Cloud between euphoria and crash

In the age of digital transformation, the decision on the future ERP architecture presents existing SAP customers with a complex dilemma that goes far beyond the simple choice between their own data center (on-prem) and the external cloud (private or public cloud). While the classic on-prem system dominated as the ERP standard including virtualization for a long time, the ideal of cloud technology has increasingly become the focus of the SAP community in recent years, with hybrid and sovereign models bringing specific challenges and risks that need to be mastered.

The traditional on-prem model, in which the software is operated on the company's own hardware, offers ERP users full control over data, business processes and licenses. It also enables complete control and adaptability of compliance measures and individual business processes (Abap modifications). However, this ERP autonomy comes at a high price: On-prem solutions are associated with high acquisition costs for hardware and software, must be designed for potential load peaks, which causes unnecessarily high costs, and are heavily affected by the shortage of skilled workers and dependent on qualified IT personnel required for 24/7 operation. In addition, legacy systems are often unable to support new technologies such as AI or analytics. However, existing SAP customers can switch to the Business Technology Platform (SAP BTP), which can also be operated in combination with an on-prem Business Suite 7.

The public cloud of hyperscalers (such as AWS, Azure or GCP) takes the opposite approach: it offers services publicly via the internet, uses a multi-tenant structure and attracts customers with high flexibility and elastic scalability as well as usage-based billing (pay-as-you-go). However, this convenience is not risk-free for existing SAP customers. The assumption that the public cloud is generally more cost-effective than in-house operation has not proven to be true in recent years. Many existing SAP customers have optimally orchestrated their data centers in recent years.

On the other hand, ERP users report a feeling of helplessness in the event of service outages, as there is no direct access to the data center and their own IT staff. And the concept of cloudification does not automatically mean simplification, as the complexity of data center operations, see also Rise with SAP, remains. There is also the risk of vendor lock-in and security concerns, as valuable company data is located outside the company firewall.

Hybrid Cloud

The hybrid cloud developed as a result of these conflicting priorities. This cloud computing combines on-prem and private/public cloud resources and makes it possible to keep sensitive data locally while using scalable cloud services and offerings from third-party providers such as Salesforce (CRM) and Workday (HCM). The central and greatest challenge here, however, lies in the orchestration of the IT landscape. The management of hybrid systems requires the integration of different operating models and service level agreements (SLAs). The interoperability between the often organically grown on-prem solutions and the cloud-native services of different ERP providers must be painstakingly ensured. In addition, moving workloads and large amounts of data between the IT worlds is technically complex and can lead to long runtimes for large systems, which requires a high network bandwidth.

Closely linked to the hybrid strategy is the desire for digital sovereignty, which is particularly popular in Germany, as many existing SAP customers expect data to be stored and processed in their own or hosted data centers on site. The sovereign cloud or specific private cloud models (such as HPE GreenLake) aim to secure sovereignty over business-critical data while offering cloud benefits such as flexibility and consumption-based billing. The challenge here is the high complexity of regulations and governance, as strict regulatory requirements (for example in regulated industries such as healthcare or finance) may dictate that certain ERP data cannot leave the company's premises. Cloud use in global scenarios, especially with providers outside the EU, requires extreme caution and an intensive examination of legal frameworks such as the GDPR and potential influences from the Cloud Act in order to avoid non-compliance.

The comprehensive transformation of existing SAP customers to S/4, particularly as part of the Rise with SAP cloud strategy, is far more than just a technical upgrade; the S/4 conversion is a business, organizational, technical and, not least, licensing challenge. The challenges, risks and dangers are complex and affect critical areas such as cost control, data security and autonomy. One of the biggest hurdles is the economic justification, as the high costs of an ERP release change often outweigh the benefits in the ROI analysis. These costs are largely determined by the complicated SAP licensing. The SAP price list for S/4 is a complex work of over 200 pages, with options such as Digital Access and SAP OpenHub that unsettle the customer base. The issue of indirect use is particularly sensitive, as the licensing of Digital Access implies the contractual agreement that documents imported into the SAP system via interfaces are subject to licensing. In the past, this issue was sometimes legally undermined, but now that Digital Access has been licensed, it is considered to be resolved, although the risk of expensive additional payments or over-licensing remains high.

The Rise with SAP subscription model creates far-reaching dependencies for existing customers. The conversion of existing perpetual on-prem licenses into cloud subscriptions takes place via the complex set of rules of the Full Use Equivalent (FUE), see also E3 cover story October 2025. This process is de facto irreversible for existing SAP customers and leads to a loss of autonomy over the ERP system, as ownership of the software is transferred from the customer to SAP and a rental relationship is created. This conversion is associated with concerns about an increase in costs. Although SAP admits that migration to the cloud with FUE does not necessarily lead to higher revenues for SAP, there are still fears of a 20 to 50 percent increase in the calculation basis following the switch to the cloud. At the 2025 Annual General Meeting, SAP CEO Christian Klein said that revenue per existing customer would increase three to fourfold as a result of Rise.

The lack of a sustainable cloud exit strategy on the part of SAP is seen as an existential threat to customers. If a Rise conversion fails, the customer is left with the wreckage of their ERP system, without having moved to the cloud, but with revoked on-prem licenses, which can entail the risk of double payment.

