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SAP S/4HANA On-Premise Or Cloud – Which Edition Is Better For Your Business?

When you decide to implement SAP S/4HANA in your business model, you are not only adopting the latest trends in ERP technology but also ensuring a competitive advantage for your company. Some of the basic features of the SAP S/4HANA- the simple structures, facilities for live analysis, and better performances – allow you to get much more done in a limited time frame. You will be required to move to SAP S/4HANA once the SAP forum discontinues its Business Suit platform in 2025.

Once you start using SAP S/4HANA, you will be provided with two separate deployment options: On-Premise and Cloud. Knowing the difference between these two variants is crucial for you to choose the one that fits your business model, and will guarantee its development in the future.

Let us first try and understand the basic features of each of these platforms.

SAP S/4HANA On-Premise

This is actually the in-memory system of the SAP ERP Business Suite. Essentially, the On-premise system is located on your company’s servers and managed by the company. Thereby, you, as a representative of your company, will be able to access and take control of all its features- including its applications, servers, the HANA database, networks, and all other related systems.

SAP S/4HANA Cloud

This is a SaaS version of the SAP model. It can be deployed in public as well as private cloud networks. Individuals will be able to access the SAP S/4HANA database without any hardware, database, or IT support. The Cloud version posits a significant amount of the responsibility on the SAP system, as it provides for and manages everything from operating systems, servers, storage, applications, runtime, and networking.

What are the differences between the two editions?

Being the two versions of the SAP S/4HANA, there are plenty of preliminary similarities between On-Premise and Cloud. The differences have been listed below –

  • Licensing

SAP issues a different licensing model for individual deployments – either a traditional license or a subscription license. The On-Premise versions are classified under the traditional license. This suggests that the companies that opt for this deployment will be eligible to use it forever. The company will be charged a fee based on the number of people who have been authorized to use the SAP platform. Any subsequent maintenance and support fee is also based on this primary licensing fee and will remain unchanged unless the company desires to add more personnel to its SAP task force.

SAP S/4HANA Cloud uses the subscription license. This means that they will have to pay an annual subscription fee that will unlock all portals of the platform to them. The license needs to be renewed every one to three years, and the associated fee generated is based on the documents, bandwidth, storage, and the number of users.

  • Maintenance and Infrastructure

For SAP S/4HANA On-Premise, the customers will have to provide hardware, networks, and database. An IT department will be required to maintain the systems. While this is an expensive investment, it will eventually allow the customers a lot more control over their costs. Also, they will be able to upgrade their systems at their own desired pace.

In the SAP S/4HANA Cloud subset, the cloud network is responsible for maintaining the system, which eliminates the need for an IT department or the company’s database. Also, the system is wired to update automatically, so the consumers will be able to access the most recent model of SAP. This does lessen your control over the system since it will be managed entirely by an external body.

  • Personalisation Options

With the On-Premise system, the customers will have a lot of control over their personalization options. The customer can immediately personalize their existing SAP system to match any new business developments. This is made possible because the system is managed internally by the company and the IT staff.

The Cloud option works according to the code that SAP has defined for it. Thereby, customers do not have a lot of control over the ways in which it works, and the possibilities to modify it are significantly lower.

  • Time and Approach for Implementation

The time and effort required to implement the On-Premise deployment may be higher. This is because customers are required to test everything by themselves. Plus, they also have to invest time to create a team of people who will take the responsibility of setting up the new system manually.

The Cloud deployment uses a readymade platform that reduces the implementation time to a large degree. The integration process is automated as well, eliminating the need for manual labor.

  • Scope of Function

The On-Premise system provides you with all the provisions of the ERP Services, including certain additional services like Production Planning, Advanced Planning and Optimization, Detailed Scheduling, and the like.

The Cloud System has some of the best practice scenarios that can help you manage a business on the cloud. You can switch between editions made for marketing services, business, and the entire scope of ERP.

  • Costs

The costs of installing and maintaining the On-Premise version is higher than that of the Cloud system. This is because the On-Premise systems require the company to provide its own database and its own IT sector for development. However, the On-Premise system is largely a one-time investment and provides an added number of features and flexibility.

When should you choose the SAP S/4HANA On-Premise system?

Any industry which requires a large number of customization and features will benefit from using the On-Premise system. For example, large, well-known companies will benefit from using the on-premise system. Since the system is situated in the company’s own servers, it allows for more effective monitoring and configuration.

When should you choose the SAP S/4HANA Cloud System?

Growing companies that are looking for a flexible software platform should opt for Cloud deployment. The companies that require a high-performance offer that can be used for their basic business functions and more.

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