The S4/HANA public cloud is SAP's SaaS version of the on-premises or hosted S/4HANA ERP suite.
Sounds simple enough, but it's actually a bit more complicated.
"With S4/HANA, there are two options: One is an on-premises option, and the other is a public cloud option," said Sven Denecken, SAP's senior vice president of product management and co-innovation for S/4HANA.
As for the S/4HANA public cloud, there is S/4HANA Cloud, which is the most highly standardized one. It comes in two flavors: the classic SaaS multi-tenant and the single-tenant, Denecken said. Both are public cloud versions.
Although most SAP customers are running the multi-tenant version, some companies, such as those in heavily regulated industries -- e.g., those under the purview of the Food and Drug Administration -- opt for the single-tenant version because they don't want to share resources, he said.
"All the public cloud solutions come preconfigured," Denecken said. "The crucial difference on the multi-tenant is that you are a tenant with a couple of customers and the price point is a different one. Second, we upgrade thousands of tenants four times a year on a Saturday. ... And that's why it comes preconfigured. There's no customizing -- nothing you can do [to complicate it]."
With the single-tenant, in comparison, customers can't change their data models, but they are able to do some customizations, he said.
"Now, we are a German engineering company: We stick to the truth. I'm not doing cloud washing," Denecken said. "I don't count hosting [as] public cloud. [The public cloud] is a SaaS cloud ERP. And, yes, if you want to have your server, you can have a single-tenant edition, that's fine. You pay a premium, and you can do a little bit more there."
Public and private clouds sometimes conflated
Michael Jolton, vice president of service delivery at Nimbl, an SAP partner based in Denver, agreed there are two options for running S/4HANA in the cloud: the public option, which is what SAP is the calling the multi-tenant option, and the private cloud option.
"That is what a lot of us think of as cloud software -- you're getting it as a service," Jolton said. "It's a shared tenant across multiple companies, multiple business users. And it has quarterly updates and other benefits. The other option -- it's gotten so confusing -- is the private cloud. S/4HANA Cloud's private option -- or S/4HANA Cloud single-tenant -- is also a true cloud solution. It is purchased as a service. It is fully managed by SAP."
Both options are built on the S/4HANA on-premises code base. The difference is the multi-tenant version is preconfigured and the single-tenant version is not, Jolton said. "SAP had to start with a business model from which to configure it," which limits the multi-tenant version to the configuration chosen by SAP, he said.
The business model that SAP used was for a component manufacturer that uses primarily discrete manufacturing or offers professional services -- e.g., a consulting firm, an engineering firm or a law firm, according to Jolton.
SAP is adding to the business model and will eventually have more functionality available through the multi-tenant option, he said.
Cloud deployments slow to take off
SAP may be struggling to increase adoption rates for the S/4HANA public cloud.
In January, the vendor announced that it had nearly 1,500 customers live on S/4HANA, 19% of the 7,900 companies that had purchased S/4HANA licenses or subscriptions to that point. By June, the total number of purchasing customers had climbed to 8,400.
However, Denecken said, although SAP is "extremely happy about the growth" of S/4HANA public cloud, the company doesn't disclose numbers.
According to one analyst, those numbers are actually pretty low.
"I would say SAP has maybe about 100 to 180 cloud customers to date," said Duy Nguyen, research director at Gartner, which is based in Stamford, Conn. "SAP is really struggling to build the revenue for their cloud on the S/4HANA side. Most of what they are able to get today is the on-premises, so it is moving quite slowly."
One of the reasons is that SAP is giving people both options: on premises and the cloud.
"The cloud version is not even mature," Nguyen said. "There is a lot of functionality that's still missing. So, when they claim that new functionality and innovation [are] going to go into the cloud first, what they ended up delivering are features that people either don't care about, are not ready for or are not relevant to what they're trying to do."
Another reason for the slow adoption of the S4/HANA public cloud stems from the fact that organizations have customized "the hell out of" their ERP products, said Paul Saunders, also a research director at Gartner.
"Every organization across the world has customized their ERP [systems]," Saunders said. "So, it's not just about how do I move my existing ERP to the cloud and what benefits do I get from public cloud? But it's: How do I unpick this spaghetti mess that I've created for myself over the last 10 to 15 to 20 years, and what value am I going to get going forward?"
To address that challenge, SAP is starting to switch the focus more from "OK, let's move your stuff to the cloud" to "How can we enable you to get business value?" he said. "The cloud is part of that and obviously a big part of [SAP's] intelligent enterprise [pitch]. But it's yet to be seen how much of that is marketing and how much of that can actually be real."
SAP is at a crossroads, and to drive adoption of the S/4HANA public cloud, the vendor is going to have to explain how S/4HANA won't cannibalize its Business ByDesign SaaS-based ERP system, Nguyen said.
"If I were an SAP customer, I would [question whether] to go with Business ByDesign or S/4HANA," he said. "S/4 has all of these bells and whistles when it comes to machine learning, AI and the CoPilot [digital assistant] and everything. But if it comes down to price, then most likely Business ByDesign is going to beat S/4HANA. And as you can see, if two products are creating that conflict of market share, then I think SAP is going to end up competing [with itself]."
SAP announces HANA Cloud Services at Sapphire Now 2019