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What is SAP S/4HANA Cloud?

By Alexander S. Gillis

SAP S/4HANA Cloud is a software as a service (SaaS) version of SAP S/4HANA enterprise resource planning (ERP), a suite of integrated business applications. It helps organizations perform core business functions related to real-time analytics, scalability and automation.

According to SAP, the intent was to provide a next-generation intelligent ERP system that enables companies to achieve digital transformation. The main S/4HANA Cloud business modules include finance, sourcing and procurement, sales, professional services and manufacturing.

Cloud deployment means users can access S/4HANA's functionality without committing resources to hardware, databases or IT staff. The service includes technologies that can help bring intelligence into ERP applications, including machine learning, voice-enabled technology and an artificial intelligence offering with SAP Business AI.

SAP S/4HANA Cloud was launched in February 2017 and is ideal for medium and large enterprises. It's built on the SAP HANA database and takes advantage of HANA's in-memory processing and real-time data access. S/4HANA Cloud offering is available in editions for public cloud, private cloud and hybrid cloud environments. The Rise with SAP initiative, which was launched in 2021, enables customers to deploy S/4HANA Cloud on a public cloud infrastructure -- such as Alibaba, Amazon Web Services (AWS), Google Cloud, IBM or Microsoft Azure -- under a simplified SaaS license structure from SAP.

Three pillars of SAP S/4HANA Cloud's intelligent ERP

SAP S/4HANA Cloud incorporates the following three technologies that form the foundation of intelligent ERP, according to SAP:

• Digital assistant. SAP S/4HANA Cloud uses SAP CoPilot, a conversational AI assistant that lets users interact with ERP applications and functions. SAP CoPilot uses contextual data about the user and the task they're performing to provide information relevant to the task.
• Machine learning. SAP S/4HANA Cloud includes machine learning technology that learns how to perform and automate tasks that can be repetitive and error-prone when done manually, making them run more reliably and efficiently.
• Predictive analytics. SAP S/4HANA Cloud includes embedded analytics that can help predict the outcomes of actions. The analytics tools are configurable to the user's needs. They can be developed into apps, such as an inventory management app that can predict when stock will arrive or a sales quotation app that helps sales managers determine the probability of converting sales quotations.

Implementing, configuring and running SAP S/4HANA Cloud

S/4HANA Cloud comes in two primary editions, an S/4HANA Cloud Public Edition and an S/4HANA Cloud Private Edition. The Public Edition is hosted on a shared public cloud infrastructure that's managed by SAP, while the Private Edition is hosted on a private cloud infrastructure through hyperscalers, or large-scale cloud computing providers. The Private Edition also enables more customization and integration options than the Public Edition.

SAP also offers Premium and Premium Plus service packages to complement SAP S/4HANA Cloud's Private Edition. Premium Plus, in particular, offers more customization options, advanced features and support than the Premium service package.

Add-on packages are also offered to support automotive, life sciences, retail and utilities industry segments.

S/4HANA Cloud is configured with best practices and includes a built-in model that enables companies to standardize business processes. This is intended to reduce implementation time, cost and risk. SAP handles all back-end management, including upgrades, security and governance. Users generally need to integrate their data, then turn on the processes they need and turn off the ones they don't.

However, because SAP controls the basic infrastructure, it doesn't allow extensive customizations. This might make S/4HANA Cloud unsuitable for larger enterprises that typically require ERP systems to be highly customized to meet their needs.

Major updates to SAP S/4HANA Cloud are provided twice a year, with general updates every quarter.

Users access SAP S/4HANA Cloud from a web browser, and all business apps are launched from the SAP Fiori launchpad. To access it, users only need an internet connection, the URL and access rights.

Rise with SAP

In January 2021, SAP launched Rise with SAP, a cloud deployment and managed services offering that lets customers implement and run S/4HANA in a simplified SaaS model. SAP intended to simplify the implementation and management of S/4HANA.

When it was launched, Rise with SAP included a bundle of products and services centered on the digital core of S/4HANA Cloud.

