SAP S/4HANA On-Premise vs. Cloud: What Is the Difference?

Many people ask us about the differences between the SAP S/4HANA On-Premise offering and the Cloud edition, so let’s cover the basics for everyone here.

SAP S/4HANA is the fourth generation of SAP’s famous Business Suite enterprise resource planning (ERP) system, providing extensive functionality for finance, sourcing, procurement, sales, professional services and manufacturing activities.

It was launched in 2015 and takes advantage of SAP HANA’s in-memory computing technology, which was a game changer for performance and data analysis. S/4HANA can manage more data than its predecessor R/3 and provides a better UI through SAP Fiori.

While some companies have held out on the move to S/4HANA for the past 7 years because of their reluctance to revamp business processes, the case for making the switch is becoming stronger by the day as competitors benefit from the suite and enjoy a clear advantage.

What is SAP S/4HANA On-Premise?

The On-Premise version of S/4HANA uses SAP’s standard licensing model and is an internal system deployed on servers or virtual machines that are self-managed and maintained by the business and/or its IT partner. This means you are also responsible for installing and testing new releases for S/4HANA, which are currently coming out annually.

Partners like Ameri100 can host your On-Premise S/4HANA solution through a platform as a service (PaaS) offering, which for many businesses is an easier, safer and more affordable option than managing and monitoring it themselves.

We typically recommend On-Premise to companies in need of the full range of S/4HANA features, as well as those needing to host software on-site for safety reasons and those requiring customization of their software that cannot be offered by the Cloud edition.

On-premise is a better choice for businesses that want to be hands-on with monitoring and configuration. It tends to work well for large organizations with complex business processes that can be simplified, and it’s integrated with SAP Hybris Marketing, SAP Jam, and SAP Ariba.

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What is SAP S/4HANA Cloud?

The Cloud version of S/4HANA uses a subscription licensing model and is hosted on SAP’s server via SAP HANA Enterprise Cloud and managed and maintained by SAP. While this limits customization, it can be a much easier and cheaper way to set up your S/4HANA solution.

The benefits of the SAP cloud platform are numerous, including faster time to value, because there is no need to make the large up-front time investment required for On-Premise, and increased agility, because you can deploy, scale up and customize your cloud instance with a few clicks.

S/4HANA Cloud is a much more restricted offering than On-Premise, offering only predefined configurations and less control and flexibility. It is more suited to businesses that need an ERP for general processes and don’t require too much customization in their workflows.

Mid-sized companies tend to prefer the Cloud service because it allows them to take advantage of S/4HANA’s performance without having to worry about expensive on-premise management and monitoring.

Many companies find that they don’t need the flexibility and customization of the On-Premise solution, because their processes are standard enough that the Cloud version can handle them. Cloud is also a great option for companies that are growing fast, because it enables simple scalability.

Another advantage of the Cloud edition is that you don’t need to take on the expense of an internal IT support team. There will still be value in hiring a managed service provider to maintain and secure your cloud solution, but the costs will be much lower.

SAP S/4HANA’s Hybrid Model

If you’re still reading, congratulations, because you get to learn that there is one more option for deploying S/4HANA: the hybrid delivery model, which is designed to support both on-premise and cloud scenarios. The hybrid model can be a great option for businesses looking for fast business transformation with a lower initial cost than a full on-premise installation.

Hybrid works by allowing the storage of core data and applications on in-house hardware, while simultaneously enabling system changes without the investments required for a full-scale software license. It’s convenient for companies looking for a combination of control and agility.

How do I Adopt S/4HANA?

Before we wrap this up, let’s briefly cover the different ways your business can install S/4HANA after you’ve chosen which version to go with:

• A brownfield conversion migrates your existing SAP environment to S/4HANA, which can prove to be a challenging and risky approach for more customized SAP systems.
• A greenfield migration is when you set up S/4HANA as a brand-new environment, shedding any remnants of legacy SAP processes and reducing the risk of obstacles.
• A consolidation migrates data from disparate ERPs into a centralized S/4HANA platform, meaning regional teams can feed existing ERPs into a solution run by a designated HQ.