Goldilocks and the 6 (or 7) SAP ERP Systems
- Summary:
- How many ways can you say ERP? Quite a few if you live in SAP land and the complexity of decision making is not getting any easier.
SAP is credited with inventing ERP in the late 70’s and early 80’s. Roll forward 30 years and it seems they like ERP so much they now have six different ERP product offerings. Some of them sound like the same product but as you will find they all offer slightly different things and are tuned to specific niches within the ERP market.
At the time of writing, the six offerings are:
- SAP S/4HANA in 4 flavours
- SAP S/4HANA On Premise
- SAP S.4HANA Private Cloud
- SAP S/4HANA Cloud extended edition (was called Single Tenant Edition)
- SAP S/4HANA Cloud essentials edition (was called Multi Tenant Edition)
- SAP Business ByDesign
- SAP Business One
This number increases to seven if you already purchased the previous version of on premise ERP from SAP (aka SAP Business Suite / SAP ERP / mySAP.com / R/3) as you can keep running that until 2030.
Why so many ERP choices?
Why does the company that invented ERP need so many ERP systems? It's a good question and one that needs to be answered with a bit of history and a bit of tea leaf reading.
It is important to select the one ERP that is right for you as you should enjoy faster implementation times, a lower cost of ownership and better business outcomes. Select poorly and the opposite could be true - extended implementations, high cost of ownership and impaired business outcomes. So as you make your way into SAP ERP or consider a transition from classic SAP Business Suite to your chosen flavor, make sure you select wisely as ERP is for life not just for Christmas.
The naming conventions didn’t get this way by design. SAP has evolved to this position and I believe that understanding this evolution is key to making the right decision when selecting a new ERP system or evolving your current SAP Business Suite ERP system.
The diagram below shows how the various offering have evolved from the early days of the mainframe based SAP R/2 to the present day line up. For completeness, SAP had a product called R/1 which I haven’t shown.
Three things to note
The first thing to note is that most of the offerings have been developed by SAP in house, whereas many other ERP vendors have acquired many ERPs. The only acquired product is SAP Business One which was bought from the Israeli company TopManage FinancialSystems in 2002 when SAP wanted to get into the Small Medium Enterprise (SME) market and had nothing in-house to offer at that point.
The second is that the current S/4HANA “family” has evolved from the mainframe R/2 product which is important to know when you are considering the functional depth and technical complexity of the various offerings. One way to view the IP inside S/4HANA is to consider that at the core, SAP's ERP has been maturing for 40 plus years.
Third, only one product was built from the ground up as a Software as a Service (SaaS) offering and that's SAP Business By Design. All of the others are either on-premise offerings or on-premise software that has been adapted for one or more cloud delivery.
Which leads me to the Goldilocks title of this blog and the dilemma that I see customers face when trying to select a product from this portfolio.
- Some are too big
- Some are too small
- Some are too complex
- Some are not complex enough
- Some are not cloudy enough
- Some are too cloudy
And of course one may just be right.
Trying to find the right one (or ones for large enterprise) is a headache many CIOs can’t face so they are putting off the decision and continuing to run SAP Business Suite if they are existing SAP customers.
SAP just made this easier for CIOs by extending support to 2030 for SAP Business Suite. This is creating a headache for SAP as they want everyone to move to the new ERP line up so they can show growth and deliver to shareholders expectations. Quite how that plays today is another matter but you can confidently expect that at least 30% of those who are on the road to S/4 but not yet made a decision just kicked that apricular can down the road.
What should CIOs do?
While staying where you are might be the right decision you could miss opportunities to make your organization more competitive and/or provide your existing ERP services at a reduced cost — or both.
Despite current uncertainty, I believe that all CIOs should be making the 'What's next for ERP' decision a key one for 2020, so that they can plan the eventual transition in a timely way and also make informed decisions about investments in their pre-transition landscape.
Making the right selection involves many moving parts. Below I provide my 20,000 foot view on which one could be right for you. Each is listed in order of the functional coverage, technical flexibility and implementation complexity they represent, based on my long experience with SAP systems.
