Choosing between an on-premise or a cloud deployment is one of the first steps of moving to SAP S/4HANA. In this blog series, we interview Jos Romijn, Cognitus EMEA Delivery Director and Co-founder, and one of Europe’s leading S/4HANA implementation experts for his advice on deployment options.
This is part two of our series on on-premise vs cloud deployment. For part one of the series, click here.
When you deploy your S/4HANA implementation “on premise”, you essentially take on all of the IT infrastructure in-house. That means setting up servers, networks, and the rest of the environment to host and deliver S/4HANA across your organization.
This represents enormous immediate costs and long-term maintenance costs but offers significant advantages to organizations in need of highly customized or highly secure environments.
The primary advantage of choosing an on-premise implementation is that you get complete control. With a cloud implementation, SAP retains ownership of the implementation and its updates. You can customize very little and must largely stick to SAP Clean Core and Best Practices. That means you’ll almost certainly have to redesign the business around those Best Practices, which can require a considerable internal investment and considerable change management.
With an on-premise implementation, you choose software, configuration, upgrades, system changes, and security. You get complete control of every aspect of your implementation. And, when you want to upgrade or customize, you can simply make it happen.
Of course, that can be negative as well. For example, you have to spend more time in the research and decision-making process to choose licensing, to decide on implementation, to build and configure security standards based on organizational needs, etc.
On-premise implementations normally offer uptime in excess of 98.95%. You can operate unimpacted by your ISP or anything but electric, providing you invest in good hardware. That can be significant for organizations with significant processing needs – because you’re not reliant on your ISP.
Traditionally, many organizations have chosen on premise to maintain a competitive advantage. If you move to a cloud deployment, everyone knows exactly what you’re using and what your business processes are. With an on-premise deployment, that isn’t the case.
However, increasingly, even high-security and high-competition organizations in pharmaceuticals and oil and gas are opting for cloud deployments. While that’s in part due to significant increases in security and privacy in multi-tenant cloud over the last half decade, it’s also a nod to just how valuable predictable costs and licensing can be, even to enterprise organizations.
On-premise installations have a higher capital expenditure (Capex) than cloud – although TCO (Total cost of ownership) does reduce over the lifetime of the installation. Often, total costs will be higher than a cloud implementation because of initial upfront investment (hardware, software licenses, IT teams, etc.)
At the same time, higher Capex translates into higher operational expenses, meaning you can depreciate those costs over time. Depending on your organization, that may actually be a benefit rather than a drawback.
You are responsible for long-term maintenance of your deployment, including software and upgrades, cybersecurity, network, and hardware. That can amount to considerable long-term costs for hardware upgrades (CPU, memory), backups, your discovery and recovery strategy, etc.
An on-premise deployment also means you’re responsible for your own Discovery & Recovery strategy – meaning you’ll need a second data center and the ability to switch to it in case of an emergency. That can increase total costs beyond face value hardware and maintenance costs.
Setting up an on-premise deployment often requires detailed and methodological research to determine hardware, licensing needs, setup needs, etc. You’ll want to fully understand your needs and the scope of the implementation before making decisions and investing, because unlike with a cloud implementation, you can’t simply change the licensing.
In addition, you’ll need more time for hardware setup, for finding space for your physical servers, etc. All of that means an on-premise deployment takes significantly more time than the cloud.
Eventually, when you want or need customization, an on-premise implementation is king. Still, there are plenty of other reasons you might want to go on-premise for your S/4HANA, including control of security, privacy, and more freedom to use your own processes rather than SAP’s best practices.
If you’d like help with your decision, contact us for a consultation based on your organization and its needs.