Growing-focused businesses have a choice when deciding which SAP enterprise resource planning solution (ERP) they should adopt: SAP S/4HANA Cloud Public Edition or S/4HANA Private Edition. While many firms will benefit more from the Public Edition and its software-as-a-service model, there are substantive differences between the two, and cases when the Private Edition makes more sense.Nearly 10 years ago, in 2015, market leader SAP rolled out S/4HANA, its flagship ERP solution made for the cloud. Previously, the company’s flagship ERP solutions, SAP R/3 and SAP ERP, were on-premise software solutions. But the world was changing, so SAP rewrote more than 400 million lines of code and reinvented its industry-standard ERP solutions for the cloud in the form of S/4HANA.

Things changed again in 2021, with the release of   SAP S/4HANA Cloud Public Edition . SAP recognized that not every business needs the complexity and control that comes with the Private Edition. Most businesses do not need such things, in fact. So SAP introduced an almost equally powerful but less cumbersome software-as-a-service version of S/4HANA, dubbed Public Edition.

Growth-focused, midsized, and large businesses now have a choice.

Understanding the Differences Between S/4HANA Public and Private Editions

The differences between SAP Cloud ERP (SAP S/4HANA Cloud Public) and Private editions can be grouped into five main areas: ownership and control, security and compliance, scalability and performance, cost, and customization and integrations.

The decision between the two ERP offerings comes down to the needs of a business around these five areas.

1. Ownership and Control- The single biggest difference between SAP Cloud ERP and its Private Edition counterpart is ownership and control.
   
   With the Private Edition, businesses purchase a license for S/4HANA and install it on any infrastructure they select. This could be a company’s own data center, or an infrastructure-as-a-service provider such as Amazon AWS, Microsoft Azure, Google Cloud Platform, or Alibaba Cloud.
   
   S/4HANA Private Edition is therefore a single-tenant, private cloud environment maintained by the business and its support partners. This means the business has complete ownership and control over not only its data but also the underlying infrastructure. But with this control also comes the responsibility of setting up the infrastructure and maintaining it properly, both from an operational and security perspective.
   
   SAP Cloud ERP (S/4HANA Cloud Public Edition), on the other hand, is software-as-a-service. SAP maintains and controls the underlying cloud infrastructure, and the business uses S/4HANA in a multi-tenant cloud environment. The business controls the data and the application layer, and SAP controls everything else.
   
   
2. Security and Compliance- The impact of a private cloud S/4HANA vs. a public cloud version starts to become clear with security and compliance considerations.
   
   With SAP Cloud ERP, security and compliance are primarily SAP’s responsibility as the cloud provider. With the Private Edition, the business must design and deploy both security and compliance functions on its own.
   
   This difference can be a pro or a con depending on the needs of a business. The advantage of having SAP handle overall security and compliance is the use of robust, well-maintained standard best practices for security and compliance. The downside of this approach is that the business cannot put custom security provisions in place, something that regulated industries such as financial services might need.
   
   
3. Scalability and Performance- Does a business think it can optimize performance better than SAP? This question highlights the performance and scalability difference between S/4HANA Public and Private editions.
   
   SAP Cloud ERP is tuned for overall performance by the maker of the software solution, SAP. Performance with the Private Edition depends on the business managing it, enabling performance tuning but also requiring it.
   
   In terms of scalability, the Public Edition is highly scalable and elastic because it is a software-as-a-service. The Private Edition can scale, but it often scales less easily because it depends on expanding the infrastructure of the business managing it.
   
   
4. Cost Considerations- The Public and Private Editions of S/4HANA operate on entirely different spending models. The Public Edition operates on a pay-as-you-go model as a cloud service, which means it is an ongoing operating expense. The Private Edition requires a large up-front cost for equipment and licensing as cloud-based but self-managed software, which makes it mostly a capital expense.
   
   For the typical business, S/4HANA Cloud Public Edition offers the lowest total cost of ownership (TCO) and produces the highest return on investment. But this is not always the case.
   
   For businesses with variable workloads, TCO definitely favors the Public Edition because the scale of the solution always matches operational needs. When a business has predictable and consistent workloads, however, the Private Edition sometimes proves more cost-effective because the scale can be defined and precisely configured at the onset without the need for the SaaS cost associated with scalability.
   
   
5. Customization and Integrations- Among the two variants, the S/4HANA Private Edition allows a greater degree of customization and integration with third-party software, partner systems, and cloud solutions because businesses using the Private Edition have complete access and control over the SAP code. Businesses can deeply customize the Private Edition if they choose.
   
   The Public Edition, by contrast, leans more heavily on standardization and modularity because the inner workings of the platform are off-limits as a SaaS offering. This limitation sometimes is an advantage in disguise, because standardization and modularity reduce cost and complexity.
   
   The emergence of the SAP Business Technology Platform (BTP) has narrowed the advantage of the Private Edition when it comes to integrations and customization. The BTP is a cloud platform for add-on modules, developing custom code that easily plugs into SAP ERP solutions without having to modify the core, and an integration suite for connecting just about anything to an SAP ERP solution. The BTP fundamentally is an attempt to bring all the flexibility of the Private Edition to the Public Edition, but through a more cloud-native, modern, and sustainable architecture.
   
   So, businesses that need the highest degree of customization might still choose the Private Edition, but most businesses can configure the system as they need and avoid the related hassles of deep customization with the Public Edition combined with the BTP.

Get Help Choosing the Right Solution for Your Business

Both editions of the SAP S/4HANA Cloud come with advantages and disadvantages. The choice largely depends on whether a business needs its ERP in a private cloud or if it can take advantage of the public cloud for simplicity and reduced costs.

Navigator Business Solutions has helped businesses select and implement more than 300 ERP solutions over the past 20 years as an SAP Gold Partner.  If you would like help deciding which version of SAP is right for your business, contact one of our experienced ERP consultants by calling (801) 642-0123 or writing us at info@nbs-us.com .