For organisations wanting to ‘lift and shift’ their ECC to S/4HANA and reviewing their options

Implementing an S/4HANA ERP is a big project, often a re-implementation rather than a migration for most organisations and takes an average of 20 months to complete, according to last year’s UKISUG survey. Companies that do not have the time, resources or money to undertake such a major project, yet have decided they need the agility of a new S/4HANA ERP system for the future, will undertake a ‘lift and shift’ migration.

Although not the most efficient way to move onto a new platform, many organisations choose this option when migrating their old ECC system over as it is the least cost, time and risk way to move an ERP. Efficiency savings, optimisation and advanced features can be undertaken post migration as part of continuous improvement programmes.

When Microsoft wanted to move their internal SAP ERP from on-premises to their Azure cloud they followed a ‘lift and shift’ method. However, after it was moved, they then started an optimisation project to add automation with cloud features like auto-scaling and achieved a reduction in their operating costs by nearly 20%*.

S/4HANA Services and Product variants

There are four types of S/4HANA Cloud subscription services : S/4HANA Cloud Public Edition; S/4HANA Cloud Extended Edition (EX); SAP S/4HANA Cloud Private Edition and the hybrid version of this SAP S/4HANA Cloud Private Edition Customer DC option. There are two main scenarios used with the S/4HANA Product license.

Users that want to preserve their years of customisations to get their ERP to operate according to their business processes will choose a ‘Lift & Shift’ method with a brownfield migration. S/4HANA is available in 6 types of product license or subscription service, but only specific variants of S/4HANA can accommodate this type of migration.

Table 1: all SAP S/4HANA Cloud subscription service and product variants

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SAP’s licensing, subscription services and purchasing models

User have three main choices for a new S/4HANA system: SAP subscription services, DIY solutions based on a traditional license ownership model or the third option of a custom solution through an authorised SAP Partner Managed Cloud [PMC] provider.

Figure 1: S/4HANA Main 3 choices: SAP subscription services, DIY Product or Custom Solutions via PMC

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There are considerable rules and restrictions with these different models, including which environments they can be deployed, who can manage them and who is licensed to customise the service by applying a service wrap or presenting the services on alternative commercial terms or pricing models.

DIY traditional license ownership model

Users choosing the product perpetual license ‘AnyPrem’ version of S/4HANA have no restrictions on where they deploy their system, as long as it is in the customer’s own domain (eg. deployed at customer site ‘on-premises’, at the customer’s own colocation with their data-centre provider or within the customer’ s own public cloud account/instance). Perpetual licenses are for environments owned or controlled by the user. These landscapes can be managed themselves or they can appoint their MSP/SAP Partner of choice to manage it for them. Note these licenses do not permit use at installations that are not controlled by the user, such as a third party MSP’s own cloud service or MSP controlled public cloud instances.

Figure 2: Do It Yourself: Product deployment options (any locations under user control)

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Partner Managed Cloud [PMC] services around Product licenses

Perpetual licenses may only be used in an MSP’s own/controlled environment if that MSP is also licensed for such use. A SAP Partner Managed Cloud [PMC] as the name suggested is authorised to managed a SAP instance at partner controlled locations on behalf of the user. When the users already have the SAP licenses, PMC partners will call this their Bring You Own (BYO) license model.

If the user does not have the licenses required (being a new customer or during an upgrade), the PMC can also provide valid licenses for use during the PMC contract, effectively allowing them to provide a full Software as a Service (SaaS).

PMC partners will offer a range of services from the full SaaS, to a BYO licenses version, often called Platform as a Service (PaaS), or just managed infrastructure services (IaaS). These options usually accommodate scenarios where the user may or may not have their own application or database licenses. A number of optional services are also common to fit in with client preferences and capabilities as part of the turnkey solution. These can include user access, system security, BCDR with backups, replicated environments, optimisation database services or various middleware services such as SAP NetWeaver or BASIS.

Figure 3: PMC Customised SaaS, PaaS and IaaS options with Product licenses

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SAP PMCs can also provide additional tiers at different locations such as Dev/Test, QA etc being seperate from Production. This can also assist with current guidelines for measures required for SOX compliance. Increasingly users are also using PMC Platform providers to run their full production systems, for several reasons including speed of deployment, independence , two-tier ERP projects or just operational efficiency.

The PMC approach could also be applied to functional elements of the overall landscape. When large new systems like S/4HANA are being rolled across the business, a two-tier ERP approach will deploy the new SAP applications a function at a time. S/4HANA Finance is the most popular first phase with the new applications often rolled out in parallel with the existing ECC ERP, being the first phase of the overall S/4HANA implementation. These new Finance applications could be deployed and managed by a PMC Provider during these early commissioning stages before the final unified landscape is managed as one.

