SAP S/4 Hana: On Premise vs Cloud - Which to Choose?

Sep 26, 2016

SAP S/4 HANA is available in two editions: on-premise and in the public cloud. Both have their pros and cons, but how should they be compared? And how will this choice impact your organization? In fact, several aspects come into play when you are considering implementing one or the other – or both, if a hybrid cloud environment would fit your company’s needs best.

To bring some clarity to the on-premise versus cloud debate, we have listed 3 key areas that will be affected by your choice.

1. On the infrastructure side

Let’s start by zooming in on the impact on your IT infrastructure. Certainly the most obvious difference between the on-premise and cloud edition is the fact that with SAP S/4 HANA in the cloud you no longer need to invest in internal technical support capabilities. At all? That might be a bridge too far, since your IT support engineers probably also guarantee smooth and stable operation of other IT applications. But moving to the cloud should in any event allow you to scale down your internal support activities considerably.

Another important aspect to take into account concerns upgrades. With S/4 HANA on-premise you opt in – or not – to a yearly upgrade, while the cloud edition automatically enrolls you into a quarterly upgrade cycle. There are two time slots to choose from, and that is about the only freedom of choice there is. First you upgrade your testing environment, and then two weeks later the upgrade of your production environment inevitably follows. That means all flows need to be re-tested every quarter. So if you are considering downsizing your functional support team, keep the upgrades in mind to avoid overburdening the key users of the system with the frequent testing cycles.

2. On the functional side

SAP S/4 HANA in the cloud is a slimmed-down version of the on-premise solution. The deployment is faster, but the offering is far more limited. It is a template-based solution, focusing on a limited number of key processes, with only a reduced set of customization options. Choosing the cloud edition is in fact a decision to adapt your processes, such as procure-to-pay and order-to-cash, to the way in which they are defined in the tool. Any additional functionality you want should be developed on a separate development platform for subsequent connection. S/4 HANA on-premise, on the other hand, offers the full range of functionality. Anything you require can be provided. If you pay for it, that is.

3. On the project management side

These two clearly distinct functional paths also demand a completely different approach to project management, affecting both the job of the implementation consultants and their counterparts on the customer side. In the cloud edition, the focus lies on the end goal that the process pursues. The path towards that goal is mapped out in the software. Therefore the role of the implementation consultant should be much more that of a change agent. An experienced transformation consultant who combines project management skills with strong change management capabilities. So make sure you select a partner who is well aware of the challenges that may come your way and who can offer the capabilities to counter them.

Why make a choice?

Instead of choosing between on-premise or the cloud, there is a way of getting the best of both worlds. We expect a growing number of large enterprises to implement a hybrid cloud environment, rolling out the on-premise edition at headquarters and the cloud edition at satellite offices. In that way they take advantage of the same database structures – allowing easier interfacing – and avoid the complexity of having to roll out the corporate template worldwide. And with BO Cloud and The Digital Boardroom, SAP now has the tools to combine data from both systems real-time in one report.
So which solution suits your organization? Or should the question be: is your organization ready to consider the cloud? The agility and flexibility – with much smaller risks of vendor lock-in – that the cloud offers are definitely benefits worth considering. Having an agile organization, capable of easily adjusting its business model to a rapidly evolving market, is key in the digital era. So take some time, step back and build a future roadmap for your business. Then you will undoubtedly find the right answer to the on-premise vs cloud equation.


    • Pieter Lootens. You can follow Pieter on Twitter or connect with him on LinkedIn
  • Bernard Sohier. You can connect with Bernard on LinkedIn

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