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The Definitive Guide To


SAP S/4HANA Cloud is a Software-as-a-Service (SaaS) version of the SAP S/4HANA ERP system and runs on the SAP HANA in-memory database. SAP S/4HANA Cloud allows users to access their data virtually, faster, and "in real time" to accelerate processes.

What is SAP S/4HANA Cloud?

SAP S/4HANA Cloud is a Software-as-a-Service (SaaS) version of the SAP S/4HANA ERP system. It is a suite of integrated business applications that enable the planning of company resources according to the needs of the company. With SAP S/4HANA Cloud, this suite is also available as cloud ERP software.

As the "intelligent ERP system of the new generation," the SAP S/4HANA Cloud was first launched in February 2017. With an ERP system as a cloud-based software version, the provider offers companies a solution that does not depend on their own resources such as internal hardware, databases, and IT expertise.

Users can virtually link their departments and functional areas, digitize their business processes, and thus adapt more quickly to new development trends.

The SAP S/4HANA Cloud runs on the SAP HANA in-memory database. This high-performance analysis application, which before the SAP cloud solution was only available in combination with various hardware, uses artificial intelligence to analyze large amounts of data, among other things.

The in-memory technology of the development and integration platform allows users to access their data faster and "in real time" to accelerate processes. With the SAP Cloud Platform, this also works virtually.


Figure 1: Integration of 2 Tier scenarios for Analytics | Source: SAP Blog

What is the difference between SAP S/4HANA On-Premise and Cloud?

Companies interested in a S/4HANA ERP solution can choose between the S/4HANA Cloud and S/4HANA On-Premise versions. Both models are based on the SAP Fiori design concept, which is designed to simplify and personalize the user experience. While they are very similar in terms of functionality, the variants differ in their implementation and handling.

We've already discussed all of the S/4HANA deployment options but let's see the basic differences between the SAP cloud and on-premise versions.

Deployment options

SAP S/4HANA Cloud - Public Cloud

The common variant of the SAP S/4HANA Cloud falls into the Software-as-Service (SaaS) category. This means that the ERP system resides on the provider's server and is fully operated and maintained by the provider. In general, it involves: 

  • Subscription-based software use rights
  • SAP manages software
  • Multitenant Software-as-a-Service environment

SAP S/4HANA Cloud - Private Cloud

In addition to the standard cloud, there is also a private version in the form of the SAP S/4HANA Enterprise Cloud (HEC). This is also referred to as Infrastructure-as-Service (IaaS), as the customer receives their own server from the service provider. Although this is a private SAP cloud, the system is still maintained by the provider. In general, it involves:

  • Perpetual or subscription-based software rights
  • SAP provides hardware, operations services, and optional application
  • Single-tenant environment

S/4HANA On-Premise

With the ERP solution S/4HANA On-Premise, customers use their own server to host the application. Before users can implement it on their internal hardware, they must first purchase it in the form of a traditional licensing model.

With S/4HANA On-Premise, the customer takes care of the maintenance and development of the software and manages all areas including the HANA database, data centers, and networks. This can mean more flexibility, but also more effort. Which updates or support packages are required is also at the customer's discretion. In general, it involves:

  • Perpetual software use rights
  • Customer responsible for hardware, implementation, and ongoing operations

Licensing models

In addition to the flexible deployments mentioned above, SAP provides different licensing models: perpetual licenses, subscription licenses, and consumption-based term licenses.

SAP S/4HANA Cloud - Public Cloud

All SAP software deployed in the cloud is available through a subscription-based license model that is paid as an annual subscription fee as part of a term contract. Subscription term lengths are usually between three and 5 years. In general, it involves:

  • Term license - typically 3 to 5 years
  • Annual subscription (recurring) fee based on estimated use — includes everything: software use, database, maintenance and support, hardware, and application management
  • Available for cloud solutions primarily (SAP S/4HANA; SAP C/4HANA; SAP Concur®, SAP Ariba®, and SAP SucessFactors® solutions; SAP Cloud Platform, and SAP BusinessObjects solutions)

SAP S/4HANA Cloud - Private Cloud

The private cloud of SAP S/4HANA has a consumption-based model for all SAP software deployed in SAP's public cloud. In general, it involves:

  • Term license
  • No annual commitment; payment based on actual usage — includes everything: software use, database, maintenance and support, hardware, and application management
  • Available for selected cloud offerings (SAP Cloud Platform, SAP Ariba®, and SAP Fieldglass® solutions)

SAP S/4HANA On-Premise

The on-premise perpetual license provides customers with the use of rights of the software in perpetuity to an agreed quantity of software. You can choose between "Classic" SAP software and SAP S/4HANA-branded software. In general, it involves: 

  • Perpetual software use rights
  • One-time license fee — includes software use rights and database
  • Annual recurring support fee — includes maintenance and support
  • Available for on-premise scenarios primarily (SAP ERP®, SAP S/4HANA®, SAP C/4HANA, and SAP BusinessObjects® solutions)

For example, if a company has 3,000 employees and it authorizes 150 employees to use SAP, it will only have to pay a license fee once and only for those 150 employees.

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

SAP S/4HANA Cloud offers numerous advantages, especially for small- and medium-sized companies. For example, many technical or financial requirements that would be necessary to implement a classic on-premise solution are eliminated. But what exactly speaks for the use of SAP cloud ERP software?

