Implementing SAP S/4HANA enterprise management suite by migrating from any existing ERP solution will be a wise decision for sure. While deploying the S/4HANA suite, you’ll come across two versions, SAP S/4HANA On-premise and SAP S/4HANA Cloud. Let’s see the salient features and fundamental differences between both versions, which will help you implement the solution that will be best suited to your business needs, budget, and resources.

While choosing between On-premise and Cloud version of S/4HANA, one must ask below questions to make the right choice:

  • What are the key differences between both of the versions?
  • How to choose between them?
  • How will this choice affect the organization?

Let’s find answers to these questions.

SAP S/4HANA On-premise and SAP S/4HANA Cloud both have their pros and cons. The On-premise version gives you maximum control over the data as everything is saved and maintained on the local servers of your organization. However, if you’ve space issues in your servers, then you can go for the S/4HANA Cloud version, which also delivers fast-paced operations when you have timing constraints in your on-going projects.

The main difference between On-premise and Cloud is that SAP S/4HANA Cloud edition is Software as a Service (SaaS), which is hosted on SAP’s servers and is entirely maintained by SAP. Unlike On-premise edition, software upgrades happen automatically every quarter in the Cloud version.

After checking the key differences, let us now have a glance at the table below. This tabular data will elaborate on the difference between On-premise and Cloud.

SAP S/4HANA On-premiseSAP S/4HANA Cloud
Licensing methodTraditional licensing Subscription licensing
Infrastructure & maintenanceDeployment and maintenance is incorporated and managed by the customer who purchases the licensing of On-premise editionSystem infrastructure and maintenance are totally under SAP’s control once the customer takes subscription of the SAP S/4HANA Cloud edition
Innovation in softwareIn the On-premise version, planning, testing, controlling, upgrading and changing within the system are the full responsibilities of a customerIn the Cloud version, the automatic latest innovation upgrades are incorporated quarterly by SAP
Scope to customizationThe On-premise edition is highly compliant with individual business requirements and customizationThe Cloud edition is predefined for best-practice and configured with limited specialization
Functional scopeOn-premise edition supports full ERP Scope. Also, integration with SAP Hybris Marketing, SAP JAM, and SAP Ariba Network is possible in SAP S/4HANA On-premise editionCloud edition supports critical industrial scenarios and ERP scenarios. In the Cloud edition, one can integrate with SAP SuccessFactors Employee Central, SAP Fieldglass, SAP Hybris Marketing, SAP JAM, and SAP Ariba Networks.

Now, let’s move to the last question where we’ll see how the choice you made amongst SAP S/4HANA On-premise edition and SAP S/4HANA Cloud edition can affect your organization.

The SAP S/4HANA On-premise edition avails the full spectrum and functionality of this suite along with the highly flexible customization. This edition works best for large organizations that have very well-established complex business processes that need simplification. Unlike Cloud edition, the On-premise edition provides more opportunities for effective monitoring of business processes in large organizations. 

SAP S/4HANA Cloud edition offers higher quality performance, faster upgrade cycles (quarterly, unlike annually for on-premise version) at the cost of greater agility and lower flexibility in customization. The mid-sized companies which are looking for management of rapid business development processes can opt for the Cloud edition.

In a nutshell, every organization must spend some quality time in designing a road-map and take into consideration the difference between On-premise and Cloud edition for SAP S/4HANA. Integrating the appropriate ERP solution is essential to succeed in your business and achieve planned goals.