SAP Cloud: Public vs. Private

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.

How widespread is the use of the SAP Cloud today?

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.

Will the cloud prevail?

There will certainly be no way around the cloud for companies in the future. The announcement by SAP CEO Christian Klein in 2023 that innovations will only be made available in the cloud in future is a clear sign of SAP’s future strategy. Although the on-premises solutions will continue to undergo further functional development, innovations such as artificial intelligence (AI) and green ledgers will only be available in the SAP cloud.

Larger function modules and enhancements based on the SAP Business Technology Platform (BTP) are only available in the cloud.

The full range of functions is not yet available in the public cloud, unlike in the private cloud or the classic on-premises solutions. However, given the current high speed of SAP development, updates are being added to the public cloud almost daily, meaning that industry-specific retail, fashion or manufacturing functions are already available in addition to the very mature finance functions. Therefore, it is expected that the full range of functions for all 25 industries covered by SAP will also be available in the public cloud in the next 1-2 years—all the more reason to consider the SAP Public Cloud as an option.

SAP S/4HANA Cloud, Public Edition – The direct route to Clean Core

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.

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.

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.

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.

SAP S/4HANA Cloud, Private Edition – The customised path to the cloud

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.

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.

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.

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.

The most important differences at a glance

The most important differences

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.

How do I start my journey into the SAP Cloud?

Getting started with the SAP Cloud, whether public or private cloud, always begins with an SAP Digital Discovery Assessment (DDA). This online tool helps companies to determine which cloud version best meets their requirements.

It is recommended that the DDA is carried out with an SAP partner to determine the exact range of functions required. The assessment provides an immediate result on whether the public cloud is suitable.

What is essential when choosing the right implementation partner?

It makes sense to work with an experienced partner for both the digital discovery assessment and the implementation of the SAP Cloud. But what characterises a good partner?

• SAP Partner: Comprehensive expertise in SAP systems is essential. Therefore, it is good if the implementation partner has a close partnership with SAP.
• Holistic approach: The partner should know all processes end-to-end and be familiar with the entire SAP infrastructure, from the public cloud to the private cloud and beyond.
• Roadmap: The partner should keep an eye on SAP’s development planning in order to be able to make recommendations for future functions and add-ons via SAP BTP and avoid unnecessary costs.
• Change management: Transformations such as SAP Cloud are not just IT projects but “people projects”; the partner should be very experienced in supporting companies with organisational change management.
• Customer projects: Practical experience from numerous customer projects indicates the partner’s expertise and competence.

Sneak Peak: The first SAP Public Cloud implementation in the Nordics

KPS supports a pension fund in the Nordics with its cloud project. The company’s financial operations are being migrated from a highly customised on-premise SAP ECC system to the SAP Public Cloud. The SAP Activation Service enables fast fit-to-standard workshops, which shortens the go-live process to just 6-12 months. This project is scheduled to go live by the end of 2024 and is the first implementation of its kind in the Nordics.