We dive deeper into two SAP S/4HANA implementation approaches and figure out how they differ.
SAP S/4HANA On-Premise vs. Cloud: Deployment Options Explained
SAP announced the discontinuation of support for the SAP Business Suite 7, including SAP ERP 6.0. Now there is no question if businesses should migrate to SAP S/4HANA. The question is how your business can prepare for SAP S/4HANA implementation and what deployment approach to choose, on-premise or сloud. Let’s find out what edition will meet all your business needs.
What Is the Difference?
| On-Premise Edition | Cloud Edition | |
| Licensing model | Traditional licensing | Subscription |
| Cost (implementation) | It is more costly because of functional scope, project duration, and the need for additional hardware and/or software. | The price is comparatively lower. |
| Implementation time | On-premise version requires more cost and time (because of additional hardware or software) and qualified personnel to build a new environment. | Shorter due to the ready-made platform used by the cloud version. |
| Functional scope | Full ERP scope. | Key industrial and embedded ERP scenarios. |
| Customization | Due to system flexibility, there are many opportunities for customization. | Customers have full access to the on premise extensibility framework, supporting in-app and side-by-side extensions in addition to code enhancement and modifications. Expert configuration is possible with full IMG (Implementation Guide) access, and the operating expense model is subscription-based. |
| Scalability | Long-term planning and extra resources are required. | To scale the system up or down is easier, faster, and cheaper. |
| Upgrades | You decide how often to upgrade your system and define the schedule of software upgrades in case your business processes require new SAP features and innovations. | You have less control over system upgrades. Your provider informs you about the impending upgrades in advance, and you can choose the timing and functionality. New SAP features are released every six months. |
| Maintenance, support | The system is supported by in-house IT specialists. | The provider is responsible for the system maintenance. |
| Infrastructure | Customer's Hardware | SAP Data Center or Hyperscale |
| Who manages the system | Customer | Provider |
| Security | You need security experts and often additional security software to support on-premise system security. | The provider has all the required tools to ensure the customer's system security. |
What Edition Does Your Business Need?
On-premise and cloud implementation are two main ways you can choose between after deciding to move to SAP S/4HANA. But some businesses can go the hybrid way. Let’s consider them all to understand which of these three models is right for your business.
Who сan сhoose SAP S/4HANA on-premise edition?
SAP S/4HANA On-Premise is suitable for large manufactured enterprises. In this case, their business industry doesn’t matter; the main thing is well-established internal processes that do not need changing.
This ERP system version gives you complete control over hardware, software, and maintenance schedules. SAP S/4HANA On-Premise is an excellent option for businesses that want to achieve maximum process flexibility and seamless integration with third-party systems.
SAP S/4HANA On-Premise is also good for those enterprises that already use SAP ECC and want to migrate to SAP S/4HANA due to the discontinuation of support for the former version in 2027.
The on-premise deployment model is best for businesses that want to manage their entire IT landscape or require keeping the business application close to other parts of their organization. You can also choose an on-premise model if you have strict rules governing access to your data and not allowing you to operate your systems outside the company.
Who can choose SAP S/4HANA cloud edition?
SAP S/4HANA Cloud is the SaaS version of S/4HANA. It means you get access to most of the SAP S/4HANA On-Premise features without spending money on special equipment, databases, and IT specialists maintaining them. It also helps you benefit from using SAP Business Technology Platform and SAP Business Network.
This ERP system version will be good for medium businesses in the active growth phase that want to build their processes on a scalable platform. Such a system will grow with the company, providing the business with the required solutions, flexibility, and quarterly updates.
Two options are possible by the SAP S/4HANA Cloud implementation, Private and Public Cloud.
SAP S/4HANA Private Cloud
SAP S/4HANA Private Cloud is an on-premise implementation in a secure private cloud. In this case, SAP acts as a cloud service provider that manages the infrastructure and software. This SAP implementation scenario means that all update schedules must be agreed upon with the customer.
SAP S/4HANA Private Cloud also allows for a specific system modification level. However, this feature will require additional financial costs due to the increased management complexity.
SAP S/4HANA Public Cloud
Today SAP S/4HANA Public Cloud is available for finance, marketing, and production areas. This ERP system version supports the most common business processes. Unlike SAP S/4HANA Private Cloud, this version does not allow any changes in the software settings, as it works in an overall system.
SAP S/4HANA Public Cloud is fully managed by SAP; the system is also updated quarterly, but the schedules are not agreed upon with the customers.
This SAP S/4HANA version is simplified so that the implementation time will be shorter than in other cases.
Who can choose the hybrid model?
The hybrid model combines the best of cloud and on-premise editions to accelerate business transformation and reduce IT infrastructure costs while maintaining system reliability.
With a hybrid implementation, you can run some business transactions locally (such as finance, inventory, and manufacturing) and others (such as customer relationship management) in the cloud.
The hybrid model is also suitable for companies with a divisional structure. In this case, SAP S/4HANA On-premise can be deployed to your headquarter and the cloud edition — to your branches.
In a Nutshell
Choosing the right SAP S/4HANA implementation model will help you achieve your specific business goals. The LeverX team consists of highly qualified experts whose experience and knowledge allow them to cope with any tasks, from system analysis to its implementation and post-launch support.
Ready to start your migration journey? Contact our experts!
