S/4HANA cloud: I am a believer!

In 2015, SAP introduced S/4HANA Cloud (S4HC). It is one of the four options that SAP offers to the market for deploying its S/4HANA ERP-core. And it is a special one!

S4HC is special in the sense that this deployment option will completely change the way we have been implementing and using ERP since the late eighties. And it is special for all parties involved: the vendor (SAP), SIs such as Capgemini, and end-user organizations. In this blog I will explain why – looking at it from the end-user organization perspective. In my next blog, I will explore the vendor and SI perspective.

First, something about the technology. S4HC has a multi-tenant architecture. From a technology perspective, S4HC is not special nor did it get the suffix “Cloud” only because it runs on one of the big infrastructure cloud providers (AWS, GCP, Azure, etc.). In fact, S4HC runs in SAP’s own data centers at this moment. It is, however, the multi-tenant architecture which makes S4HC special: multiple organizations that run their ERP-core business processes using the same S/4HANA software instance, which is completely operated and managed by the vendor (SAP) “as a Service” (SaaS). This multi-tenant architecture managed by the vendor, which has been common practice for vendors “born in the cloud” but which is new for SAP, means a big change and has big potential for end-user organizations.

1. “Always up to date”
Multi-tenancy and end-to-end management by SAP allows SAP to upgrade the ERP-core software almost constantly (in practice on a quarterly basis). This means no more heavy and long-running projects for upgrading software that has been out-of-support for years. Instead, SAP is almost constantly capable of transferring the latest IT-innovations from its innovation platform (SAP Cloud Platform and Leonardo) to its ERP-core. This makes the ERP-core truly “intelligent,” with embedded functionality like AI/ML into the ERP-core business processes, whenever it becomes available. And it makes the ERP-core constantly compliant with national and international regulations like GDPR whenever it needs to.

2. Maximum unburdening of IT management
SAP offers S4HC as a Service (SaaS) in its purest form. Resulting in an unburdening of IT management to an extent end-user organizations never experienced before. This is very interesting for the growing number of end-user organizations that have “outsourcing of IT” as one of their corporate principles.

3. Fit to standard
SaaS has also a constraint: end-user organizations that implement S4HC need to stick to the standard ERP-core business processes that come as best-practices with S4HC. “Fit to standard” is the credo here (as opposed to “fit gap”). Companies need to differentiate on something else than their ERP-core business processes. That in itself is a big step for companies: fit to standard is what we have been trying to do since the first ERP implementations in the late eighties. And let’s be honest – we have not been very successful so far. But more and more companies choose for this standard and best-practice approach, at least for part of their business.

4. Simpler, cheaper, faster
If end-user organizations succeed in sticking to the standard ERP-core business processes, fit to standard and multi-tenancy managed by the vendor will make ERP-implementations much simpler, much cheaper (TCO), and much faster (time to value) than in the early days.

So yes, S4HC is indeed “something completely different.” It is special compared to the other three S/4HANA deployment options. As far as I am concerned, the fit to standard approach of S4HC is going to be a challenge for end-user organizations, particularly given how we dealt with this philosophy in the past. But looking at the direction the industry is going with Cloud ERP, the growing interest of companies to go for standard and best practice ERP-core business processes and taking the enormous potential into account for end-user organizations, S4HC makes me a true believer in its potential.