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SAP S/4HANA: Which Operating Model Suits Which Scenario?

June 17, 2015 by Andreas Schmitz

For any enterprise, the decision about whether to run SAP S/4HANA on premise or have it managed by SAP in the cloud depends on a number of factors. This article provides an overview of possible scenarios for the various SAP S/4HANA operating models.

There’s plenty of choice: the cloud finance edition for financial shared service centers, the cloud enterprise edition for group subsidiaries, and the on-premise edition for core processes. The deployment scenarios described below illustrate which applications and enterprises the various SAP S/4HANA operating models are best suited to.

SAP S/4HANA, cloud project services edition

This edition of SAP S/4HANA is ideal for professional services companies that want to manage their project business and draw up financial statements with SAP Simple Finance in the cloud.

Pure service providers ‒ such as management consultants Deloitte and Anderson Consulting and HR consultants Randstad ‒ are likely to operate very effectively with public cloud solutions. SAP S/4HANA, cloud project services edition, became available in the first quarter of 2015. It is characterized by a carefully tailored functional scope and highly standardized processes that are ideally aligned to the project business. Because many of the tasks they perform are coordination-based, such as assigning employees to projects and recording activities, professional services companies do not necessarily need to adapt the software to meet individual requirements, the basic framework fits. The functions supplied as standard are so closely aligned to this industry’s task profile that they perform both project completion and financial closing processes with ease. SAP Simple Finance, the first innovation in the SAP S/4HANA roadmap, is already being deployed in an integrated cloud scenario.

SAP S/4HANA, public cloud marketing edition

Marketing campaigns in the cloud

Most enterprises don’t consider the job of initiating and managing marketing campaigns to be part of their core business. Yet marketing campaigns tend to consist of broadly similar processes and measures. Their aim is to address customers through various channels, to segment them, analyze them, and then prepare and send out mail shots. Processes like these are easy to standardize and lend themselves to being separated out from the core business and, thus, to being managed in the cloud.

“We already have corresponding ideas in the pipeline for other lines of business too, including sales, HR, and procurement,” says SAP S/4HANA development project lead Stefan Batzdorf.

SAP S/4 HANA, public cloud edition

Financial shared service centers no longer need their own data centers; SAP Simple Finance delivers IFRS-compliant financial statements

Whereas the headquarters of a global corporation may choose to continue operating its financial systems on-premise, its shared service centers, which are often located in Eastern Europe or the BRIC countries for reasons of cost and efficiency, could opt to shift their financial operations to the public cloud. After all, the SAP S/4HANA public cloud solutions cover all the core financial scenarios: billing, invoice processing, payment, month-end closing, group closing, and IFRS-compliant financial statements. The key benefit from the corporation’s perspective is that it no longer needs to operate data centers for these operations, but it can still access the figures for the shared service centers in real time in the SAP HANA database.

SAP S/4HANA, cloud enterprise edition

Group subsidiaries: full range of ERP functions from the cloud

If it is not financially viable for a company to operate its own data center “just” for HR, financial, and marketing processes, it may make sense to follow an approach in which the on-premise systems at headquarters are fully integrated with cloud-based systems at the subsidiaries. Employees won’t have any idea that they are toggling between an on-premise and a cloud system as they switch from working on financial transactions to placing an order or accessing the integrated HR systems.

Large enterprises: complete switchover from on-premise to the cloud

Until recently, this scenario seemed little more than a vision for the far-distant future; the reason being that a manufacturing company’s logistics processes are so tightly interwoven with its financial processes that both sets of processes needed to be supported by SAP S/4HANA to enable an entirely cloud-based deployment. However, the cloud enterprise edition of S/4HANA now makes this scenario possible because it covers all the ERP functions — financials, logistics, manufacturing, supply chain, quality assurance, and HR. It is the ideal edition for customers who want to move right over to working with standardized business processes in the cloud.

Large enterprises with legacy IT landscapes

IT landscapes that have grown organically over many decades and are still based on older versions of SAP R/3 are sometimes so complex that they are impossible to modernize. In this case, the only option is to start with a clean slate. Which means either reinstalling the entire system or moving it to S/4HANA, cloud enterprise edition. Either way, an IT transformation roadmap is required. One of the benefits of opting for the cloud approach is that it gives companies standardized core processes that cover all their business operations, including those that are specific to their industry. Moreover, unlike the situation with on-premise systems, companies don’t have to worry about the total cost of ownership (TCO), because they no longer operate the software themselves. SAP takes care of everything, updates, testing, and corrections. Fees are paid per user, based on the application scenario.

Hybrid approach: cloud and on-premise

Core business stays on-premise

“Only as much cloud as necessary,” is the motto for companies whose business model centers on keeping their core business, and, thus, any unique selling points, on-premise. When it comes to adjusting software to meet specific requirements, an on-premise SAP S/4HANA deployment has certain advantages over the cloud model. In an on-premise deployment, companies can continue using existing system configurations; they can make their own decision about which data center hosts their software; and they can extend their software to meet special requirements as and when they need to. An automotive company’s core business is manufacturing; a bank’s is transacting financial processes. HR is not necessarily a unique selling point for either. And this is where it is possible to follow a standardization approach and move non-core business processes to the cloud. In many cases, a mixture of on-premise and cloud-based systems makes perfect sense.

  • One example might involve a company deploying talent management software from SuccessFactors in the cloud, while running payroll for its subsidiaries on-premise. The reason? Payroll is closely linked to finance, and that’s an area that many companies prefer to keep a very close eye on.
  • In another example, a company might opt to map its entire supply chain on-premise, but to place its online ordering process in the cloud. SAP uses this approach with the Ariba web shop, which employees access to order office supplies, books, and company cars.

Test SAP S/4HANA free of charge.

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