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Cloud vs On-Premises With SAP S/4 HANA

Simplified architecture, improved performance, and real-time analytics. Certainly, you’ve heard the word about the benefits of SAP S/4HANA and you’re excited to put it to use. Now, you’re faced with the decision about which is better for your work environment, cloud-based or on-premises service?

There are certain advantages to choosing one over the other. In order to make an informed decision about your company, it’s necessary to learn a little more about how each solution works, and how it will fit in with your business requirements.

SAP S/4 on the Cloud

This application is available as a cloud-based Software-as-a-Service (SaaS) technology. This option allows you to enjoy the benefits of SAP S/4HANA in a public or private virtual environment without the need to invest in infrastructure, upgrades, or storage, or an in-house team to manage it. The developer will manage every aspect of this app for you – including data, runtime, OS, and more – while you enjoy the benefits.

Using SAP S/4 HANA On-Premises

Businesses who refer this option want more custom control over their technology, and they have the space, money, and team to do it right. It’s deployed on an in-memory database platform located at your place of business, giving you complete oversight of everything from the HANA database to related applications, servers, and networks.

Head-to-Head Comparison of Features and Functionality

Now that we’re clear about how each option works in a business setting, we’ll get down to the nitty-gritty about price points, features, and maintenance.


One of the most important considerations is finding the best tech solution for your budget without sacrificing functionality. At first glance, it might seem that you could save a lot of money by choosing SaaS and avoiding the investment in hardware, training, and infrastructure.

However, you should also consider the cost of annual licensing when calculating the cost of cloud vs on-site service. We’ll get to that in just a minute, but first, we need to help you evaluate the cost of purchasing an on-premises application.

You’ll need to calculate:

* The cost of constructing a data center, if you don’t have one on-site already
* Allocating or building a space for the server
* The price of disaster recovery in case of a crash
* The expense of hiring or training an IT staff
* Extra expenses for increased resource usage like electricity and climate controls that will need to run around the clock

Once you figure an approximate price, it’s a simple matter of performing a cost/benefit analysis.

Licensing and Use

The way SAP works, there are two different licensing models that are based on the type of service. In general, on-premises applications are charged an initial fee and granted the license in perpetuity. The fee is based on the products ordered and number of employees who will actually be using the product.

When you choose a cloud-based application, SAP uses a subscription-based billing model based on a recurring fee that’s meant to cover the cost of bandwidth, storage, and number of users. This contract extends from one to five years, depending on your service tier and actual usage.

Infrastructure and System Maintenance

Choosing on-premises applications mans you need the space and resources to implement and oversee every element of the installation and ongoing performance. That gives you an ultimate level of customization and privacy, but it could become a hassle if you’re not prepared for the responsibility.

With cloud SaaS, you just pay for the service plan and SAP takes care of everything else.

Approach and Implementation Time

If you have the luxury of time and aren’t concerned about business disruption during your transformation, you’d do well with on-premises service. This is ideal for larger companies, and startups before they launch than small companies and those that can’t afford the downtime.

When you have a smaller budget and want to be up and running faster, consider service on the cloud.

Upgrades and Tech Support

When you choose the cloud, all upgrades and support are the domain of your service provider. On-premises customers still get limited support, but any upgrades of technical problems are yours and your alone.

Integration and Functional Scope

Here, we’ve reached parity in regard to integration. Both ERP systems are easy to integrate with other SAP products like SAP Ariba, SuccessFactors, Hybris, Fieldglass, and Jam.

The main difference is in the functional scope of the applications.
With SAP SaaS, you’re limited to preset industry best practices and the edition you choose from among Enterprise, marketing professional, or full-scope ERPs. On-premises applications give you the full scope by default as well as additional standard features like Detailed Scheduling (PP/DS) and Production Planning that were previously only available with the former ERP Business Suite’s SAP Advanced Planning and Optimization (APO) feature.


If you want full control over your networks, servers, and storage, then on-premise is the way to go. Those with little tech knowledge, smaller companies, and businesses with flexible needs will do better in a virtual environment that offers scalability and can live with predefined limits on certain features or functions.

Final Thoughts

Your digital transformation needn’t be stressful of difficult. Finding the right SAP S/4HANA solution for your company is simply a matter of matching your company requirements and the best option. Our goal is to provide you with a comparison based on the criteria that matters to business owners in the real world using first-hand information.

Armed with this information it should be easy to find the best path for your circumstances, budget, and expected usage.

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