SAP HANA Cloud vs On-Premise: Which One is Right for You?

OpenTeQ Admin | Updated: Apr 22,2025
SAP HANA Cloud vs On-Premise: Which One is Right for You?

It takes more than just keeping up with the latest ERP technology trends to make the switch to SAP S/4HANA. Your company may gain significant competitive advantages from this decision.  

SAP S/4HANA will help you accomplish more, from time efficiency to a quicker return on investment, owing to its streamlined architecture, real-time analysis, and performance enhancements. 

You must understand the differences between SAP Cloud and On-Premise as you progress to SAP S/4HANA.  

What distinguishes SAP cloud from on-premises solutions? Which one ought to be selected for your company? To provide you with a summary of the advantages and disadvantages of each deployment strategy, each will be compared below.  

Understanding the distinctions between the two is essential to determining which is best for your business's requirements and how it will affect operations over time. 

SAP On-Premise S/4HANA  

SAP S/4HANA Based on the SAP HANA in-memory database technology, the SAP ERP Business Suite is available on-premise. This is an internal platform that is run by your business and housed on your own servers. The HANA database, applications, servers, networks, and other associated systems are all within your company's management and control.  

Cloud-based SAP S/4HANA  

One Software as a Service (SaaS) version of S/4HANA is SAP S/4HANA Cloud. It allows users to take advantage of SAP S/4HANA capabilities without requiring hardware, a database, or internal IT personnel, and it is accessible to businesses in both public and private clouds.  

Applications, data, runtime, middleware, operating system, servers, storage, and networking are all taken care of for the client with SAP S/4HANA Cloud. SAP handles all updates, so clients don't require a lot of IT resources. 

The Distinctions Between SAP Cloud and On-Premise  

Now that each system's description is clear, let's examine the key distinctions between the two, which are typically the ones that cause customers the most anxiety.  

 

Model of Licensing  

For every deployment option, SAP offers a distinct licensing model: either a subscription license or a conventional perpetual license. The majority of on-premise deployments are licensed using a perpetual licensing model, which grants users the perpetual right to use SAP software. 

Based on the number of employees utilizing the program and the software products ordered, a corporation is paid an upfront software price.  

Suppose that a client wants to implement SAP S/4HANA on-premises and that they employ 5,000 people, but that only 100 of them are authorized to use SAP. Since they only require a single license, the license charge is then solely based on those 100 SAP S/4HANA Professional Users. The future annual charge, which includes maintenance and support, is then based on this initial licensing fee and will not vary unless a company adds/changes the product or the number of users. 

SAP S/4HANA cloud, on the other hand, employs a subscription license model, meaning that users do not have perpetual access to the software. Rather, they must pay an annual charge that includes all SaaS features. The cost of this license, which normally lasts one to three years, is determined by business KPIs like the number of users, documents handled, or storage or bandwidth capacity. 

 

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Business Processes: Infrastructure & Maintenance 

Customers must supply their own infrastructure, databases, networks, etc. when opting to deploy SAP S/4HANA on-premise. To keep everything up to date, they also need a specialized IT crew. Customers will have better control over expenditures during the rollout, even though it can be a little pricey initially.  

Furthermore, each time there is a new upgrade, they are not need to completely redesign their system. They will be free to improve at their own speed instead. 

SAP is in charge of managing the entire system, including maintenance, in the cloud edition deployment. Customers are thereby relieved of the burden of supplying their own database and IT personnel.  

Additionally, you will always have the most recent version of the software because the system will be automatically upgraded every three months. 

 

Personalization 

Customers have greater customization freedom and control with the on-premise solution. If a customer wishes to modify their present SAP ERP system in accordance with business requirements or if the business has a new demand, they can do it immediately. This is a benefit of having their own IT personnel and controlling the system internally. 

The cloud edition, meanwhile, makes use of a preset setup. Clients get access to SAP's pre-configured solution, which adheres to SAP best practices for the relevant business process. Users are therefore significantly be able to customize and have less control and flexibility with reference to specific requirements. 

Time and Method of Implementation  

Because clients must plan and test everything themselves, an on-premise deployment may need more time and effort to implement. They must also invest time in assembling a team of qualified individuals committed to establishing a fresh culture and system.  

However, because the cloud version uses a pre-configured, ready-made infrastructure, it may be implemented more quickly. Because the cloud provider has already provisioned and tested the system, users don't have to worry about planning or testing. 

Integration & Functional Scope  

You can access the entire suite of ERP services with SAP S/4HANA on-premise, including the simplified version of SAP Simple Finance, now known as SAP S/4HANA Finance.  

Additionally, you receive the extra capabilities of Production Planning and Detailed Scheduling (PP/DS), which were formerly exclusive to SAP Advanced Planning and Optimization (APO) in the ERP Business Suite.  

In the meantime, industry best practices that are necessary for cloud-based enterprise operations are integrated into SAP S/4HANA cloud. There are editions for business, marketing professional services, and the whole ERP suite. 

Packages for Upgrades and Support 

Customers will have more control over an upgrade with an on-premise deployment, as was previously noted. 

Both the actual schedule and the frequency of upgrades are left to the customers. They can also choose whether to install the most recent version of their system's support package. 

Nonetheless, a business will have to invest more of its own time and money in the actual improvement. Additionally, it must ensure that the technical and functional staff are aware of the upgrade and how it may affect their present SAP system and transactions. 

Which Is Better for Your Business, SAP Cloud or On-Premise?  

It should be easier to choose between the two options now that the differences between them have been clarified. Given the various factors mentioned above, any business that needs SAP S/4HANA's whole capabilities and range can use the On-Premise edition. 

The on-premise edition is usually the greatest option for meeting industry-specific business requirements and having more freedom to alter the system as needed. Large businesses that already have a well-established business process and have no immediate plans to change it are the major ones for whom it is advised. Customers have better overall control over their SAP ERP system with this option.  

However, the SAP S/4HANA Cloud edition is the best choice for businesses seeking an ERP solution that can expand with them. These clients will be spared the burden of managing the related IT infrastructure and resources. 

Conclusion  

Selecting which transformation path to pursue is a crucial step in creating a roadmap for your business transformation. Every decision you make should support the demands and requirements of your business and be in line with its goals.  

Therefore, before choosing the best platform for your company, it is crucial to take the time to think through all of the options and their ramifications. 

Stay tuned with OpenTeQ Technologies to know more about the SAP industry and maximize the potential of your company! 

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