The cloud has evolved into the primary location for organizations to store data and software applications. Many companies that have not yet fully utilized cloud storage for their hardware, software, and data requirements, are currently considering moving their Information Technology (IT) operations to the cloud.

Additionally, global corporations of all sizes and across all sectors are modernizing (or planning on updating) their data architectures and platforms to leverage the latest data analytics, data science, and Business Intelligence (BI) applications simultaneously as they move to the cloud. A Deloitte study indicates that “cloud and data modernization are highly interrelated and… reinforce each other.”

Along with the wide-spread adoption of the cloud by multiple organizations, SAP ERP (Enterprise Resource Planning) software is also moving to the cloud. Not only are the SAP software owners and developers offering cloud-based PaaS (Platform-as-a-Service) or SaaS (Software-as-a-Service) solutions themselves, but their ERP software is being installed and offered by third-party data center infrastructure specialists like


A brief history of SAP, the company

Before we look at the specifics of SAP cloud hosting,

SAP SE, the company, is one of the world’s leading producers of business management software. In summary, they develop solutions that “facilitate effective data processing and information flow across organizations.” Succinctly stated, the company’s primary aim is to provide an interconnected business solution on a fully digital platform.

When SAP first introduced their original SAP R/2 and SAP R/3 software, they benchmarked the global standard for ERP software. Additionally, when SAP introduced their SAP S/4HANA package, ERP software has reached new heights with its in-memory computing, able to process vast amounts of data, as well as to facilitate advanced technologies such as artificial intelligence (AI) and machine learning.

On the other end of the ERP scale, SAP Business One is a business management solution designed for small to medium-sized organizations. It is a single solution, streamlining business processes like accounting, purchasing, sales, inventory, campaign management, and production.


The benefits of SAP cloud-based hosting

As described above, apart from the SAP Cloud Platform offering, SAP also is hosted on third-party private cloud infrastructure. Let’s look at the benefits of signing up to use SAP’s ERP software as offered by a private cloud provider.

1.    Shortens Time-to-Value

The Time-to-Value (TTV) metric quantifies the time taken for a customer (or user) to realize and extract value from a product or service. note that this metric is similar to the ROI (Return on Investment) number. But instead of measuring the financial success of an investment, the TTV metric measures the effectiveness of an investment.

Implementing a cloud-based SAP solution rather than an on-site installation shortens the TTV or reduces the time taken from the first day the migration from an existing on-premises software solution project is kicked off to the project’s end or the time when the system is fully operational.

Not only does this fact improve the organization’s ability to generate an income quickly after the decision to move to a cloud-based SAP solution, but it also reduces the cost of maintaining an on-premises solution, including the maintenance of hardware and networking architecture as well as the ERP software itself.

2.    Increase cost-savings

Have you ever calculated the actual cost of purchasing, installing, and maintaining an on-site server stack, especially one capable of running SAP S/4HANA? As part of the calculation, it is essential to include direct and indirect costs when making the calculation. Direct costs include:

  • Computer hardware and software costs
  • Heating or cooling costs
  • The cost of the server room’s rental

Secondly, the indirect costs for running and maintaining an on-premises server architecture includes salaries of system administrators and IT technicians as well as lost productivity due to downtime.

Without going into details, it is reasonable to conclude that the cost of on-site computer service ownership is exponentially higher than the cost of the cloud-based solution’s monthly fee.

The second number to calculate is the cost of the vCPUs, RAM, and disk space that you will need to run your operations. The physical cost of purchasing enough CPUs, RAM, and disk space versus the monthly rental of enough processing power, memory, and disk storage is also substantially lower higher. As a result, it makes sense to move to the cloud from an on-premises server architecture.

3.    Improve scalability and elasticity

Cloud scalability is defined as the ability to increase or decrease hardware resources as needed to meet the changing demands made by an increase or decrease in the requirements by the business to run increased or decreased workloads.

On the other hand, cloud elasticity is the system’s ability to grow or shrink to meet changing workload demands dynamically. In other words, elasticity is a short-term requirement, and scalability is a medium to long-term requirement.

Both are benefits of moving to the cloud and from an integral part of a successful cloud-based SAP solution.

For instance, SAP includes the functionality to run complex data AI-based data analytics queries. When these queries are running, it stands to reason that the system workload requirements are much higher. However, this is not a continuous high workload demand. A cloud-based architecture will scale up automatically, using higher vCPUs and memory (RAM) to run these queries. When complete, the system will automatically scale back down to the vCPU and RAM needed to run the system under normal circumstances.

Secondly, the SAP usage will increase over time as the company grows and increases its operations. In an on-premises server-based scenario, the company will have to purchase new server components for the IT infrastructure to grow in-line with the software requirements, taking weeks or months to arrive. Juxtapositionally, the company can scale up its virtual server hardware requirements (vCPUs, disk space, and RAM) in minutes, minimizing the risk of losing income due to extended downtime or the inability to meet the increased workload while waiting for new servers to arrive.


Final thoughts

Based on this discussion, it is reasonable to conclude that for many reasons, deploying a cloud-based SAP ERP solution is preferable to running an on-premises server stack. Apart from the reasons described above, other reasons include fast deployment, improved cash flow management, flexible hardware capacity, and the option of managed IT services, allowing your company to concentrate on what matters, delivering a quality product, increasing sales numbers, and increasing your top and bottom lines.

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