On a technical level, the S/4 transformation entails high risks. Solving data problems is considered the biggest challenge. The consolidation of customer and vendor master data into the new business partner approach is critical, as historically grown systems often suffer from poor data quality, duplicates and a lack of structures. The ballast of old data and legacy information also hinders the return to the SAP standard (clean core) and prolongs projects.

The clean core strategy propagated by SAP, which bans modifications and in-house developments from the S/4 core, clashes with the traditional degree of customization of many ERP systems. For customers with a heavily „dirty“ core and extensive Z developments, the conversion is extremely complex and labor-intensive, which can lead to long delays. Future adjustments must be made outside the core system, for example via the Business Technology Platform, which entails additional architectural effort and the need for new expertise in the IT departments. There will be an SAP Community Summit on the topic of Clean Core and BTP on April 22 and 23 in Heidelberg.

Although SAP and the hyperscalers offer a high level of security, the ERP user is still responsible for compliance and correct licensing in the cloud - even with Rise with SAP. The processing of sensitive data in the public cloud, especially with cloud providers based outside the EU, should be treated with caution due to legislation such as the Cloud Act, which can undermine GDPR regulations. There is also the risk that SAP may delete all data in the cloud as soon as the contract ends, forcing customers to proactively back up their data before the contract ends. Here, existing SAP customers often miss the aforementioned lack of a cloud exit strategy.

With the end of mainstream maintenance for ERP/ECC 6.0 approaching by 2030 or even 2033 at the latest, existing SAP customers are being forced to make strategic decisions. SAP is meeting this challenge with its comprehensive Rise with SAP offering, which is designed as a Business Transformation as a Service (BTaaS) and aims to simplify and accelerate the path to the cloud.

The strategic cloud transformation with Rise does not begin with the technology, but with the clarification of the medium and long-term business strategy, from which the goals for the S/4 conversion must be derived. The question of which deployment model is the most suitable - on-prem, public cloud or private cloud - is of fundamental strategic importance and must be examined with an open mind. Although SAP pursues a clear cloud-first strategy and has increasingly pushed this in recent years, the reality is that hybrid system landscapes are the rule for most existing SAP customers.

The Rise offering bundles various core components into a single subscription contract in order to reduce complexity and position SAP as a general contractor. In addition to the cloud ERP S/4 (in private or public edition), it also includes the Business Technology Platform, Business Process Intelligence (Signavio), the SAP Business Network and integrated tools and services. The BTP acts as a technological bridge and innovation platform that enables side-by-side extensions and thus supports the important clean-core strategy. This strategy, which aims to keep the core system as close as possible to the SAP standard, is crucial to continuously benefit from innovations and updates and is relevant for both the public and private cloud. Within Rise, existing S/4 customers can choose between two main deployment options: the Cloud Public Edition and the Cloud Private Edition. The public cloud, which is based on a multi-tenant model, is suitable for companies that pursue standardized processes and strive for the lowest total cost of ownership (TCO), but only allows limited configuration and customization. In contrast, the Private Cloud Edition (PCE), which technically runs as PaaS/SaaS in a dedicated public cloud environment, is aimed at medium-sized and large existing SAP customers with complex and individual requirements.

The success of the S/4 conversion, especially to the cloud, depends largely on careful preparation and the elimination of legacy issues. Experts advise using the transformation as a great opportunity for data harmonization, which should ideally take place before the actual conversion. A key requirement is the cleansing and consolidation of customer and supplier master data, as this must be transferred to the new business partner (BP) data model in S/4. Furthermore, the transformation should be combined with the creation of a separate, context-aware data layer in order to decommission legacy systems and massively reduce the amount of data that is migrated to the new S/4 system, which lowers costs and accelerates the changeover. Dealing with customer-specific Abap code (custom code) is also critical; tools such as the SAP Readiness Check and the Abap Test Cockpit are essential for this in order to determine the necessary customization efforts at an early stage and ideally outsource the code to the BTP (to ensure the clean core).

In conclusion, the choice of cloud strategy with Rise with SAP is a complex undertaking that for most existing SAP customers leads via the Private Cloud Edition and hybrid architectures.

Book tips

André Tiebing, Benjamin Kunold,
Patrick Jungk, 2025, 606 pages,
ISBN 978-3-367-10239-6

Thomas Saueressig, Tobias Stein,
Jochen Boeder, Wolfram Kleis,
2024, 644 pages, ISBN 978-3-8362-9479-9

Steffi Dünnebier, Uwe Zabel 
2023, 457 pages, ISBN 978-3-8362-9239-9

Matthias Friedrich, Fred Kindler,
Marcel Kirsten, Daniel Kloppich,
Mathias List, Bert Lorenz, Lars Teuber  
2023, 651 pages, ISBN 978-3-8362-9464-5

From SolMan to Cloud ALM

The switch from SolMan (SAP Solution Manager) to SAP Cloud ALM (Application Lifecycle Management) presents existing SAP customers with one of the biggest strategic and operational challenges in the course of the S/4 conversion.

