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Minh-Thu Dotu

Sales & Marketing Manager

The Cloud compared to renting an apartment

The choice between the On-Premise and the Cloud version can be compared to the decision to buy a house to renovate using the latest technologies or to rent a fully furnished, equipped and secured apartment.  In the case of an empty house to be renovated (like On-Premise), it is necessary to provide capital to invest in renovation works and to ensure security in case of fire or theft. The advantage of being owner is that you can choose your furniture and appliances. You can also add as much equipment as you wish.  In the case of renting a furnished, equipped and secured apartment in a building (Cloud), you choose the apartment that suits you and benefit from all the advantages offered by the building management, such as surveillance cameras or concierge services. With the Public Cloud, you share hardware, memory, network equipment, and security framework maintained by SAP, just as you share utilities, the front entrance, or the building pool.  Migrating from SAP ECC or another ERP to SAP S/4HANA increases the options. S/4HANA offers the option of an On-Premise, Cloud or Hybrid deployment. To help you make the right decision, we have listed in detail the areas that will impact your organization. 

Features of Cloud compared to On-Premise

1. License 

The licensing model is similar to real estate management.   

As an SAP customer, if you buy the On-Premise software, you are buying a product. You own the software as an asset; you are in a CAPEX scheme.    

If you purchase the Cloud version, you are buying a service and do not own the software. You are in a subscription license model and pay an annual fee for the software as a service (SaaS), including maintenance and upgrades. This is called OPEX. 

2. Infrastructure

In the case of an On-Premise system, your IT team is responsible for the infrastructure. They manage the servers, the network, the storage, the operating systems. They ensure security and disaster risk. They have to plan the purchase, installation, testing, upgrades and security of all elements.  

With a Software as a Service, all of this is done by SAP.  

3. Reliability and security

The Cloud service provider offers the hardware and knowledge to apply the latest security measures. The Cloud significantly reduces the risk of implementing a new data system and helps companies, especially smaller ones, focus on growth.   

Some companies are reluctant to use the cloud for a variety of reasons. They have questions about ownership, leakage or control of their data. They have doubts about the level of security guaranteed. Yet only the largest companies can afford to hire top security specialists.   

A provider like SAP offers maximum security due to economies of scale. 

4. Flexibility

The Cloud increases flexibility. It means dependence on the Internet but independence from the office. Wherever they are, your customers and staff have access to your data centers, with access limited in function of your criteria. 

5. Upgrades

With any On-Premise version, upgrades are available annually. You schedule them at your own pace so you can better manage their impact on your business processes and organization. The logical downside of a slower upgrade is that you don’t get the latest innovations. 

In thet Cloud version, updates are quarterly or bi-annual and either automatic or accompanied by SAP. This formula allows you to reap the benefits of its innovations immediately. 

6. Customizations

The On-Premise solution and the Private Cloud Edition solution allow for a wide range of customizations, while the Public Cloud Edition solution offers a reduced set of functionalities. It is a template-based solution. The customer relies on the Best Practices of the line of business (LoB).

Main features of the On-Premise and Cloud Editions

Licence model 

SAP S/4HANA On-Premise Edition 

  • Traditional license 
  • Buy a product 
    • License purchase fee + annual maintenance fee. 
    • You are the owner of the license 

SAP S/4HANA Cloud Edition

  • Subscription license 
  • Buy a service
    • Annual fee for the license + SaaS + maintenance + upgrades. 

SAP S/4HANA On-Premise Edition 

  • Infrastructure, software, hardware.
  • Storage / operating system.

SAP S/4HANA Cloud Edition

No infrastructure, software or hardware.

SAP S/4HANA On-Premise Edition 

Your It department is in charge of the maintenance. 

SAP S/4HANA Cloud Edition

Outsourced to SAP  

SAP S/4HANA On-Premise Edition 

Security management is of your own responsibility. 

SAP S/4HANA Cloud Edition

Security management is supported by SAP.

