A buyer's guide to S/4HANA Cloud SaaS ERP

What is S/4HANA Cloud?

S/4HANA Cloud emphasizes simplicity and standardization for companies that prefer a cloud-focused ERP strategy. It was formerly called S/4HANA Cloud Essentials Edition (ES), and prior to that was known as Multi-Tenant Edition. With this product, many of the common benefits of cloud computing take center stage. That includes outsourced management of infrastructure, shorter innovation cycles, the ability to easily provision new users or functionality, and the capacity to scale up computing power as quickly as needed.

With S/4HANA Cloud, companies that don't want to allocate internal resources for deploying and managing infrastructure can outsource many of the foundational requirements of their ERP system to an outside party. SAP hosts and manages the cloud environment, installs upgrades and handles all other aspects of managing the platform on which S/4 HANA rests. That eliminates the need to invest in dedicated on-site servers and associated infrastructure.

Functional scope

Simplicity comes at a cost, though. S/4HANA Cloud is missing many of the features of SAP's full-blown ERP product. For businesses whose needs are primarily centered around core financial modules, this version will probably be a good fit. A subset of SAP's industry products are available for S/4HANA Cloud, and localized versions are available for 42 countries.

S/4HANA Cloud is also integrated with SAP SuccessFactors Employee Central, which handles HR; Fieldglass, which handles vendor management; Hybris, which handles e-commerce and CRM; and Ariba Network, which handles procurement and supply chain management.

Extensibility

The ability to customize and enhance S/4HANA Cloud is more limited than with other versions of the product. Access to many of the familiar SAP development tools are missing, and experienced SAP consultants may initially decry the limitations of a multi-tenant version. SAP has rolled out some new tools, however, that provide considerable flexibility.

In-App Extensibility gives power users functions such as creating new fields and adding business logic. Side-by-Side Development opens up a wider range of possibilities. Even though it lacks the familiarity of traditional SAP customization methods, a creative developer can used this to extend S/4HANA Cloud very effectively.

S/4HANA supports the use of partner-developed content, but partners must add those configurations manually.

Licensing

S/4HANA Cloud is available on a subscription basis only. Some of the other S/4HANA configurations allow for a traditional perpetual license model, but the S/4HANA Cloud product is strictly sold on a pay-as-you-go basis. As with many cloud-based products, hosting and infrastructure management are incorporated into monthly fees. Given the nature of ERP implementation and usage, multi-year contracts are common.

Who manages the environment?

S/4HANA Cloud runs on the SAP Cloud Platform (SCP), a multi-tenant (public cloud) platform managed by SAP. Customer data is colocated with that of other SAP customers in a shared environment. It's more cost-effective than segregated private cloud resources, but there is a trade-off. Customers of S/4HANA Cloud have considerably less flexibility and fewer extensibility options than they do with the more expensive, more complex variations of S/4HANA.

Suitable implementation scenarios

S/4HANA Cloud is limited to new -- that is, greenfield -- implementations. In other words, it is not suitable for companies performing a direct migration from an older SAP instance.

Customers planning a move from SAP R/3 or ECC would need to implement a new system from scratch. Given many of the limitations that come with S/4HANA Cloud, though, it's unlikely that R/3 or ECC customers would be satisfied with this version anyway. Many of the customizations created on an older SAP system cannot be used with this version, and the limited functional scope of S/4 HANA Cloud could mean a downgrade for most customers. For these reasons, the vast majority of S/4HANA Cloud customers will be comprised of net-new implementations.

The upgrade process

With S/4 HANA Cloud, upgrades are not optional, and customers have no control over the timing when new features are added to their software. SAP rolls out upgrades four times per year, and they're installed automatically.  For some, this represents an advantage, insofar as it eliminates the traditional disruptive upgrades that typically occur every year or two with on-premises systems. In the Cloud, customers get new functionality faster, without embarking on large-scale upgrade projects. On the other hand, some customers might view forced quarterly upgrades as a negative, a more frequent (albeit smaller-scale) disruption over which they have no control.

S/4HANA Cloud use cases

The most common use cases for S/4HANA Cloud are new SAP customers or subsidiaries of larger enterprises running on SAP. S/4HANA Cloud provides a standardized platform for those kinds of scenarios, with relatively easy integration to a large enterprise SAP implementation.

S/4HANA Cloud does require customers to accept some degree of standardization, though. New customers should expect that the emphasis will be on reworking their business processes to fit the software, rather than the other way around. To quote a common phrase among SAP consultants, S/4HANA Cloud customers should plan on "embracing the standard" in order to make their ERP implementation fully successful.

Indeed, standardization has its advantages. If customers can live with the limitations of S4/HANA Cloud, they can enjoy the benefits of an SAP system at a more affordable price. At the same time, they will be setting the stage for growth, if and when they need to step up to a more robust and flexible version of SAP's product.