SAP Cloud Rental Model

The challenge of renting versus buying

Buying a house or a thousand professional user licenses for SAP Business Suite 7 requires financing. When buying a house, the heads of the family meet and discuss the decision. In a business context, it’s the CIO or CCC manager who is responsible to the executive board for the expansion of SAP licenses. In both cases, the question is how to raise the capital. Financing is one of the keys to an investment’s success, whether that be a house or SAP licenses.

At first glance, renting or subscribing to the cloud may seem easier. If you negotiate skillfully, you may be able to live mortgage-free for the first month, or use the cloud for free for six months. Compared to the upfront investment of a purchase, beginning with a rental model is less capital intensive.

The success of cloud computing is based on a low entry barrier to entry. For a few dollars or euros, users acquire access to an email server in the cloud without investing in server hardware, maintenance, or software licenses. However, if you are thinking long term and planning your ERP commitment for 25 years, you should carefully consider whether to buy or rent.

Requirements and exit strategy

A sword of Damocles, an imminent and perpetual peril, hangs above the vulnerable necks of all tenants, where a landlord can at any moment theoretically force their tenants to leave.

Neither a hyperscaler nor SAP will impose their own requirements and terminate cloud contracts. But what if a tenant wishes to leave the SAP or hyperscaler cloud? Is there an exit strategy? What can the cloud customer take with them? What rights does an SAP customer have if they are left with their data as CSV files?

The risks of a rental model

Life is not always easy, and a lease is always a promise for the future and a compromise with your own needs: as long as business is good and the rent can be paid monthly, both sides seem to benefit. But what happens to the data in the cloud if the rent is not paid? Can the cloud landlord delete the data on the first day of non-payment? Here is a bit of advice: read the SAP General Terms and Conditions for RISE and GROW and consult your legal advisor.

Have you considered what you are allowed to change, improve, and modify in a rented apartment? According to current rental law, it can already be questionable to hammer a nail into the wall to hang a picture. The situation is similar with the SAP Public Cloud for S/4 Hana. The scope for modifications and extensions is extremely limited. SAP's recommendation is to place a second cloud system in addition to S/4. This second system is called SAP Business Technology Platform. It is just as expensive as S/4, but now you are allowed to make modifications, in a manner similar to Abap with CAP and RAP.

Master in your own house

If you can afford it, a fully financed on-prem model is of course much more secure and future-proof than its cloud counterpart. Nobody can tell you what to do on your own server with your own licenses, and the exit strategy is simplified to the end of maintenance. There may be no more feature enhancements, but the data and processes remain and are only dependent on the electricity bill being paid on time.

The cloud operating model has proven itself and is the next logical step after virtualization, but cloud also works in-house, on your own or rented servers, and with your own SAP licenses.

Rental, i.e. a cloud subscription, can have economic advantages. Your own SAP licenses are an insurance policy for 25 years of successful ERP. If you want to remain an SAP customer for the long term, there is no reason to become dependent on an SAP cloud.

Cloud subscription with safety net

We recommend reading the upcoming article by Myrja Schumacher (Honico) and Guido Schneider (SCL365) for all SAP customers who are considering cloud computing. The report discusses the SAP cloud model critically and constructively, and mentions when it is worth renting a larger apartment than you currently need. Renting is not impossible. However, for successful cloud computing with S/4 Hana, SAP customers either need a lot of experience and knowledge, or they need Myrja Schumacher and Guido Schneider’s advice from the May 2024 articles in E3 Magazine. If you are a German speaker, feel free to drop by the SAP Competence Center Summit 2024 in Salzburg and ask them in person.