Features of S/4 in the Cloud

The article in the February issue about the questioning of SAP's S/4 strategy raised a lot of dust. This may have to do with similar sensitive topics in the same period in other media, or with SAP's imminent ad hoc announcement on the 2021 results, in which, among other things, particular emphasis was placed on the fact that the largest increase in the annual result was contributed by the cloud business.

The transformation to cloud ERP market leader is not an easy path for SAP. At the beginning of the cloud era, a strategic decision had to be made to make the R/3 version cloudfit or to go down the road with a new technology right away. For existing customers, the R/3 version for the cloud would have been easier and cheaper in any case, because they would have saved themselves a change of technology. However, new customers would not have played along with this strategy, which would have hit SAP hard in software sales. This resulted in the double-edged sword for all customers: on the one hand, the new ERP system S/4, which was already due, and on the other hand, the associated complexity, both for the on-prem, hybrid and cloud solutions. For SAP, however, there is more to it than that. SAP essentially only has to develop the software once for all platforms and can sell S/4 licenses to all existing and new customers in return.

The S/4 development is technically a great challenge for all customer groups in many areas, whereby serious differences can only be seen in detail. The biggest improvements are in hardware development and with the new in-memory database technology in performance. In the areas of the software interface, the functions and processes, and in integration, the innovations have been very different.

SAP has the most difficulty with the software surface. Here, a smooth transition was chosen instead of a hard cut. The many adjustments to the old SAP GUI and the introduction of Fiori in the core systems are only a partial success. However, this has resulted in a uniform interface, which does not go down well with many customers when they compare it with other providers. The issue of the uniform interface is exacerbated by another facet due to the many software acquisitions, although customers are somewhat more tolerant here. In terms of functions and processes, there are very different characteristics in the modules.

In some areas there are hardly any innovations and other modules are developed hybrid or new for the cloud. Also regarding the completion of the solutions, according to the roadmaps, there are long time frames and differences between cloud and on-prem. Generally known is still the most important and still in implementation topic of the integration of all major software acquisitions. Cloud solutions can only be operated successfully by customers if there is full software integration of all core applications. 

In addition to the appropriate cloud solutions, the corresponding operational management is also an important focus for customers. Finding the best and most favorable cloud partner is currently a challenge in its own right on the sourcing market. In the area of various outsourcers and hyperscalers, a market upheaval or market concentration is currently taking place.

With the cloud topic, attention should also be paid to the costs and risks in connection with the advantages and disadvantages. The periodic rental costs are in any case more expensive in total than the purchase licenses, regardless of the balance sheet strategy. The cloud providers live very well from the customer dependencies in terms of time and price. The advantages lie in the constant and therefore calculable costs, in the flexibility depending on the contract design and in the reduced effort.