns with your unique business requirements. Don’t hesitate to get in touch with us today for more details and valuable insights.

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