In this blog, we will outline the different S/4HANA options that SAP customers can choose from, including S/4HANA Cloud and RISE with SAP, and discuss the potential advantages and disadvantages in relation to differing customer needs. As ECC support and maintenance will end by 2027 and with S/4HANA on-premise no longer receiving new innovations it’s crucial for SAP customers to know the available choices, including the possible drawbacks and benefits of each option. This knowledge will help SAP customers effectively plan their transition or explore alternatives in time for the deadline. If you would like to know more about what S/4HANA is, we have previously written an SAP S/4HANA overview article available here.

There are several ways to deploy SAP S/4HANA which cater to diverse customer ERP positions and demands. SAP customers can choose from the following options to align their ERP transformation with their organizational goals:

• S/4HANA on-premise
• S/4HANA Cloud, public edition
• S/4HANA Cloud, private edition
• RISE with SAP

Let’s look at each option in more detail.

S/4HANA On-Premise (Contract Conversion)

SAP S/4HANA on-premise represents the traditional ERP implementation approach, empowering customers with complete control over system customization and maintenance. SAP announced a maintenance availability commitment for SAP S/4HANA until 2040, guaranteeing a long-term support strategy for the next generation of SAP software. However, SAP also announced they will be focusing innovation on S/4HANA Cloud only. So, while S/4HANA on-premise will still have support until 2040, it won’t have significant new functionality.

Customers can undergo an S/4HANA Contract Conversion by terminating their entire existing contract and replacing it with new S/4HANA licenses and terms & conditions. A contract conversion allows customers to continue using Business Suite/ECC Software until the completion of their S/4HANA transition, along with their new S/4HANA licenses. This can be beneficial to customers as it allows the opportunity to repurpose unused software. When terminating the current agreement, SAP customers are also eligible for a credit of the value of their existing software.

Previously, the credit for the conversion was capped at 90% of the new S/4HANA maintenance base. The maintenance base is the value of all the SAP software owned by a customer. However, as of July 2023, SAP has made changes to the credit policy for customers transitioning to SAP S/4HANA on-premise using the Contract Conversion. The credit limit has been reduced to 80%, and further adjustments are planned to reduce this further. It is important that SAP customers are aware of the diminishing credit opportunities to plan their transitions accordingly.

Example 2023 Credit Conversion Calculation

• A customer has a maintenance base of $1,000,000 on Business Suite/ECC Software.
• The new S/4HANA contract has a value of $1,200,000.
• They will receive a credit of up to 80% of the $1,200,000 = $960,000.
• The credit of $960,000 is applied towards the purchase of the SAP S/4HANA on-premise software, which means the customer only pays the remaining $240,000.

As a general rule, S/4HANA software tends to be 10% more expensive and SAP does not allow for the reduction of the maintenance base. This means customers should be prepared to see a minimum increase of 10% to their maintenance base with no provision to reduce it and also be prepared to pay at least 20% of the new contract up-front.

Overall, S/4HANA on-premise provides control and customization for customer’s ERP systems, backed by a commitment to support until 2040. SAP customers should be aware of diminishing credit opportunities and lack of new functionality over the coming years if they choose to migrate to S/4HANA on-premise. Note that customers who migrate to S/4HANA on-premise still have the option to later migrate to S/4HANA Cloud.

S/4HANA Cloud, Public Edition and Private Edition

SAP S/4HANA Cloud, public edition, introduced 2017, caters to net new as well as existing customers in search of a basic cloud-based ERP solution. The public cloud option offers core ERP functionality for a range of industries in 42 countries. S/4HANA public is considered the standard cloud deployment option, while the other option S/4HANA Cloud, private edition offers different scopes of service, with the latter having a broader scope and more flexibility.

S/4HANA Cloud, public edition offers a limited set of features and minimal customization possibilities. As a result, customers might find themselves with fewer features and products to choose from. Prospective customers must also be aware that opting for public cloud means relinquishing control over support, as well as having access to a limited selection of languages and industries. S/4HANA public cloud includes the following solution areas; manufacturing, professional services, sourcing & procurement, HR, sales support, and financial services.

Additionally, the deployment of the public cloud necessitates a greenfield implementation, which involves building a new system or project from scratch, without being constrained by existing technologies or processes. The shared infrastructure of the public cloud might not align with the strict security concerns of certain customers. Therefore, customers should carefully evaluate their specific needs and security requirements before choosing this option.

For existing SAP ECC customers looking to transition to the cloud while retaining configuration and extensions, SAP S/4HANA Cloud, private edition is an option to consider. Upgrades have a similar approach as on-premise solutions, which gives customers the control over the upgrade pace. Extensibility options allow businesses to adapt the ERP solution to specific needs.

The choices for deploying S/4HANA private cloud are diverse. Customers can opt for a ‘lift & shift’ strategy when moving from SAP S/4HANA to the cloud. This involves shifting the SAP system without altering the software or its version. Existing ERP systems have two approaches: “brownfield” for those meeting current and future data and structure needs, and “greenfield” for a complete redesign of data and structures. Additionally, a selective data transition is available, particularly beneficial for redefining master data and structures. It’s important to mention that the last option is often provided as a consulting or service package. For customers that seek a more secure environment, S/4HANA private cloud may be better suited as it is not shared with other customers, alleviating security concerns.

The decision between S/4HANA Cloud, public edition and S/4HANA Cloud, private edition hinges on individual business requirements. For those starting anew or seeking streamlined implementation with regular updates, the public cloud would be a choice to consider. On the other hand, existing ECC customers that seek customization and retaining extensions may find the private cloud option more suitable. In either case, customers should undertake careful analysis and ensure alignment with long-term goals. These are essential considerations for a successful ERP transformation journey.

SAP HANA Database

Regardless of the S/4HANA deployment option SAP customers choose, they should also be prepared for a transition to a HANA database. This transition adds more time, cost, and complexity to the migration process. For on-premise, SAP customers can select either the Runtime or Enterprise edition of the HANA database, and each edition has its own advantages. The Runtime license lets SAP customers use licensed SAP applications on the database, but with some limitations on how data is integrated. On the other hand, the Enterprise version offers more flexibility though is usually more expensive. It allows both SAP and non-SAP applications to use the HANA database and provides better data integration capabilities. It’s important to note that customers considering S/4HANA on the public and private cloud don’t need to go through this transition. This is because S/4HANA Cloud comes with its own dedicated SAP HANA database.