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General Status of the Two-Tier Strategy
The two-tier strategy is well documented in the SAP Signavio Process Navigator for SAP S/4HANA Cloud Public Edition, providing considerable information on this topic. SAP offers over 50 two-tier scenarios, encompassing approximately 68 distinct scope item elements in the SAP S/4HANA Cloud Public Edition. Traditionally, we created these two-tier scenarios to drive hybrid deployments of SAP S/4HANA Cloud Private or on-premise editions for corporate companies, while using SAP S/4HANA Cloud Public Edition for subsidiaries. Now, this concept supports all possible deployment combinations, including corporate companies utilizing the SAP S/4HANA Cloud Public Edition.
Customers should refer to the deck for detailed information on the two-tier strategy in the SAP Signavio Process Navigator.
Customers can apply the "Two-Tier ERP" filter in the SAP Process Navigator to view all relevant scope items involved in two-tier end-to-end scenarios (this is available for SAP S/4HANA Cloud Public Edition and SAP S/4HANA Cloud Private Edition). For additional information on Two-Tier ERP, you may refer to the SAP Two-Tier ERP community at https://pages.community.sap.com/topics/s4hana-cloud/two-tier-erp
I would now like to introduce two models for companies engaged in acquisitions utilizing SAP S/4HANA. While there are additional models to consider, these two provide a foundational understanding of the deployment strategies and potential options available.
Acquisitions When Corporate Company Is in SAP S/4HANA Cloud Private Edition
In cases where the corporate company operates on SAP S/4HANA Cloud Private Edition (or SAP S/4HANA on-premise), there are several options for integrating new acquisitions. Companies can either integrate the new business into the current corporate system or deploy the new company in an SAP S/4HANA Cloud Public Edition system.
We increasingly see customers favoring the use of SAP S/4HANA Cloud Public Edition due to its speed, independence, low total cost of ownership (TCO), agile innovation cycles (including upgrades), system operations managed by SAP, and rapid implementation capabilities. This aligns with a fit-to-standard approach using SAP Best Practices to bring newly acquired businesses on board. These new businesses are typically deployed in a two-tier architecture with the corporate system, ensuring agility and swift integration. Two-tier scenarios are often recommended to connect these systems, particularly with a focus on financial integration, depending on their level of independence from the corporate structure.
Let me provide an example of a two-tier process: for financial consolidation while maintaining independence, companies can use financial consolidation (1SG) with group reporting capabilities to manage financial reporting while allowing the business to operate independently. This approach provides business agility in response to constant market changes that the new business might experience.
If the corporate entity continues to acquire new businesses that they plan to retain long-term, they can use the same public cloud instance to add new companies as company codes, thereby benefiting from the same public cloud instance and contract. As of version 2502, SAP S/4HANA Cloud Public Edition covers 59 standard countries in 33 languages (by version 2508, we plan—subject to change—to cover 60 standard countries with 34 languages) and 159 non-standard countries using the Configuration Localization Toolkit as part of localization as self-service (in a 3-system landscape only). Therefore, adding international acquisitions should not pose a problem given the system's ample capabilities to meet compliance requirements.
If this corporate entity is looking to acquire many new businesses internationally and provide them with independence, we could also consider a federated architecture with different SAP S/4HANA Cloud Public Edition tenants distributed by geography to address concerns like data residency, latency, and other related issues. However, I won't cover this in this blog.
For turnaround acquisitions—if the plan is to enhance operations and later spin off the business in the short term—it is advisable to obtain a new cloud subscription and operate this business in a separate SAP S/4HANA Cloud Public Edition landscape. Please discuss with your account executive directly to explore your options for adding a new subscription. If the new subscription is added under the same customer number (sold-to-party), please request that the new SAP S/4HANA Cloud Public Edition environment has a different "provision-to-party." This strategy allows for the rapid and independent onboarding of a new acquisition, aligning with SAP Best Practices. The speed of the spin-off is facilitated as it becomes a contract ownership transfer, enabling the transition of the subscription to the new business while maintaining operational autonomy and providing a platform for future growth without requiring a burdensome technical setup for the carve-out of the business.
Acquisitions When Corporate Company Is in SAP S/4HANA Cloud Public Edition
For corporate entities already utilizing SAP S/4HANA Cloud Public Edition, integrating acquisitions can be streamlined within the same cloud environment. This approach facilitates a uniform deployment model across the corporate and acquired entities, enabling consistent processes and a unified system landscape.
I have observed an increasing trend among our customers using SAP S/4HANA Cloud Public Edition, where they expand their current system by adding new countries and company codes. This model offers several advantages, including reduced integration costs, streamlined governance, rapid implementation using SAP Best Practices, and expedited onboarding processes. Companies can leverage the existing public cloud infrastructure to extend their operations to newly acquired entities, ensuring business continuity and operational efficiency.
SAP is evaluating options (plans subject to change) to facilitate a templated approach for organizational structure and configuration using SAP Central Business Configuration to accelerate the creation of company codes.
For turnaround acquisitions, if the intention is to enhance operations and later spin off the business, it is recommended to obtain a new cloud contract and operate this business in a separate SAP S/4HANA Cloud Public Edition landscape. Please discuss with your account executive directly to explore your options for adding a new subscription. If the new subscription is added under the same customer number (sold-to-party), please request that the new SAP S/4HANA Cloud Public Edition environment has a different "provision-to-party." This strategy allows for rapid and independent onboarding of a new acquisition, aligning with SAP Best Practices. The speed of the spin-off is facilitated as it becomes a contract ownership transfer, enabling the transition of the subscription to the new business while maintaining operational autonomy and providing a platform for future growth without requiring a burdensome technical setup for the carve-out of the business.
SAP is evaluating future scenarios for company code carve-outs that might offer additional capabilities for the rapid spin-off of company codes operating in the same system instance (this can be done today with a specific IT consulting project). However, at the current stage with release 2502, the most agile approach is to build a company code in a separate instance if you want a turnkey solution for a quick spin-off of the turnaround acquisition company.
In conclusion, SAP’s two-tier strategy provides flexible and efficient deployment models for companies navigating acquisitions. Whether the corporate entity utilizes SAP S/4HANA Cloud Private Edition or SAP S/4HANA Cloud Public Edition, the two-tier approach ensures rapid integration and sustained agility. I encourage our customers to explore the detailed scenarios and models available in the SAP Signavio Process Navigator to fully leverage the benefits of the two-tier strategy.
Your insights and opinions are valuable, so please don't hesitate to contribute by commenting on this blog.
More Information on SAP S/4HANA Cloud Public Edition:
- SAP S/4HANA Cloud Public Edition, release info here
- Product videos on our SAP S/4HANA Cloud Public Edition and SAP S/4HANA YouTube playlist
- SAP S/4HANA PSCC Digital Enablement Wheel here
- Early Release Webinar Series here
- Inside SAP S/4HANA Cloud Podcast here
- openSAP Microlearnings for SAP S/4HANA here
- Best practices for SAP S/4HANA Cloud Public Edition, here
- SAP S/4HANA Cloud Public Edition, Community: here
- Feature Scope Description here
- What’s New here
- Help Portal Product Page here
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