After rebuilding their Enterprise Resource Planning (ERP) solution, SAP launched S/4 HANA, its fourth-generation business suite to help businesses transform their digital needs. S/4 HANA is the successor to SAP ERP Control Center (ECC) and SAP R/3, delivering more advanced data compression technology, a simplified platform, and a more efficient memory solution. The S/4 HANA platform runs exclusively on the SAP HANA in-memory database architecture, where both on-premise and cloud-hosted implementations are supported.
While many companies have started upgrading their corporate ERP systems to this next-generation solution, choosing the right implementation option for your company’s budget, needs, and team can be a challenge.
Let’s take a closer look at the four different implementation approaches:
Cost: $$$$ | Customization: ★★★★ | Control: ★★★★
SAP S/4 HANA On-Premise is considered equivalent to the ECC systems that already exist today. Since this edition is an internal platform (meaning the S/4 HANA systems are hosted on a company’s servers), companies are allotted complete control over the architecture of the system. On-Premise offers the highest level of flexibility over customization, which includes the HANA database, applications, and servers. Companies can also edit core code and create custom links and transactions.
Ownership of the On-Premise edition is end-to-end, so companies have full discretion over maintenance and upgrade decisions regarding SAP-released support packs. In addition, companies have the ability to choose any third-party vendor support and application options they would like to connect to their S/4 system - without limitations.
Although On-Premise has the most effective monitoring and configuration options of the four approaches, its increased flexibility and customization comes at the highest price. Not only are there infrastructure and IT operations costs for hosting on an in-house server, companies are responsible for planning, testing, and maintaining yearly SAP system upgrades, support packs, and transports.
Best Fit: Large companies, or those with a disparate organizational structure looking for a full range of features and customization capabilities.
Cost: $$$ | Customization: ★★★★ | Control: ★★★
Hanna Enterprise Cloud (HEC) is commonly referred to as ECC in the cloud, offering the greatest customizable abilities of the cloud-based implementation approaches. HEC implementation is similar to that of On-Premise, but it is hosted in the cloud by either SAP’s servers or another vendor (e.g., AWS, Microsoft Azure). With the HEC deployment option, companies can leverage the full range of capabilities and functionalities without having to supply the on-site hardware, database, or internal support staff, reducing overall costs. Maintenance is also performed by SAP, or a combination of SAP and a cloud services provider.
Similar to On-Premise, companies have the freedom to edit core code and create custom transactions, ownership over upgrades, support packs, and transports, and full control over third-party vendor support and application options. The only key difference is where the system sits.
While HEC has many advantages, having SAP or another vendor host the system has a drawback. Although companies embracing the HEC edition can choose their third-party vendors, SAP must approve of these vendors first and they are limited by version. Therefore, after each new version is released, vendors must reapply to gain approval from SAP.
Best Fit: Large or medium-sized companies looking for high functionality and customization capabilities, but at a lower cost than On-Premise.
Cost: $$ | Customization: ★★ | Control: ★★★
Single Tenant Edition (STE) is an SAP-hosted cloud option, in which a company is the sole tenant of a dedicated cloud infrastructure. Due to some of its more restrictive functionalities and capabilities, STE is often considered a slimmed down version of On-Premise and HEC. Since this option is SAP-hosted, companies do not supply their own hardware, and maintenance is performed by SAP. STE offers companies a cost-effective option because of its standardized approach and limited customization capabilities.
Companies still have full access to all existing standard Application Programming Interfaces (APIs) and can copy and create custom transactions and catalogs. And, while SAP may maintain ownership of the S/4 environment, companies still have the ability to purchase third-party applications to connect to their S/4 systems.
However, when deciding on which implementation option to choose, STE has four key limitations to consider:
Best Fit: Small companies with a low user count looking for a fairly standardized approach, but with some customization and functionality capabilities.
Cost: $ | Customization: ★ | Control: ★★
Multi-Tenant Edition (MTE) is an SAP-hosted and owned cloud option and is considered the simplest of the four approaches. In the MTE option, a company shares the cloud infrastructure with other companies (i.e., tenants) instead of having that dedicated cloud application like in STE. Companies are not responsible for supplying the hardware and maintenance, and regression testing is supported by SAP, making it the most cost-effective solution. MTE provides the ability to group existing modules and create roles from those catalogs. And, while the capabilities and functionalities supported in MTE are limited, access is standardized and streamlined to provide the basic and necessary functions.
However, since various companies have their data stored in the same cloud infrastructure, companies do not have access to any of the ABAP layers beneath the web UI. Companies only have access to an SAP whitelisted set of APIs and are not able to create custom APIs. Companies cannot create or edit custom code or transactions, either. In addition, SAP has strict requirements for upgrades. Upgrades and support packs are released quarterly, and companies are expected to implement these changes within a two-week period. Companies can also only choose from an SAP-approved whitelist for vendors and third-party applications.
Best Fit: Small companies with a low user count looking for a standardized approach with minimal flexibility and functionality capabilities and at a lower cost than STE.
Whether migrating from an existing ERP solution, or starting fresh, choosing which SAP S/4 HANA implementation approach is right for your company can be a challenging decision. All four deployment options vary by cost, customization, and control, so taking the time to consider all aspects of each option and their implications is crucial. The choice should also involve the expertise and viewpoints from your audit and compliance teams, IT and security personnel, and key business leadership. To learn more about the impact of these four approaches on your security and risk management programs, check out this discussion from our experts:
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