Defining the Cloud ERP Solutions

The Cloud ERP core is the center of SAP's Business Suite portfolio. The term enterprise resource planning (ERP) was originally coined by Gartner in the 1990s to describe an integrated suite of applications that use a common data model. These applications manage end-to-end business processes, including finance, manufacturing, and human resources.

By implementing an ERP system, businesses can reduce costs and increase productivity through data-driven decision-making.

Most cloud applications have services delivered by the provider of the application, which are typically detailed in the Service Level Agreement (SLA). However, the architecture and services offered vary based on whether the cloud applications are SaaS (Software as a Service) or managed cloud services.

SaaS applications are completely managed by the service provider and come ready to use, including all updates, bug fixes, and overall maintenance, and are typically multi-tenant. 

SAP's Cloud ERP SaaS offering is SAP S/4HANA Cloud Public Edition, which is installed in an SAP data center. There is also a package of additional licenses and tools that accompany the core ERP software to help customers get the most out of their solution.

In a managed cloud service, the service provider has control over the cloud infrastructure and is fully responsible for its operation, maintenance, monitoring, availability, and support, and the infrastructure is typically single-tenant. In addition to the SLA, there's an additional document describing detailed roles and responsibilities of the customer and the service provider. Certain services are negotiable, where the customer may choose to perform a task themselves, or request the cloud provider perform the task on their behalf for an additional fee.

SAP's Cloud ERP managed cloud services offering is SAP S/4HANA Cloud Private Edition. The managed cloud services are delivered by Enterprise Cloud Services (ECS), and the software is hosted on an Infrastructure as a Service (IaaS) that can live in an SAP data center, or a third party data center partner. We refer to these data center partners as hyperscalers, which include, Microsoft Azure, Amazon Web Services, Google Cloud, and Alibaba Cloud. There is also a package of additional licenses and tools that accompany the core ERP software to help customers get the most out of their solution.

Whether customers are just starting their journey to the cloud, or looking to modernize an existing ERP system, the GROW with SAP and RISE with SAP packages will streamline the process with proven implementation methodologies.

GROW with SAP paves a clear path for customers to start with Cloud ERP in Finance, Supply Chain, and Spend Management, and to expand flexibly across the SAP Business Suite portfolio as they grow.

Expansion happens as the business grows on the same system, not as a re-implementation. It is supported by subscription packages, tools, and services tailored to needs of customers in growth stage.

The technical Cloud ERP product is SAP S/4HANA Cloud Public Edition in this scenario.

GROW FAST is an implementation service to help growing businesses go live faster with:

• Rapid Deployment: Go-live in weeks, not months with SAP Finance Base and SAP Supply Chain Base packages.
• Partner-Delivered Expertise: Certified SAP partners provide implementation services using advanced tools, templates and proven methodologies
• Fastest, lowest-risk path to launching your business on SAP: Enables quick adoption of a core cloud ERP scope with transparent pricing

RISE with SAP provides several transition options for customers who already have the previous version of SAP's ERP software, Enterprise Central Component (ECC) and have requirements for a higher degree of complexity in their systems.

The technical Cloud ERP product is SAP S/4HANA Cloud Private Edition in this scenario.

The first option is to start fresh, which is attractive to customers when their current ERP system simply won't keep up.

The next option, which most customers choose, is to modernize with a clean core approach. A system conversion is used to maintain customizations that have been built in the existing ECC system to preserve what still delivers strategic value, but there is a strong emphasis on removing outdated code and data to clean up the landscape and make it as easy as possible to adopt future release upgrades.

Last, when different parts of the business require different journeys, a 2-tier hybrid approach enables customers to modernize core headquarters systems, while quickly rolling out a simplified ERP in the public cloud to subsidiaries or business units. This approach uses both the private edition and public edition solutions at different levels of the organization.

The decision of which Cloud ERP solution to select often depends on the degree of standardization versus the degree of flexibility required by a customer in their enterprise software, and the implementation method.

A two-tier ERP strategy is when a company uses different ERP systems (either from the same vendor or different vendors) at different layers of the organization.

There are several possible two-tier ERP scenarios, but a common model is where Tier 1 serves as the global backbone running administrative ERP processes (e.g. finance) and Tier 2 is tailored for localized business needs, a subsidiary, or a smaller business unit.

This allows an organization to standardize on Tier 1 to meet functional and budgetary requirements, while maintaining flexibility with the business functions in Tier 2.

With SAP S/4HANA Cloud Public Edition, an organization can quickly deploy the public cloud for a subsidiary, while keeping the total cost of ownership low. This approach offers agility to the subsidiary, while the tight integration with SAP S/4HANA (on premise) or SAP S/4HANA Cloud Private Edition deployed for the headquarters will ensure a high degree of visibility into the data and operations of the subsidiary.

Other market drivers to adopt a two-tier ERP may include:

• Onboard new acquisitions quickly
• Standardize subsidiaries on a harmonized platform
• Prepare for an anticipated divestiture
• Adapt to new Processes or entirely new Business Models
• Centralize services like finance or procurement
• Extend the supply chain control with business partners
• Expand through Joint Ventures
• Adapt to evolving geo-political situations
• Prepare for changing data residency regulations

There are three common examples of two-tier ERP scenarios: Headquarter and Subsidiary, Central Service, and Supply Chain Ecosystem.

Building an effective two-tier ERP strategy is about more than just integration scenarios. It's critical to conduct a thorough analysis of the functionality necessary for each subsidiary or satellite, and the strategy must define how the interdependence of the organizations will affect the business processes AND the reporting strategies.

For example, the reporting strategy for intercompany transactions and enterprise-level reporting should be defined up front. In addition, master data management will follow integrated process requirements, and therefore should also be planned for early in an implementation project. Last, change enablement is multi-dimensional, because there are new systems that require sufficient end-user training, and potential changes to business processes with the interdependence between organizational entities.