SAP S/4HANA: On-premise vs. Managed Cloud. Which is right for your Enterprise?

SAP S/4HANA for Enterprises

Whether you decide to implement S/4HANA enterprise management by migrating an existing SAP ERP solution or you are consider a new implementation initiative, it is important that customers choose a deployment option that best suits their business needs, budget and resources.

There are three main questions that typically get asked: What is the difference between on-premise and cloud editions? How to choose between them? And how will this choice affect my enterprise?

Let’s explore these questions and how you can make the right choice for your business.

SAP S/4HANA on-premise vs on-cloud edition

SAP HANA can be deployed on two delivery platforms: on-premise for maximum control, and in the cloud for fast time-to-value. Both have their pros and cons. Although, there is one more option: a hybrid delivery model that supports both on-premise and on-cloud scenarios.

SAP S/4HANA on-premise edition is an internal platform, located on your own servers, maintained by your company. SAP upgrades are released annually but have to be implemented and tested by your own team.

SAP S/4HANA Cloud edition is Software as a Service (SaaS) hosted on SAP’s servers and is maintained by SAP. Software upgrades happen on a quarterly basis. The cloud version is available to enterprises in both private and public editions. While private cloud comprises complete S/4HANA functionality and also extends geographical reach, public cloud helps address challenges in the LOB, overall strategy and ERP.

Main differences between on-premise and cloud editions:


SAP S/4HANA On-Premise SAP S/4HANA Cloud Edition
1. Licensing Model Traditional Licensing Subscription Licensing
2. Infrastructure & Maintenance Model Deployment and maintenance is implemented and managed by IT staff of a customer System infrastructure and maintenance are under SAP’s control
3. Speed of Innovation Planning, testing, controlling, upgrading and changing within the system are the full responsibility of a customer The automatic latest innovation upgrades happen quarterly without customer’s participation
4. Implementation Approach High compliance with individual business requirements and customization Predefined best-practice configuration with limited specialization
5. Functional Scope Full ERP Scope, integration with SAP Hybris Marketing, SAP JAM and SAP Ariba Network Key scenarios, Embedded ERP scenarios, integration with SAP SuccessFactors Employee Central, SAP Fieldglass, SAP Hybris Marketing, SAP JAM and SAP Ariba Networks

1. On-premise edition has a traditional licensing, which means a preliminary purchase with annual maintenance. License fee allows the company to own the software and reduces current maintenance fee. But the cost of the upgrade will be high. The cloud edition has a subscription license, which means that one predictable monthly payment covers everything from infrastructure to system upgrades.

2. SAP S/4HANA on cloud edition doesn’t requite you to invest in internal IT support, which ensures the smooth and stable operation of other IT applications and reduces expenses on IT staff. On-premise edition, on the other hand, provides high cost of entry and IT operations compared to SaaS because of infrastructure needs and staff support.

3. With S/4HANA on-premise, your team has to plan, test and control all system upgrades which happen yearly. All changes are under the organization’s control, while the cloud edition automatically upgrades the software quarterly without customer’s participation.

4. SAP S/4HANA on cloud is a limited version of on-premise edition. Deployment is faster, but the offering is very restricted. On-cloud edition is focused on the main key processes, with a limited set of settings. On the contrary, on-premise edition offers a full range of functions which can be extended for extra payment.

SAP S/4HANA on-premise edition has the full ERP like the current SAP Business Suite, but includes simplifications for SAP Simple Finance. It is integrated with SAP Hybris Marketing, SAP JAM and SAP Ariba Network.

The SAP S/4HANA cloud edition includes industry scenarios for marketing and the professional services industry. It also includes the most important scenarios required to run the entire enterprise in the cloud using a digital core. When you sort out the main differences between delivery platforms you can make a choice between editions best suited for your enterprise.

Who can choose SAP S/4HANA On-Premise Edition:

SAP S/4HANA on-premise edition is suited for any industry enterprises which require a full range of features consolidated with highly flexible customization. This edition is perfect for large enterprises with very well-proven business processes, which they are not interested to change.

For large, well-known enterprises, the on-premise platform fits the most. The system located on company’s own server provides opportunities for more effective monitoring and configuration than cloud edition.

Who can choose SAP S/4HANA Cloud Edition:

Middle size companies who look for a light and flexible database platform to scale while growing should consider SAP S/4HANA cloud edition for their businesses.

On-cloud edition is the best option for companies that require a high-performance offer that covers their core business strategies, but at the same time provides greater agility, flexibility and faster upgrades cycle (quarterly rather than annually). SAP S/4HANA Cloud edition makes sense for rapidly growing enterprises who want a platform that can grow and change with their tempo.

Who can choose SAP S/4HANA hybrid model:

As was mentioned at the beginning of the article, there is one more deployment option for customers who are interested in rapid business transformation with reduced initial cost. A hybrid model that uses both on-premise and on-cloud editions enables to store core data and applications on organization’s hardware and at the same time, allows to change the system and adapt new opportunities for business improvement without additional advance charges for a full-scale software license.

The SAP S/4HANA hybrid model is the expedient deployment option for companies who want to get two in one: flexible IT solutions and innovative business transformation under full control of core business applications.

Read: Important Benefits of SAP S/4HANA that Businesses Must Consider


Needs of an organization should define the right choice of the delivery platform. After all, the choice should help your business succeed and achieve planned goals. Therefore, enterprises must spend considerable time in designing a roadmap for their future and also in ensuring that the organization is prepared for the transformation.

To make your business transformation smoother and faster, the Savantis team offers consulting and support from consideration, planning and implementation to migration and upgrade services to enable you to achieve your business goals in a short time and realize business value. Savantis is an experienced SAP-certified partner, well aware of the challenges a company may meet on the way to the business transformation and we will be able to help you mitigate risks and maximize ROI.

Still have doubts which option of SAP S/4HANA is right for your business? Talk to one of our experts now: 

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