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

Let’s define SAP S/4HANA editions so you can understand the nuances between them and better lay out your SAP S/4HANA roadmap.

We receive many questions about the differences between SAP S/4HANA On-Premise offerings compared to SAP S/4HANA Cloud. It is essential to define the different editions of SAP to make sure there is no confusion.

For those with a non-technical SAP background, here is what you should know about the differences between SAP S/4HANA On-Premise compared to SAP S/4HANA Cloud.

Let’s first define S/4HANA before we get into where you can host S/4HANA.

What Is SAP S/4HANA?

SAP S/4HANA is the fourth version of SAP Business Suite. SAP created SAP S/4HANA in 2015 to take advantage of SAP HANA’s performance and data analytics capabilities. There are a lot of benefits and challenges with S/4HANA.

S/4HANA exclusively runs on SAP HANA, while SAP ECC can run on a third-party database. S/4HANA is designed to manage more significant amounts of data than SAP ECC and R/3 and provides a better user experience with SAP Fiori.

Some companies are reluctant to move to S/4HANA because they will have to overhaul their existing business processes completely. S/4HANA Finance has become a stepping stone for this transition because S/4HANA Finance allows users to move accounting and finance processes to S/4HANA while maintaining SAP ECC or other SAP products.

S/4HANA prepares businesses for the digital future where companies can better integrate business processes.

What Is SAP S/4HANA On-Premise Edition?

SAP S/4HANA On-Premise Edition uses the standard SAP licensing model. It is an internal platform installed on servers or virtual machines managed by yourself or a trusted partner, and your company maintains the application software. SAP upgrades are released annually, and your team has to implement and test those new releases.

SAP S/4HANA On-Premise can also be hosted by a managed services provider like Syntax in the Syntax Private Enterprise Cloud. Syntax maintains it for customers and provides a near platform as a service (PaaS) solution.

The On-Premise Edition has the complete ERP like SAP Busines Suite but includes simplifications for SAP Simple Finance and integrates with SAP Hybris Marketing, SAP JAM, and SAP Ariba Network.

The On-Premise Edition is best for companies that need a full range of features that can be customized. This edition is suitable for organizations with proven business processes and looking for effective monitoring and configuration.

What Is SAP S/4HANA Cloud Edition?

S/4HANA Cloud Edition is only hosted on SAP’s servers in SAP HANA Enterprise Cloud and maintained by SAP. Because SAP controls the basic IT infrastructure, it does not allow extensive customizations. This may not make S/4HANA Cloud suitable for medium to large enterprises that typically require ERP systems to be customized to meet their business process requirements.

SAP makes this available in a software as a service (SaaS) model. Central S/4HANA Cloud Edition functions are finance, sourcing and procurement, sales, professional services, and manufacturing.

SAP says there are five main ways that companies can benefit from implementing S/4HANA Cloud Edition. They are faster return on investment (ROI), increased business agility, lower total cost of ownership (TCO), better governance and compliance, and an efficient ERP.

The SAP S/4HANA Cloud Edition utilized a subscription licensing model and is a limited version of the On-Premises Edition. The offering is very restricted, has pre-defined configurations, and provides less control and flexibility for specialized requirements. The Cloud Edition is focused on main processes, while the On-Premise Edition offers a full range of functions.

What Are the Different Paths to SAP S/4HANA?

A S/4HANA project is a complex undertaking because your SAP systems touch many applications in your IT environment. There are three main paths to an SAP S/4HANA transformation.

1) Brownfield

A brownfield conversion takes your existing SAP environment and migrates it to S/4HANA. This is a higher risk approach from a business perspective because current SAP systems are likely high customized. Migrate these customizations into SAP S/4HANA can be challenging. You could do a technical upgrade with this approach and then fix the problems after the migration.

2) Greenfield

A greenfield migration sets up a brand SAP S/4HANA environment. It is a preferred method for new SAP customers and enterprises that don’t have complex environments with mutual dependencies. You can put your current SAP environment in archive mode and move forward with S/4HANA. With a greenfield conversion, you can get rid of your antiquated and legacy business processes behind.

3) Consolidation or Transformation

This type of migration allows you to migrate data out of your regional ERP systems and consolidate them into a central platform at a global level. While you make a move to S/4HANA, your international locations can still use their regional systems for their day-to-day business processes.

What Is Best for You?

It’s essential to understand the differences between S/4HANA so you can make informed decisions to ensure their SAP systems and business requirements are aligned for a crucial S/4HANA project.

To learn more about SAP, visit our SAP insights page, where we have SAP whitepapers, webinars, data sheets, and much more. Contact us today to find out how we can help with your SAP S/4HANA journey.