Flexible subscription

With the subscription model, a monthly fee is paid for using the SAP cloud platform. This is linked to the number of users. Users can add or remove users from the subscription as required. However, additional maintenance costs are never incurred.

Fast implementation

In contrast to an on-premise solution, SAP S/4HANA Cloud can be implemented faster. The pre-built platform is provided to the user in a standard version, so no custom programming is required. In addition, the user-friendly user interface requires no prior knowledge.

Increase efficiency

SAP best practices enable users to adopt standardized, proven processes and procedures for resource management. This simplifies and accelerates analysis and business processes. Industry-specific functions are also available in the form of individual roadmaps.

Maintenance and support

Thanks to the SAP cloud platform, customers do not have to worry about server capacity or software maintenance. The development and support of new products and services are also possible with little effort thanks to integrated analysis tools and configuration, pricing, and offering functions.

Fast innovation cycle

Flexibility and adaptability are particularly important for customers in rapidly growing companies. The SAP S/4HANA Cloud offers a quarterly innovation cycle. Users can benefit from new innovations such as machine learning or predictive analytics as they become available.


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The main pillars of SAP S/4HANA Cloud

The intelligent ERP system is based on three innovative technologies. These were developed by SAP and enabled SAP S/4HANA Cloud to achieve company-wide process improvement and a seamless digital transition. The three pillars at a glance:

SAP Digital Assistant

SAP S/4Hana Cloud provides users with a virtual assistant, SAP CoPilot. By using artificial intelligence, the assistant can adapt to the user and their role based on contextualized information. The natural interaction via voice and text commands facilitates the use of ERP applications and functions. 

SAP Machine Learning

The integrated machine learning in SAP S/4HANA Cloud enables users to automate tasks. This is particularly useful when tasks are recurring and errors could occur due to manual execution. In addition, automation means increased time savings. 

SAP predictive analytics

Thanks to SAP Predictive Analytics in SAP S/4HANA Cloud, informed decisions can be made quickly. In fact, the analysis tool can predict the results of certain actions by taking into account all data available to it. In the form of individual applications, the tool can be adapted to the user's needs and application areas.


What are the biggest challenges of the SAP S/4Hana Cloud?

In 2018, LeanIX and PwC conducted a study in which various companies were asked about the SAP S/4HANA ERP system. 65 percent of those surveyed said that migration to SAP S/4HANA was an important part of their digital development strategy.

The ERP system is therefore not seen as a mere data management tool, but as a driving force behind the digital transformation, which can be used to completely re-align company models and processes.

However, the transition to S/4HANA involves some challenges. Since SAP plans to discontinue mainstream maintenance for its current ERP solutions from 2027, companies must prepare for migration to S/4HANA now.

According to the study, the biggest challenges are existing, complex IT landscapes, unclean master data, and proprietary developments in ABAP that are not compatible with S/4HANA. The respondents also see inconsistent business processes that need to be harmonized as a major hurdle. Furthermore, there are concerns about the necessary expertise and stakeholder support.

The study also found that most companies do not yet feel ready for the SAP Cloud Platform. 44 percent of respondents said they would prefer an on-premise solution but wanted to prepare for a migration to the cloud. There are several reasons for this reluctance: On the one hand, they have already invested in an expensive hardware and their own IT infrastructure. On the other hand, SAP offers a slimmed-down, smaller range of functions in its cloud version.

In addition, many companies already use other cloud solutions for various business areas. Integrating these into a new ERP cloud system represents a further challenge.

How do you migrate to SAP S/4HANA Cloud?

Companies have two options when migrating to SAP S/4HANA. Enterprise architects differentiate here between the greenfield and the brownfield approach. In the greenfield strategy, the SAP system is implemented from scratch. Although all data is transferred in a cleansed form, processes must be re-built and adjusted.

When switching to the S/4HANA Cloud variant, companies cannot avoid this effort because the entire system landscape has to be reworked. In the brownfield strategy, which is often used in the on-premise solution, a system conversion takes place. This means that current processes are adopted and optimized.

Migration to the SAP S/4HANA Cloud is a multi-step process and requires good planning. In addition to the SAP S/4HANA Migration Cockpit tool, there are useful enterprise architecture (EA) tools that simplify the transition to digitalized management and provide a transformation roadmap. According to the study, 73 percent of those surveyed are already taking advantage of the benefits of business capability mapping.

This concept is used by enterprise architects and serves as a bridge between strategy and implementation in IT. Professional enterprise architecture solutions such as LeanIX integrate seamlessly with SAP Solution Manager, so that the current status, progress, and target architecture are always kept in view.



Even though the migration to the S/4HANA Cloud is challenging, the SAP Cloud Platform offers companies the opportunity to implement a unified and efficient ERP system that saves costs and effort in the long run.

In contrast to the on-premise solution, customers with the S/4HANA Cloud variant relieve their own server and do not have to worry about software maintenance. They also benefit from fast data processing, the latest innovations, and flexible pricing models.

To make the transition to S/4HANA Cloud or On-Premise as smooth and transparent as possible, appropriate enterprise architecture tools with S/4HANA and a team of SAP experts are required: These divide migration into different phases and ensure that a company keeps track of its system restructuring.

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