Enterprise Resource Planning Blogs by SAP
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Welcome to the second of three-blog series to dispel myths about Cloud ERP. Today we will debunk the myth that companies need to either stay on premise or move to the cloud. This blog post builds on the first Cloud Myth Busting blog post that you can review here.

When IT and business leaders think about their ERP deployment strategy, they often make a mistake of assuming that this is a binary decision – choice between staying with their infrastructure "on-their-premises" or ripping the existing systems out and going with all ERP and enterprise applications to public cloud. The reality is more nuanced.

Thanks to new technologies and deployment strategies available today, IT leaders have broader set of options to choose from when deploying their next generation ERP solutions. And this is all the way from leveraging Infrastructure as a Service - like hyperscalers to "get rid of my iron in the basement" - to all as Software as a Service, which is by far the highest degree of standardization you can leverage. And lets please stop calling everything cloud.

I will cover some of the options in this article and provide additional resources that will help your organization prepare for deployment of Cloud ERP. And happy to hear your thoughts and share with the high network of experts created after > 20 years in this industry and shepherding major business to adopt more standardization every year.


Historical context

Traditionally the deployment strategy (on-premise or cloud) was being thought about as a binary decision mainly due to the concept of single central instance deployment model established in early days of ERP. This model has been fit for the purpose during the time when it was introduced as the hardware, software and network connectivity were limited which also limited the deployment options. Cost and complexity to integrate multiple systems was too high and single central instance offered a lot of benefits, including central master data management and governance, single source of truth for the business and promise of common set of harmonized processes across the entire organization. The single central instance model has been adopted and is in use across wide range of organizations of various sizes and geographical footprint.

Even in today’s business environment, the need to centrally govern many aspects of the deployment and operations of ERP environment do not go away. Topics like master data governance, financial consolidation & reporting, harmonized business processes across the entire organization and others are more relevant than ever.

Each business should have a common set of harmonized business processes that are executed commonly across the enterprise. Additionally, each organization needs clear governance for master data and financial reporting. This is not what I am aiming to challenge in this article. What I aim to dispel is the myth that organizations have limited options and must decide to either stay on-premises or rip their existing infrastructure and implement cloud solutions to achieve the goals outlined above.

Today’s technology and business capabilities of ERP solution allow organizations to standardize and take advantage of cloud technologies in strategic areas of their business while continuing to leverage existing investments into their infrastructure and technology. Let us go into more detail.

Public cloud helps organizations standardize business processes - that's SaaS

In the first MythBusters blog post I have talked about the cloud mindset embodied in SAP Activate and specifically in the execution of fit-to-standard workshops. Organizations that adopt this mindset and embrace the standard functionality first approach in their deployment will set foundation for standardization of their processes. I have included the visual representation of the fit-to-standard process in Figure 1 below. It consists of 6 steps that business users and configuration experts follow to review the fit of the pre-delivered business functionality and to identify delta requirements and necessary configuration for the implementation. This way the businesses following the fit-to-standard approach already start setting foundation of common standardized processes for the enterprise.

Figure 1: Fit-to-standard process consists of 6 steps


The notion of clean ERP core and adoption of standard processes first is not unique to the cloud deployments. Many IT and business leaders drive their organizations to follow the same principles when they implement SAP S/4HANA on-premise or in private cloud deployment. It makes sense to limit the amount of custom code and modifications to your ERP environment to allow your organization to absorb the upgrades and new capabilities faster. It is a known fact that highly customized ERP systems are painfully hard to upgrade, and they fall very quickly behind the innovation cycle that SAP provides to their customers with regular updates.

But the use of fit-to-standard is just the first step in the adoption journey. The second is the strong governance of the delta requirements and custom code that must be tied to the overall value of the new capability for the organization. SAP provides customers deploying SAP S/4HANA Cloud solutions a wide range of tools, capabilities, and guidance.

