Defining the Cloud ERP Solutions

We'll start with the heart of SAP's Business Suite portfolio, the Cloud ERP core. The term enterprise resource planning (ERP) was coined by analysts at the research firm Gartner in the 1990s to describe an integrated suite of business applications that share a common data model and cover end-to-end business processes in areas such as finance, distribution, manufacturing, service, supply chain, and human resources.

By implementing an ERP system, businesses can achieve significant cost reductions and boost productivity through better 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 transformation journeys will streamline the process with proven implementation methodologies.

GROW with SAP is the best fit for organizations looking to start fresh in a clean system with standardized business processes that are enhanced and improved through release upgrades twice per year in the SAP S/4HANA Cloud Public Edition SaaS solution.

RISE with SAP is the best fit for organizations who already have the previous version of SAP's ERP software, Enterprise Central Component (ECC) and have a higher degree of complexity in their system.

These customers can transition to the cloud through a system conversion to SAP S/4HANA Cloud Private Edition that maintains many of the customizations they've already built in their ECC system, or start fresh in a clean system with standardized business processes that can be adapted. Release upgrades occur twice per year, but customers have control over when the upgrade is installed within the mainstream maintenance period (7 years).

Both the GROW and RISE with SAP transformation journeys are not limited to Cloud ERP. The SAP Business Suite takes a holistic perspective in assessing all potential solutions a customer may require, which can expand into other line of business cloud solutions, data & analytic solutions, or even custom applications built and hosted in SAP Business Technology Platform.

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.

The implementation methods are:

• New Implementation / Greenfield - New Implementation with a clean system.
• System Conversion / Brownfield - System Conversion from your existing SAP ERP system.
• Selective Data Transition - Typically combines greenfield and brownfield, often in a two-tier ERP scenario. For example, the SAP ECC system is converted to SAP S/4HANA Cloud Private Edition, and SAP S/4HANA Cloud Public Edition is deployed for a specific line of business, such as Professional Services. This allows standardization in the ERP system, with a fast-moving and frequently updated public cloud solution for a specific LoB.

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 & Subsidiary
• Central Service
• Supply Chain Ecosystem