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Decide on SAP S/4HANA Cloud: Single-tenant vs. multi-tenant edition
Understanding the benefits and limitations of S/4HANA Cloud versions is essential to making the right choice. Here are some factors for consideration.
Choosing between S/4HANA single-tenant edition and multi-tenant edition is an important decision for CIOs and other business leaders.
Both SAP S/4HANA Cloud essentials edition (ES) -- formerly called S/4HANA Cloud multi-tenant edition -- and S/4HANA Cloud extended edition (EX) -- formerly called S/4HANA Cloud single-tenant edition both have their strengths and limitations. Understanding the differences between the two can help leaders ensure that they select the edition of the ERP software that best meets their business needs.
Carrier Global Corporation leaders faced just this issue first for the company's U.S. group, then for its European subsidiary, Carrier Commercial Refrigeration Europe.
One of the company's goals for Carrier Global was to reduce its indirect labor force based on modernizing the IT architecture, said Joseph Palomba, enterprise architect at the heating, ventilation and air conditioning company, based in Palm Beach Gardens, Fla.
"From a business goal perspective, we were running a 50-year-old mainframe [AS/400] that cost us [about] a million dollars a year and the IT architecture around the mainframe was disparate," he said. "We had many, many different applications that were end of life. So, there was a goal to modernize the IT applications."
The Carrier buying team wanted cloud ERP for its many advantages over on premises. SAP was a logical choice because Carrier is a deep-rooted SAP company, especially in the commercial HVAC space and even in the refrigeration space. They chose S/4HANA Cloud and then had to decide on which version.
Like Palomba, leaders who are choosing between S/4HANA Cloud single-tenant edition and multi-tenant edition should consider several issues. Here are a few.
Cost
Both SAP Cloud multi-tenant and single tenant are SaaS products requiring greenfield implementations. And both multi-tenant and single-tenant versions of S/4HANA Cloud can provide cost savings when compared with the on-premises version of S/4HANA.
Multi-tenant and single-tenant cloud options are both less expensive than an on-premises deployment, said Rebecca Wettemann, a principal at Valoir, a Boston-based research firm. In both single-tenant and multi-tenant S/4HANA Cloud, companies don't have to buy costly infrastructure. However, multi-tenant is significantly less expensive.
Multi-tenant is easier for SAP to manage because companies share standardized code, Wettemann said.
More tools are included in the S/4HANA Cloud ES which is also something to consider.
Multi-tenant can save organizations money because SAP "throws in" a number of tools, such as the Enable Now training tool, as well as an automated testing tool that allows companies to build and run automated test scripts, said Michael Jolton, vice president of core ERP presales at Nimbl LLC, a Denver-based consulting company.
"With single-tenant, you have to license those tools separately," Jolton said.
Implementation time
The multi-tenant version of S/4HANA Cloud is also the winner in the time-to-implement category.
"First, SAP has already preconfigured the code, optimized it for the hardware, done the security . . . and it's already pre-tested," Wettemann said.
Training is also mostly standard, she said.
"So, from a time-to-deploy perspective, it's a lot faster," Wettemann said.
SAP S/4HANA Cloud ES, simply doesn't require the same complex implementation strategy as compared with S/4HANA Cloud EX -- as long as companies use it the way it was intended.
Implementing the preconfigured S/4HANA multi-tenant can be very quick -- four to six months, Jolton said.
"With S/4HANA multi-tenant, your implementation should basically be master data setup and data migration, and, of course, integrations and extensions," he said. "Where people get caught up and where multi-tenant projects go wrong is when companies want to make S/4HANA multi-tenant do something it's not configured to do."
Instead, CIOs and other business leaders can look to S/4HANA single-tenant edition and accept the added time-to-implement.
The single-tenant model enables enterprises to do more customizations, and consequently implementation takes longer than multi-tenant, Wettemann said.
"So, I may want to implement things that are not in the standard code that are specific to my business, which means I need to go through that whole development test cycle before I can go to production," she said. "Also, if I'm doing more customization, then I'm going to have more things that I need to train users on beyond that core SAP S/4HANA training, so I'm going to have to develop custom training for that."
Those endeavors take time.
Implementing the single-tenant version could take from eight to 12 months, Jolton said.
Cloud provider choice
The selection of a cloud provider is also a factor when it comes to the S/4HANA single-tenant vs. multi-tenant decision.