With the announced end of mainstream maintenance for SolMan 7.2 at the end of 2027 (with extended maintenance until 2030), companies need to realign their ALM strategy. Cloud ALM is positioned by SAP as the strategic ALM solution for all existing SAP customers. It is a native public cloud application that is fully consolidated from the cloud and is primarily aimed at customers who use or are planning to use cloud-centric solutions such as S/4 Cloud, SuccessFactors or the SAP CX portfolio. In contrast to SolMan, Cloud ALM can be put into operation quickly and quickly provides initial monitoring data. The usage rights for SAP Cloud ALM are included in support contracts such as SAP Enterprise Support, Cloud Editions. Despite this strategic realignment, the changeover poses considerable challenges and risks for long-standing SolMan users, as Cloud ALM is not a fully-fledged alternative to SolMan. The functional scope of SolMan, which offers a much broader range of functions for the entire application lifecycle (including project management, monitoring, incident management, change management and test management), is currently not matched by Cloud ALM. In particular, SAP Cloud ALM lacks lifecycle management for the SAP Business Suite and non-SAP applications as well as functions for IT service management (ITSM).

The biggest risk lies in its suitability for hybrid environments. While SolMan was tailored to on-prem and hybrid landscapes in the past, SAP Cloud ALM currently appears completely unsuitable for hybrid system landscapes, as it is primarily geared towards the public cloud. Customers who continue to operate parts of their SAP landscape on-prem or in the private cloud need to clarify the extent to which Cloud ALM can effectively support these heterogeneous topologies.

The changeover also means a profound change in the role of the SAP Basis department (from CCC to CCoE): instead of maintaining its own systems, the tasks shift to coordination, provider management and the acceptance of business requirements that are passed on to SAP or hyperscalers. Another risk is the dependency on licenses, as the right to use Cloud ALM expires immediately if the existing customer terminates SAP support.

In summary, SAP Cloud ALM, integrated with Signavio and Lean-IX as well as the SAP Business Transformation Center for data migration, forms a platform that is designed to ensure the management of data transformation, innovation and cross-system business continuity. SAP is thus pursuing the goal of creating a comprehensive basis for AI-driven process optimization.

Hyperscaler: friend and foe

The path to the cloud has long been unavoidable for existing SAP customers, but the decision as to which cloud is the best is like a strategic balancing act between SAP's own offerings such as Rise with SAP and the direct use of the infrastructure of large hyperscalers.

The hyperscalers - above all Microsoft Azure, Amazon Web Services (AWS) and the Google Cloud Platform (GCP) - offer a deployment option known as Infrastructure as a Service (IaaS), which differs fundamentally from the packaged SAP solutions of the Private Cloud Edition (PCE) or the Public Cloud Edition.

The main attractiveness of an SAP system that is operated directly on a hyperscaler in the IaaS model lies in the maximized flexibility and agility. In contrast to the rigid, predefined hardware requirements of an on-prem system, the hyperscaler platform enables elastic scalability. Resources, such as for development, test or sandbox systems, can be provided within a few hours or dynamically booted up and shut down again. This not only offers investment security, but also enables flexible operation in terms of time, which is billed to the minute when the virtual machines (VMs) are not in use - a key factor in reducing operating costs (TCO). Some studies point to cost savings of 40 to 75 percent for SAP operations on Azure or annual savings of over three million US dollars by migrating the SAP infrastructure to Google Cloud.

Another key advantage of the hyperscaler approach (IaaS) is the ability to continue using existing SAP licenses (Bring Your Own License, BYOL). This allows existing customers to take their purchased on-prem licenses into the cloud without having to immediately switch to the subscription model associated with Rise with SAP. The serverless, fully managed solutions of the hyperscalers enable a high speed of innovation that goes beyond what SAP itself offers in the core system.

In comparison, Rise with SAP - which is often hosted on the same hyperscalers but runs as a private cloud edition - is a bundled overall package. Although it offers the customer a single point of contact (one face to the customer), it restricts flexibility as it combines software, hosting and operation in a single subscription. Those who rely on Hyperscaler IaaS, on the other hand, can negotiate individual contracts with hyperscalers and service providers and optimize the licenses across the entire IT infrastructure.

Despite these advantages, operating SAP on hyperscaler clouds is associated with considerable risks and challenges. One of the key problems is that the lift and shift of an old ERP system to the hyperscaler infrastructure modernizes the infrastructure level but retains the old ERP at the software level. The true benefits of SaaS, such as agility and innovation, can thus be missed.

Last but not least, the legal framework and data security represent a major hurdle. The migration of SAP systems to the cloud, especially to the public cloud of a hyperscaler, is technically complex. Regulated industries are subject to special, often industry-specific legal regulations that make cloud use complex. Customers in the public cloud must take compliance (e.g. GDPR) very seriously and actively address it. SAP itself is also trying to offer cloud innovations such as AI in S/4 only for its cloud solutions, which could potentially disadvantage existing on-prem customers or IaaS users outside of Rise. The decision to run SAP on a hyperscaler therefore requires careful consideration between the infrastructure flexibility gained and the increased management complexity as well as the uncertainties regarding costs and compliance.