Product |
Best Fit |
Cloud / On Premise |
SAP S/4HANA On Premise |
This offering has the broadest range in terms of scope and technical flexibility — you can write your own code, deploy to hardware you own and configure the solution to your exact requirements. Basically if you currently run SAP Business Suite On Premise then On Premise S/4HANA will feel reassuringly similar. If you want you can convert your existing SAP Business Suite to this version. |
On Premise software that can be deployed to Cloud providers with many providing out of the box hardware images for this purpose. |
SAP S/4HANA Private Cloud |
The same software as the On Premise version above but run by SAP on SAP HANA Enterprise Cloud (HEC). This takes away some of the technical decisions but still provides access to all of the rich functionality and flexible modification options. Various options are available for Application Management Services (AMS) - from monitoring/patching/upgrades to full application management. If you want you can convert your existing SAP Business Suite to this version. |
On Premise software deployed to SAP HANA Enterprise Cloud with SAP Application Management Services |
SAP S/4HANA Cloud extended edition |
Same software as the On Premise version but you have to start with a clean system and SAP encourage you to configure this using Best Practice scope items using the Activate methodology. As these Best Practices don’t cover all of the On Premise functional scope where you find gaps you can dip into the On Premise capabilities and you can write modifications in the system (like you would with the On Premise version). You get a packaged Application Management Services (AMS) bundle that covers an upgrade twice per year. |
On Premise software that is managed by SAP and the customer to create “Cloud-like” experience |
SAP S/4HANA Cloud essentials edition |
Cut from the same code base as the On Premise version but delivered as Software as a Service. You have to implement using Best Practice Scope Items and you can’t modify the code base (although you can still add programmatic logic and data objects/fields to the system). Any major additional functionality would be created side-by-side using APIs to call / or be called from/to S/4HANA. SAP provide SAP Cloud Platform for this extension purpose — but you can use others. This offers faster and more predictable implementation times but for those used to either on premise SAP ERP or SAP S/4HANA the scope in terms of functionality, industries and countries is more limited. |
Software as a Service which has evolved from an On Premise code base |
SAP Business By Design |
This product was developed by SAP in the 2000’s and I believe was supposed to be the replacement for SAP Business Suite but SAP struggled with adoption in larger enterprises so it was repositioned for the SME market once S/4HANA was born. Built for cloud it offers a fully integrated ERP scope that goes beyond that offered by S/4HANA — covering HR/CRM for example. It is configured using built-in scoping selection tool and you can’t modify the code base. Some larger organizations have this as their 2nd tier ERP system for smaller countries as SAP provide pre-package integration to S/4HANA. |
Software as a Service built from the ground up by SAP |
SAP Business One |
This is the only acquired product from SAP but that was nearly 20 years ago so we can now call this an SAP product. Available On Premise or Hosted (cloud) it offers a good breadth of ERP features and has a happy user base. Perhaps offers a solution for the second or third tier of a large enterprise ERP strategy. |
On Premise software that is offered as a managed service in the cloud |
None of this comes without problem for the entire SAP ecosystem.
- For SAP this is a massive code base (and associated technical debt) to manage / evolve where it is really really hard to create a consistent marketing and sales message. Could this be simplified? Architecturally, you're looking at a 10 year project that doesn't have a high expectation of success.
- For SAP customers / SAP prospective customers this is a baffling array of different options with ta high risk of making the wrong call, especially if you don't have a firm grasp of the nuances involved.
- For SAP partners, keeping up with and holding all the skills required to correctly advise clients and do a great job of implementing is nigh on impossible. Thinking about S/4HANA for example, we know of instances where third party developers are waiting to get a better deal from SAP and/or better line of sight into customer uptake before refactoring functionality built for ECC.
While I think choice is a great thing, trying to explain the above to anyone who hasn’t been in the SAP world for 20 years get kind of awkward — come on SAP, please step back from this and make it easier for customers to understand what you have — you never know it might improve sales !!