In an S/4HANA multi-tenant cloud deployment, SAP shares the infrastructure, applications and platforms among multiple customers so that they share all resources, said Christian Schuette, the owner and managing director of SapXPerience GmbH, a consulting company in Zug, Switzerland.
"The advantage is that SAP manages scalability, security and upgrades in the multi-tenant cloud," he said.
Single tenant offers more choice in this, as well.
Companies that choose the single-tenant option can purchase licenses to run S/4HANA on the big three cloud providers, Amazon Web Services, Microsoft Azure and Google Cloud, Jolton said.
And that means more control.
With an S/4HANA single-tenant cloud deployment, an enterprise gets dedicated access to the cloud infrastructure, applications and platform, Schuette said.
Upgrades
Multi-tenant upgrades are quarterly and mandatory, which offers both advantages and disadvantages.
The good: Companies are constantly getting the "latest and greatest" functionality, Jolton said.
The bad: Companies that have implemented S/4HANA Cloud ES must accept every cloud update and have no say about timing, Jolton said.
"The challenges we've seen is that sometimes stuff that was there, isn't there anymore, and you might've been using it," he said. "And you do have this continual need every quarter to make sure that you've run your regression tests, particularly on any kind of integration, and everything's working."
With upgrades, as with other areas, single-tenant offers more choice -- and more responsibility.
SAP S/4HANA Cloud EX provides customers with two optional upgrades per year, but customers are contractually obliged to perform one upgrade every two years, said Marco Valencia, vice president, SAP S/4HANA Product Success & Customer Co-Innovation at SAP, in an email.
That allows for flexibility.
A single-tenant cloud deployment allows a company to select a convenient time to implement the upgrade, according to Jolton.
Business and integration needs
No ERP conversation is complete without addressing the business case. An ERP system -- whether on-premises or cloud ERP -- should deliver on business goals. Business leaders must use those as guiding principles on whether single tenant or multi-tenant is the right choice. Understanding which technologies are currently in use within the company is a key factor in this.
For Carrier Global, a key factor in deciding between the multi-tenant and single-tenant cloud editions of S/4HANA was the fact that two-thirds of the company's business was run on Force.com, Palomba said.
"Our sales processes, our service planning, our execution and dispatching processes were all done on Force.com," he said.
This meant Carrier Global didn't need the horsepower of S/4HANA EX.
"When you're comparing the investment of single tenant versus multi-tenant from that perspective, we wanted as light a solution as we could in the back office because our investments in operations and sales were made somewhere else," he said.
Carrier needed a simplistic back-office system to receive service transactions coming from another platform into SAP to essentially cost and invoice its customers, Palomba said.
"Around the edges, we needed account receivables, accounts payable, general ledger -- just basic financial capabilities," he said.
Palomba and team chose to implement S/4HANA Cloud ES in its U.S. business (i.e., Carrier Global) on the basis of its goals and existing technologies.
Customization needs
S/4HANA multi-tenant doesn't have the customization capabilities of single tenant, but there is some choice.
"I was looking for things like service contracts, service orders and revenue recognition and the platform did not have those," Palomba said. "So, Carrier [Global] and SAP entered into a co-innovation agreement and SAP actually built some missing functionality for me."
In January 2020, Carrier Global went live on SAP S/4HANA Cloud ES, Palomba said.
When it comes to deciding between a single-tenant and a multi-tenant implementation, Palomba said it also important to understand that "[Business] complexity typically drives increased functionality complexity."
That's why Palomba and team recently opted to implement S/4HANA Cloud ES for its European business, Carrier Commercial Refrigeration.
"This is a 12-country, very accelerated implementation of S/4HANA that's also connected to Force.com and ServiceMax," he said. "The speed at which I'm going to execute this project [and its complexity] just didn't lend itself to multi-tenant. This program was too aggressive, had too many complicated requirements that weren't necessarily built into the multi-tenant product."
The single-tenant version of S/4HANA had more customization capability to handle the complex needs, Palomba said.
However, that kind of choice is not free.
"[S/4HANA Cloud EX] comes with an additional software price tag because I'm actually building out my own infrastructure that I didn't have to worry about in the multi-tenant," he said. "With the multi-tenant, I signed the contract, SAP stood up an environment within a week and I was ready to go."