Platform services are becoming increasingly more popular for newer, more complex landscapes such as S/4HANA or BW/4HANA for production service, quickly providing the user with a fully managed environments for customers to run their SAP applications, without worrying about all the SAP middleware and system elements

SAP S/4HANA Subscription Services

ECC users that wish to ‘lift & shift’ their existing customisations will need a brownfield migration and must choose one of the Private Edition services. These variants of cloud service are built on more modern cloud architectures developed with SAP’s hyperscaler partners and will support all the customisation required to be go though an easy and reliable ‘lift and shift’ migration.

Figure 4: SAP subscription services supporting 'lift & shift' migrations

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SAP’s Private Edition Cloud service also has a hybrid option with infrastructure deployed at the customers own data centre for those that need their data located on-premises. Note this is still a fully managed subscription service from SAP. Two top SAP hardware vendors [Lenovo and HPE] have been chosen by SAP to provide the equipment needed onsite and work with them to ensure the system will be fully owned and managed by SAP as part of their service.

Whichever option is chosen, the Private Edition service that is managed by SAP will include an annual upgrade. However due to the potential for huge variation from supporting such wide customisation (that could include modifications to the core code), all scheduling and testing of upgrades does remain the responsibility of the client. Clients taking this private edition variant service from SAP, will still likely require expertise from SAP partners to manage these elements of their environment or utilise additional SAP Cloud Application Services (CAS) services.

Customised SAP Subscription Services with PMC

As described earlier, PMC providers provide custom managed services for users utilising the perpetual product licenses that can from SaaS, PaaS and IaaS variants .

The role of providing custom managed services to users with licenses, has now been extended to offer custom managed services for users that prefer to adopt SAP RISE and all other SAP subscription services with some customisation.

PMC providers can offer service wraps around standard SAP services to accommodate the needs of the client. This allows the partner to provide turn-key solutions that manage both SAP and non-SAP environments or both existing on-premises and new cloud services.

Figure 5: PMC customised service wraps around SAP subscription services

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PMC providers can determine their own commercial terms for these bundled services that suit both partner and user needs. They might bundle with other services, offer on fixed-price terms on variable factors more suited to the client’s type of business or vertical. PMC are not tied to offer subscription services on a ‘per user per month’ price models that standard subscription services dictate.

Conclusion: All about Customisation and Control

Companies now have extensive choices for S/4HANA that could follow the traditional perpetual license model, adopt S/4HANA Cloud subscriptions services or use a customised solution with their PMC.

Choosing the AnyPremise ‘product’ license is a ‘highly-customised’ choice that gives users full control of their environment, infrastructure and cloud instance. This option gives users the flexibility to determine their own system price/performance objectives as well as make their own decisions on which partner(s) to use. Users will also have a license for life that could be depreciated on a Cap-Ex model over 5-10 years and actually used for 20 years with annual maintenance charges being the only ongoing SAP charge. This option allows full flexibility to adopt different delivery partner/deployment models or even use alternative cloud vendors in the future, should their business needs change.

S/4HANA Cloud subscriptions service offer more simplicity and suit users that strive toward a ‘low-touch’ IT approach. However, users that have to choose the Private Edition version to support a ‘lift & shift’ will still require partners to provide Application Management Service (AMS) and manage /test their system upgrades to ensure that core updates do not adversely effect these customisations. As a subscription service there is no residual value, users will pay their SAP subscriptions for as many years as they use the service. What ability clients have to price fix or restrict price increases for the long term is unclear.

S/4HANA Cloud subscriptions services now have more customisation potential through PMC to solutions that closer match user needs .

Organisations evaluating their options might first consider their future aspiration for their business apps and where they are striving towards on the spectrum of ‘low-touch’ to ‘highly-customised.’ Low-touch users will want to do as little IT as possible and take subscription SaaS services wherever possible. Highly-customised users will want to control as much as possible themselves.

Most will be somewhere on this spectrum and look at their own resources, skills and capabilities and use partner expertise to complement what they prefer to do themselves. They will choose standardised services where possible and insist on being able to control/customise only the elements that are really necessary for their business. Users will use partners in all scenarios to benefit from economies of scale and automation etc.

There is no shortage of S/4HANA choices for users to get the best solution for them that meets the business needs now and in the future.

About Opal Wave

Opal Wave is the UK’s leading specialist in SAP Enterprise Performance Management (EPM) and provides software, lifecycle services and managed cloud hosting services to enterprise customers across a wide range of industries and international geographies.

At Opal Wave we empower our customers with better and faster decision making capabilities across the organisation. We specialise in Enterprise Performance Management (EPM), including SAP Business Planning and Consolidation (SAP BPC), SAP Analytics Cloud (SAC), S/4 HANA Finance Group Reporting as well as our leading SAP Platform and Hosting services.

“Moving BW/4HANA and S/4HANA systems to either a private or public cloud, requires a specialist platform which Opal Wave has architected, enabling customers to succeed on their digital transformation journeys

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