SAP Cloud: Public vs. Private

Public Cloud vs Private Cloud

The transition to the SAP Cloud

Slowly but surely, more companies are realising the strengths and benefits of the SAP Cloud to secure decisive strategic and financial advantages. At a time when flexibility, efficiency, and innovation are crucial to market success, the cloud offers opportunities that go far beyond traditional IT infrastructures.

This was not always the case. For a long time, on-premises systems dominated companies' system landscapes. For a long time, companies have been concerned about data security and data sovereignty regarding cloud applications. However, the advantages and positive experiences with cloud providers in the non-ERP area now outweigh these concerns. Many SAP customers, and those who want to become customers, are evaluating the switch and asking themselves: Is it worth moving to the SAP cloud? And if so, which solution is the best fit - the SAP S/4HANA Cloud, Private Edition or Public Edition? Or even a hybrid form?

Read this blog to learn more about the various cloud options, the advantages and disadvantages of each, and the best route to the SAP Public Cloud.

According to the DSAG Investment Report 2024 (German SAP user group), most companies still rely on SAP Business Suite (68%) and SAP S/4HANA on-premises (44%). The use of SAP Cloud is still subdued, but the number of cloud users is slowly increasing: in the private cloud, usage rose from 8% to 11% last year and in the public cloud, from 3% to 6%. Compared to SAP Business Suite and SAP S/4HANA On-Premises, SAP Cloud usage is still somewhat restrained, but an upward trend is recognisable.

Infrastructure & costs

The SAP Public Cloud, officially known as the SAP S/4HANA Cloud Public Edition, is hosted by SAP in a shared cloud infrastructure as Software-as-a-Service, allowing companies to share the infrastructure with other companies (multi-tenant). This results in greater cost efficiency and economies of scale. Companies benefit from significantly lower implementation costs and licence savings, as the public cloud is offered on a pay-as-you-go basis. All fees for use, maintenance and updates are already included in the price model. In practice, it has been shown that the implementation costs for the public cloud are often only a third or even a fifth of the costs of introducing a classic SAP ERP system. The SAP Public Cloud is available from a minimum user base of 25 users and is accessible to many companies.

Implementation

Implementing the SAP Public Cloud requires less effort from the company and the implementation partners. Therefore, the project runtimes for implementation are significantly shorter with the SAP Public Cloud, meaning that in many cases, a go-live is possible in a period of just 6 to 12 months.

Updates & AI

SAP automatically carries out all updates or release changes. This means that the software is always up to date, and there is no need to install updates. Companies benefit from more innovations from day one and are ahead of the game in digitalisation.

Standardisation

The SAP Public Cloud requires a rethink among management and users, as it specifies standardised processes. This entails considerable change management, which must be supported by top management. Unlike previous systems, in-house developments and individual customising are impossible in the public cloud. Instead, it requires a new process design based on the fit-to-standard principle and a greenfield approach. The advantage lies in the standardisation, which enables a clean core and removes old ballast. Customisation is possible in three different ways:

Key user expandability
Developer extensibility
More complex extensions that can be added via the integrated SAP BTP (Business Technology Platform)

Therefore, cloud customisations are possible, but only where SAP prefers them.

Infrastructure, costs & security

In contrast to the public cloud, the private SAP cloud offers companies the option of operating SAP applications in a dedicated cloud environment provided exclusively for their use (single tenant). In the private cloud, the cloud does not have to be shared with other companies. This enables greater control and security over your data. The private cloud can be particularly advantageous for industries with strict compliance requirements or companies with sensitive data. A subscription model also covers the costs of a private cloud. However, the costs of operating a private cloud are higher as it requires a more comprehensive infrastructure and offers fewer economies of scale than the public cloud. In addition, the total cost of ownership is generally higher for individually implemented solutions.

Implementation

Implementing the SAP Private Cloud is comparable to that of classic SAP systems. The effort and duration of the implementation depend on a company's individual requirements. As a rule, the company and the implementation partner must invest more time to utilise the full range of functions.

Updates

The updates in the SAP Private Cloud follow the previous annual release model. However, to remain in regular maintenance, companies must upgrade at least once every five years. With the private cloud, companies must ensure regular updates to their software to stay up to date and benefit from innovations.

Individualisation

The SAP Private Cloud offers the option of making specific customisations and configurations to meet individual business requirements. Existing processes can also be transferred to the private cloud, which means the changeover is possible with the brownfield approach or a shell migration.

To stick with the flat example, the private cloud is, therefore, the architect's house that can be completely customized.

Decision

Which SAP Cloud is suitable for whom?

Whether the public cloud or the private cloud is an option depends on the company's requirements:

Public cloud: a favourite of the SME sector

With its flexible and cost-efficient structure, the SAP Public Cloud scores particularly well with medium-sized companies.

The subscription model saves high initial investments, which reduces the financial burden and ensures predictable, regular costs. The public cloud also offers high scalability, allowing SMEs to react quickly to growth and market changes without setting up additional infrastructure. Fast implementation and continuous updates help SMEs always work with the latest technology.

What's more, future technologies such as machine learning and extensive data analyses, once the privilege of large companies, are available via the SAP Public Cloud.

Private cloud: popular with companies with complex requirements

The SAP Private Cloud suits companies with high security, compliance and customisation requirements.

This solution offers comprehensive control over your systems and data, which is particularly important for industries with strict regulatory requirements, such as financial services, healthcare and manufacturing.

In addition, the SAP Private Cloud enables customised adaptations and in-house developments that optimally support specific business processes and can thus secure competitive advantages.

Hybrid approach: it's all in the mix for Two-Tier

The decision in favour of the SAP Cloud does not necessarily have to be an either/or question.

Companies can use both the public and private cloud and thus combine the advantages of both approaches. For example, the head office can retain control over systems using the private cloud to fulfil the high-security requirements, compliance specifications and numerous in-house developments. At the same time, subsidiaries can utilise the public cloud to benefit from its flexibility and integrate smaller units more efficiently. This so-called two-tier approach makes it possible to create customised solutions for different areas of the company.

Both the private cloud and the public cloud offer advantages. Which one is best for your company depends entirely on your requirements. For the path to the SAP cloud to succeed, the first step is to take stock of the current situation and the target scenario. Then, it is important to combine technical expertise with skilful change management and find the right implementation partners for a smooth and successful transition to the cloud.