SAP S/4HANA On-Premise Edition 

Defined and supported by you 

SAP S/4HANA Cloud Edition

Defined and supported by SAP 

SAP S/4HANA On-Premise Edition 

High adaptability level.

SAP S/4HANA Cloud Edition

  • Public Cloud: Configuration predefined by the Best Practices, with limited adaptability 
  • Private Cloud: High adaptability level, nearly like On-Premise 

SAP S/4HANA On-Premise Edition 

Unlimited variety of add-ons 

SAP S/4HANA Cloud Edition

  • Public Cloud: no add-ons 
  • Private Cloud: only add-ons certified by SAP 

SAP S/4HANA On-Premise Edition 

Maximum control and autonomy

SAP S/4HANA Cloud Edition

Easy and fast 

Some companies choose to remain On-Premise for the production entities and to regroup the financial and commercial entities in the Cloud. In this case, they apply the SAP S/4HANA hybrid model. 

SAP S/4HANA editions

1. SAP S/4HANA On-Premise

SAP S/4HANA On-Premise Edition works identically to previous versions of SAP ECC. There is nothing fundamentally new about how to implement it. 

2. SAP S/4HANA Cloud Public

SAP S/4HANA Public Cloud Edition, known previously as Multi Tenant Edition (MTE) or Essentials Edition (ES) is a Software as a Service (SaaS) offered by SAP. No non-SAP hosting is allowed. 

With SAP S/4HANA Public Cloud Edition, the customer relies on industries Best Practices. The deployment is a Greenfield. 

3. SAP S/4HANA Private Cloud

Private Cloud is dedicated to a single enterprise.  SAP S/4HANA Private Cloud Edition, known previously as the Single Tenant Edition (STE) or as Extended Edition (EX), offers more flexibility and control than the Public Cloud Edition. In addition, the Private Cloud Edition allows for multiple hosting options on SAP’s Cloud Platform, Amazon Web Service (AWS), Google Cloud or Microsoft Azure. The planned deployment for the S/4HANA migration can be Greenfield, Brownfield or hybrid. 

This table provides additional information about the features of the different options:

Customization and standardisation - SAP S4/HANA Cloud, on-premise ou Hybride

ON-PREMISE

PRIVATE CLOUD

PUBLIC CLOUD

On-Premise on customer's infrastructure

Dedicated system landscape on SAP Cloud infrastructure, AWS or Azure

SAP's Public Cloud infrastructure

PaaS

SaaS

Traditional/perpetual licensing

Subscription license

Subscription license

Governance by SAP customer

Governance by SAP & SAP customer

Governance by SAP

Highly customizable

Customizable

Standardized

Plan your own updates

Biannual (theoretically) Schedule your own update Mandatory every 2 years

Quaterly update

Greenfield, Brownfield or Hybrid

Greenfield, Brownfield or Hybrid

Greenfield deployment

Highest total cost of ownership

Low TCO

Lowest TCO

Can be reconfigured

Can be reconfigured

Cannot be reconfigured

SAP code and all other modifications are allowed

Does not allow the standard SAP code but allows all other modifications

Does not allow the creation of specific programs in ABAP and does not allow to

Allows extensions ;

Allows all add-ons ;

Can add code

Allows only add-ons certified by SAP on the Cloud ;

Can add code

Does not allow extensions ; Impossible to add code

Many large enterprises are turning to the Private Cloud Edition because of the advantages of monitoring, flexibility, customization and security it offers. The major argument in favor of the Private Cloud Edition is the ability to retain the existing configuration and transaction data with a selective data transition. 

However, the combination of SAP S/4HANA On-Premise and Cloud could be a preferred option for large enterprises due to their organizational structure. It also allows to phase the migration and to benefit more quickly from the advantages of S/4HANA.

How can we help you?

If you need advice or clarification on SAP S/4HANA matters, please contact us. We provide consulting to companies who are considering SAP ERP implementation or migration to S4/HANA. 
Need advice? Don't hesitate to contact us!
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