One of the most critical steps in your deployment journey is to establish a governance body to oversee and control the custom code and modifications – SAP recommends establishing a Solution Standardization Board either in the deployment project or as a function in your IT organization in case you have more complex program structure where multiple projects need this function. My colleagues Jan Musil posted about the concept in this blog, where you can learn more about it and get access to templates and an accelerator supporting you in its setup and operations. Strong governance will enable your organization to continually standardize the processes while adhering to rules of common sense in implementing the system with cloud mindset.


Federated Hybrid Deployment powered by Two-Tier scenarios

As we outlined above, the objective of running harmonized business processes across the enterprise is not tied to the deployment type (on-premise or cloud). In fact, organizations have a range of options to deploy their ERP solution from SAP in the cloud, on-premises or in hybrid deployment.

Many organizations today are choosing to deploy their ERP solution in hybrid model. The benefit of this deployment strategy is that it allows organizations to continue leveraging their current investment in their infrastructure and at the same time gives them opportunity to build up cloud expertise through deployment in specific part of the organization nd gradually move workloads to SaaS.

There are also scenarios where this cloud first deployment strategy can be used for newly acquired businesses or to prepare part of the business for divesture. I have previously posted a more detailed description of this approach in the two-blog series that you can find here and here. The blogs explain in detail the de-centralized federated deployment strategies leveraging the Two-tier deployment. They provide discussion of select business scenarios for enterprises to consider and provide a tangible four-step roadmap to execute such transition.


SAP has recently published a white paper detailing the steps for deploying SAP S/4HANA Cloud using the Two-tier deployment strategy while at the same time maximizing the existing investment in your infrastructure. This four-step path is discussed in the Two-Tier ERP Deployment for SAP S/4HANA® Cloud - A Practical Guide for Senior Leadership paper that you can download from SAP website here.

Figure 2: Click here to download the white paper


Links and resources:



Inside SAP S/4HANA Podcast

As always, I would like to encourage you to subscribe to our podcast “Inside SAP S/4HANA”. This podcast leverages the unique knowledge and expertise of SAP S/4HANA product experts, partners, and customers to address your needs by sharing product insights and project best practice. There is no customer success without product success and project success; we help you get to the next level and make your SAP S/4HANA projects a success. Subscribe now and benefit from the shared knowledge.


openSAP microlearnings for SAP S/4HANA

Just a couple of months ago, we launched openSAP microlearnings for SAP S/4HANA as an exciting new learning opportunity. What began with a small batch of 20 videos, has now become a channel with more than 50 microlearnings that have generated over 20,000 views since then. Today we cover multiple lines of business, like Finance and Manufacturing & Supply Chain, and key technology topics like Master Data Management, Extensibility, User Experience, and Upgrade Management. We are continuously adding new microlearnings to the SAP S/4HANA channel, so make sure you check them out.


Your Voice Matters!

If you want to learn more and actively engage with SAP subject matter experts on SAP S/4HANA Cloud, join our SAP S/4HANA Cloud Community – now fully integrated with SAP Community. The community brings together SAP S/4HANA Cloud customers, partners and SAP experts and has a clear mission: deliver an interactive community to engage with one another about best practices and product solutions. We invite you to explore the new SAP S/4HANA Cloud Community ‘one-stop shop’ as the central place for all resources, tools, content questions, answers and connect with experts to guide you through your SAP S/4HANA Cloud journey.


For more information on SAP S/4HANA Cloud, check out the following links: 

  • The power of best-in-class and Next Practices business content for a modern ERP blog post

  • SAP S/4HANA Cloud: The Intelligent ERP blog post

  • SAP S/4HANA Cloud: New Product Releases here

  • Latest SAP S/4HANA Cloud Release blog posts here

  • SAP Intelligent Robotic Process Automation Content here

  • SAP S/4HANA Cloud release info: http://www.sap.com/s4-cloudrelease

  • SAP S/4HANA PSCC Digital Enablement Wheel here

  • Inside SAP S/4HANA Podcast here

  • SAP S/4HANA Cloud Community here

  • SAP Activate Community here

  • Best practices for SAP S/4HANA Cloud here

  • Help Portal Product Page here


Follow us via @Sap and #S4HANA, or myself via @SDenecken