What is SAP S/4 HANA Private Cloud (PCE)? Independent Guide

In this guide, we'll decipher SAP S/4 HANA Private Cloud, which is one of three offerings for SAP S/4 HANA from German software giant SAP.

We'll break down the service offering for S/4 PCE, discuss which companies are best served by Private Cloud and understand some of the costs and considerations for potential S/4 HANA Private Cloud users.

What is SAP S/4 HANA Private Cloud?

SAP S/4 HANA Private Cloud Edition (PCE) is an ERP solution which leverages the On-Premise S/4 HANA codeline, hosted on a hyperscaler such as AWS, GCP or Azure and with technical management services from SAP baked into the subscription.

S/4 Private Cloud offers the flexibility of an On-Premise deployment of S/4 HANA, whilst also delivering the efficiencies of the Cloud model by outsourcing hosting and TMS. 

S/4 PCE is perfect for more complex organizations with legacy SAP ERP installations that are looking to benefit from the Cloud and modernize their IT landscape and function.

Who is SAP S/4 HANA Private Cloud suitable for?

The target market for SAP S/4 HANA Private Cloud is existing SAP ECC 6.0 or R/3 users that want to migrate to the next generation SAP S/4 HANA solution, as well as medium or larger organizations that have complex processes or strict regulations to adhere to, such as the pharmaceuticals, government or aerospace and defence industries.

SAP ECC 6.0 Migration

SAP ECC is quickly becoming end of life, which means that users either need to face dwindling support options and potentially catastrophic business consequences, migrate to a different ERP platform or upgrade to S/4 HANA.

Get more information on SAP S/4 HANA Cloud: 

S/4 HANA Private Cloud is the best option for organizations that want to perform a brownfield SAP migration from ECC 6.0 as it allows you to keep a lot of the customization you may have built in your existing installation. 

On the other hand, if you wish to implement a greenfield S/4 HANA system - you may wish to opt for SAP S/4 HANA Public Cloud instead.

Pharmaceuticals and Regulated Industries

Many organizations in regulated industries also may find the SAP S/4 HANA Private Edition is the best choice for them from the SAP portfolio. The Public Cloud Edition is subject to quarterly updates and limited control of the hosting and AMS.

This can be very problematic for organizations such as pharmaceutical manufacturers that need to validate their processes every time a system changes.

Government and aerospace and defence companies typically also want to exercise very tight control over their data and any changes that are rolled into their ERP systems without their say so.

Which companies use SAP S/4 HANA PCE?

SAP has had an overwhelming response to the release of S/4 Private and has won several landmark customers. Typically they fit the profile of being ECC 6.0 users migrating to S/4 and the Cloud, however there are some smaller greenfield implementations too. 

Companies running S/4 HANA PCE include BMW Group, Hitachi, Siemens, Astrobank, Federal Mogul, Seoul Semiconductor, FC Bayern, Nikola Corporation and thousands more.

What does SAP S/4 HANA Private Edition include?

A SAP S/4 HANA Private Edition license includes user access, hosting, technical managed services, SAP support and maintenance. 

In other words, it includes everything you need apart from implementation services and application management services (AMS).

That means that you don't need to purchase a separate commercial agreement with a hosting provider, or do the legwork of mounting SAP in a datacentre - these activities are performed by SAP themselves. 

However, you will still need to provide the application management services (AMS) yourself, or outsource this to a third party, so it's not a completely native Cloud solution - for that you should investigate the Public Cloud edition of S/4.

Hosting Options for SAP S/4 HANA Private Cloud

SAP S/4 HANA Private Edition can be hosted with a number of data centre providers from the large hyperscalers through to a select number of 'premium data centre providers'.

As of February 2024, SAP S/4 Private can he hosted in Amazon Web Services (AWS), Google Cloud Platform (GCP), Microsoft Azure, Alibaba and more. 

How much does SAP S/4 HANA Private Cloud Edition cost?

To purchase and implement S/4 Private, you'll need to factor in a number of costs.

At a high level, implementing S/4 HANA PCE will cost anywhere from $750,000 to tens of millions of dollars in year one. This will depend on the quantity of users, the scope of your implementation and the complexity of your business processes.

Let's quantify the cost of S/4 Private Edition in more detail below:

1) SAP S/4 HANA Private Edition Software Subscription

Private edition is only available as a subscription, typically on a minimum 3 year contract. Licensing can be complex but is general divided into:

• User access licenses depending on user responsibilities.
• Engine based licenses for advanced functionality. 
• Hosting or technical licenses for additional storage and sandboxes.

You can find out more about SAP S/4 HANA costs, here.

2) SAP Implementation Services

Typically you'll need the help of a SAP implementation partner to get up and running with S/4 HANA Private Edition, as with any ERP implementation, upgrade or migration project. 

You can select from global systems integrators or smaller boutique SAP partners depending on your specific needs and preferences. 

Implementation services costs will depend on whether you are simply migrating from S/4 HANA On-Premise, implementing the system greenfield or taking a brownfield migration approach from an existing SAP ECC 6.0.

How long does it take to implement SAP S/4 HANA Private?

Implementing SAP S/4 HANA Private Cloud can take anywhere from 6 months through to a number of years depending on various factors.

Many larger organizations choose to implement SAP S/4 HANA Private Edition when migrating from SAP's legacy ERP solution ECC 6.0. In many scenarios, they are transforming multiple legacy instances of ECC 6.0 onto S/4 HANA which is a complex and time consuming process that can take many years.

In general, the contributing factors to your implementation will be the number of users, the scope of the project, integrations, customizations and your own ability to execute and spend time on the project and free up resources to implement the ERP.

SAP S/4 HANA Offerings Compared

Pros & Cons of SAP S/4 HANA Private Cloud 

Pros:

• Private Cloud gives SAP customers the benefits of the Cloud, but a lot of the flexibility of an On-Premise S/4 HANA deployment model, making it a great fit for complex industries or companies who want to retain some of their legacy ECC 6.0 processes.
  
  
• S/4 PCE can be deployed in major hyperscaler datacentres alongside your data warehouse and other hyperscaler services and applications for IT standardization.
  
  
• S/4 Private Cloud licensing includes SAP license access, support and maintenance, hyperscaler hosting as well as TMS services delivered by SAP in one contractual mechanism - simplifying your IT contract management and relationships.

Cons:

• SAP S/4 HANA Private requires you or a third party company to manage the application layer - a significant undertaking and is not as low maintenance as a pure Cloud ERP solution such as S/4 HANA Public Cloud.
  
  
• S/4 HANA Private Cloud comes with almost all of the configuration and customization abilities as an On-Premise installation of S/4 - meaning implementation can be lengthy and can easily run into complexities.
  
  
• The total cost of ownership of Private Cloud is typically higher than S/4 HANA Public Cloud due to the added complexity of managing the essentially On-Premise application.