SAP's S/4HANA Cloud goal is outcomes, not deployment model

When it was first released in 2016, SAP S/4HANA Cloud was seen as an underfeatured cloud version of the on-premises S/4HANA.

Since then, SAP has regularly added functionality to S/4HANA Cloud, positioning it as the functional core of SAP's intelligent enterprise, which includes using technologies such as advanced analytics and AI to help businesses become more flexible and resilient.

SAP has faced challenges in moving its large customer base that has remained on legacy on-premises systems to S/4HANA Cloud, but this migration is the best way to take advantage of S/4HANA Cloud's functionality and flexibility, according to Sven Denecken, senior vice president and COO of S/4HANA and head of product success at SAP.

In this Q&A, Denecken discusses why standardization is critical to a customer's S/4HANA Cloud success and why the cloud offers companies more flexibility to respond to changing business conditions.

What should customers consider as they think about deploying S/4HANA Cloud?

Sven Denecken: The deployment model [for S/4HANA] is not the issue. The issue is the degree of standardization and the willingness of the client to invest in their own IT or consulting resources to configure the solution to a certain degree. That's why you don't care where it's running -- infrastructure as a service should be a commodity -- but you do care how much companies are willing to standardize. Multi-tenant SaaS is the highest degree of standardization.

Most SAP systems are customized to varying degrees. Does the standardization of S/4HANA Cloud mean that customers can't customize to meet their needs?

Sven Denecken

Denecken: Of course we shouldn't punish a customer for [their decision to customize] because there will be some things they want to tweak. That's why extensibility with SAP Business Technology Platform [BTP] is the currency. You can update the core, you can update finance, you can update logistics, you can update manufacturing, and with a whitelisted API, there might be a very specific extension. Connecting that with Rise with SAP [the program to help move SAP customers to S/4HANA Cloud], we need to analyze where the customer is today, we need to agree with the customer on where they want to go, and then we do it at their pace. Because if you only have SaaS, there's only one way, and that flexibility helped us a lot. And that's what you see in the growth.

So it's a matter of simplifying and focusing on the outcome rather than how the system is deployed?

Denecken: Absolutely. In the end, it comes down to internal business processes. That's one of the topics that with S/4HANA is actually more than just the core itself. Supply chain is in there, as well as industry cloud solutions that we build as extensions on BTP, and sustainability [products]. Supply chain has shown that, again, the cloud deployment model has a superior approach to changes.

For example, we have the SAP IBP [Integrated Business Planning] module for supply chain. It sits in the supply chain function of S/4HANA, but it's a cloud solution that you can attach even if you're still on ECC [SAP ERP Central Component], if you are on the way to S/4HANA, if you run S/4HANA on your own servers or if you're on public cloud. IBP needed to change because for years we optimized supply chains on demand -- how much we buy created the demand, and that was your planning. But that turned around, not only with the ship [that got stuck in the] Suez Canal, the pandemic, the war. It completely turned around and constrained supply chains. But if a customer has IBP installed [on premises] and customized to their needs, it's too late to change that. In a cloud solution, you can turn it around to have a constraint-driven supply plan, which no one was thinking about before.

What are some other updates to the functionality in S/4HANA Cloud that illustrate its value?

Denecken: Another advance that we put out was in digital manufacturing. In one concrete example, a customer in Switzerland called Smart Press Shop produces most of the body of a Porsche Cayenne. They have a complete digital factory with everything on the public cloud. With SAP [Digital] Manufacturing Cloud, which is a part of S/4HANA Cloud, they've created a digital twin [of manufacturing operations]. So if they face any constraints -- either Porsche giving them more or less demand, or suppliers' [quantity of] steel or aluminum coming in more or less -- the digital twin of that reality helps the company to plan for that. It's like a control tower for the entire manufacturing [process]. That's something where we see that acceptance toward public cloud solutions. They have zero installed servers, they have zero people customizing, and of course those are evolutions that we thought even three years ago would never happen.

Jim O'Donnell is a TechTarget news writer who covers ERP and other enterprise applications for SearchSAP and SearchERP.