In addition to S/4HANA, Rise with SAP offers access to the following supporting services:

• SAP Business Network Starter Pack.
• SAP Business Technology Platform.
• Signavio Business Process Management Solutions.
• A choice of hyperscalers, including AWS, Google Cloud or Microsoft Azure.
• SAP LeanIX.
• SAP Test Automation by Tricentis.
• SAP Enable Now.
• SAP Build.
• SAP Cloud ALM (Application Lifecycle Management).
• WalkMe.

SAP refers to Rise with SAP as a service for business transformation because the goal is to provide a cloud-based digital platform that enables companies to drive business innovation. It analyzes how the business works, enabling employees to respond quickly to changing business requirements, customer demands and market conditions. For example, a company could use the process to move from a product-centered focus to a service-oriented focus.

Rise with SAP was designed to evolve and include new capabilities and services as conditions change. For example, the vendor launched Rise with SAP packages for specific industry segments. It provides industry packages such as automotive, life sciences, retail and utilities.

Rise with SAP might be a harder sell for some consumers. They might not want to give up their existing on-premises SAP subscriptions because of cost considerations or concerns about the service's ability to handle complex migrations.

What is the difference between SAP S/4HANA on-premises and S/4HANA Cloud?

S/4HANA Cloud shares much of the technical DNA of its parent, the on-premises version of S/4HANA. For example, both were developed on the SAP HANA in-memory database. However, there are some significant differences between S/4HANA Cloud and the on-premises S/4HANA, including the following:

• Licensing. S/4HANA on-premises has a traditional licensing model, meaning customers pay upfront for the software, usually including a maintenance and support agreement. They own the software, but the upfront cost is high and customers are responsible for version upgrades. S/4HANA Cloud, in contrast, uses a cloud subscription model that includes maintenance and support. This means customers have a predictable periodic payment with lower upfront costs, but development and support options are limited. Rise with SAP is also another cloud option that provides flexible licensing for private and public cloud deployments.
• Management. S/4HANA on-premises requires customers to invest in their own development, maintenance and support teams. S/4HANA Cloud requires no internal support.
• Upgrades. S/4HANA customers must plan, perform, test and support version upgrades. S/4HANA Cloud major upgrades occur automatically twice a year.
• Functionality. S/4HANA Cloud is a limited version of S/4HANA, which means it has lower cost and faster implementation time than S/4HANA, although customers don't get the full set of features and capabilities. This gap in capabilities, however, has been closing more and more since S/4HANA Cloud's initial release.

What are the benefits of SAP S/4HANA Cloud?

Benefits that SAP S/4HANA can bring include the following:

• Faster ROI. SAP S/4HANA Cloud can be deployed more quickly than on-premises ERP systems.
• Flexibility. S/4HANA Cloud is a scalable service with several specialized editions and packages for organizations in different industries.
• Lower total cost of ownership. Cloud-based SaaS models reduce the total upfront cost associated with otherwise needed infrastructure and hardware. SaaS models are also commonly structured in a pay-as-you-go format.
• Quarterly updates. S/4HANA Cloud is updated every quarter.
• Real-time data processing and analytics. S/4HANA Cloud can process and analyze data in real time.

What are the challenges of S/4HANA Cloud?

S/4HANA Cloud's main drawback is that it has less functionality than the full on-premises version and generally fewer customization options. This makes it less suitable for large organizations with complex business process requirements that need customized capabilities.

Organizations with large amounts of data stored on legacy systems might also find the migration process complex. Likewise, integration with legacy systems might also require specialized middleware to ensure smooth data transfers.

Many organizations can still take advantage of S/4HANA Cloud by using it in hybrid environments. In these environments, they can use some S/4HANA Cloud functionality, such as S/4HANA Finance, while keeping more complex S/4HANA functions on-premises. Larger organizations can also use S/4HANA Cloud in smaller organizational entities, such as in different geographic locations or corporate divisions, while using S/4HANA on-premises in headquarters.

There are other ERP and cloud ERP tools available as well. Learn more about how SAP S/4HANA compares to Oracle Cloud ERP.