Understanding SAP S/4HANA Cloud Public Edition

Understanding SAP S/4HANA Cloud Public Edition 

What is SAP S/4HANA Cloud Public Edition? A culmination of SAP's 50 years in the ERP space. 

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[TRANSCRIPTION]

[Ralph Hess]: What S/4 Public is really the culmination of SAP’s 50 years in the ERP space.

[Peter Kowalke]: Hi, this is Peter Kowalke. Today I’m here with… Thanks for joining me, you two.

[Ralph Hess]: Hey, Peter. How are you?

[Russell DeLapp]: My pleasure.

[Peter Kowalke]: Let's talk about S/4HANA Cloud Public Edition. I've heard about…I know about many of the SAP offerings, but I admit I don't know as much about S/4HANA Cloud Public Edition. So let's start with the most basic here. What is S/4HANA Cloud Public Edition?

[Ralph Hess]: What S/4 Public is really the culmination of SAP’s 50 years in the ERP space. They invented ERP. Most people know that. Over the last seven years, they've been working on distilling down all the processes, the best practices, and really all of the innovation
that they've been able to assemble for large enterprises into more of a solution that was purely cloud-based. So that's really the first thing, right? It's actually in its name. It's a cloud solution. It is based in a public multi-tenant environment. That's the other part of its title.

[Ralph Hess]: And what it is, is it's a ready to run, fit-to-purpose ERP solution. Now there's a bunch of buzzwords around what I just described. But essentially what SAP has done is said, we need to make a user-friendly, easy to set up and configure solution, that's going to address the complexities of the small to midsize marketplace.

[Ralph Hess]: And as they've done that, it's been really a culmination of a number of different releases, really gained a tremendous amount of momentum over the last 18 months or so, so that it can fill an entire solution set for a number of different industries. First and foremost, of course, finance; SAP is known for finance world-class in terms of its financials. But also in the professional services industry.

[Ralph Hess]: You can audit firms, tax firms, engineering firms, construction companies, those types of industries. Also equally as robust and capable in manufacturing, distribution, and wholesale. So what SAP has really done is really on an industry by industry basis, come forward with a set of functionality that can be configured into the needs of a particular industry. So as you think about S4 public, and you may start to see it referred to in the marketplaces as SAP Grow, which is just another way that SAP is really investing in this marketplace, which is S4 public is intended for companies that are growing. So they're actually wrapping kind of “grow” around the title of it. It is what the majority of companies need in terms of business process, ranging all the way from just a standalone financial organization to professional services, to production, to full supply chain and really runs the gambit from all those various industries.

[Peter Kowalke]: So is S/4HANA Cloud Public Edition, is that for small and mid-sized growing businesses?

[Peter Kowalke]: When I think of S/4HANA, I think of large enterprises. So is this a small to mid-size offering? Is this for large enterprises? Where does it fit within the various offerings that SAP has? Because there's obvious, there's like four or five, there's many offerings these days.

[Ralph Hess]: There is. I'll start with this one and then we'll let Russell kind of wrap it up. Okay. Yes, SAP has a number of ERP offerings. What people usually think about SAP for is what the Fortune 5000 are running, right? The systems that are really monolithic systems that run entire enterprises that it takes an army of people to be able to support.

[Peter Kowalke]: The Coca-Colas, the British Petroleums of the world… which do run SAP, if I'm not mistaken.

[Ralph Hess]: Yeah, exactly. And then they also have systems for very small companies. Business One being one of them. There's then two solutions that
are really addressing a little bit of an overlap market. But I'd like to talk about where S4 Public fits in. So in an earlier session, we talked about a company's philosophy on how they're going to use technology to grow their company. So we've had companies that are $10 to $15 million invest in S4 Public because they know that they're not going to be $10 to $15 million next year, nor are they gonna be that the next year or the next year or the next year, right? They have aggressive growth plans. And they want to not have to change their system. 

[Ralph Hess]: They wanna lay the foundation and then innovate on that same foundation and grow their company. So that's one example. Where I would say typically it fits in terms of the marketplaces, are companies that are $40 million, $50 million, all the way up to half-billion dollar companies. That's usually the way people think about stratifying who would perhaps buy it. But we really are focused, in our business, we're focused on those high-growth companies,
and the entry point at which they understand and have the vision that they're going to leverage technology to their benefit.

[Russell DeLapp]: I think, in general, the operative word here is “public edition,” right? It's a public cloud. So really that's the difference you asked before of what's the difference of S4 Private Edition, or S4 Public Edition. And so what SAP has done to make this a lot more affordable to come downstream in the market a little bit is that public cloud offering, that true cloud model. And so they've taken a lot of the enterprise functions and features that are that have been cost prohibitive for the mid-market, and then made it more accessible for the mid-market in this public cloud model. In doing that, they've taken a lot of the industry best practices, right? Not just general, but the specific best practices for your industry that Ralph alluded to, pro-serve manufacturing, life sciences.

[Russell DeLapp]: And then you have a lot of, let's just take a quality management solution, right? You have 90% of the large enterprise quality management solution into the mid market now, and the price difference was always unattainable for that kind of functionality, in again the mid-market here.

[Peter Kowalke]: So, “public cloud” is one of the key points here. That means it is multi-tenant, it's in the public cloud, it's not private cloud or on-premise. Why isn’t everybody on a public cloud? When is it good to be on one or the other?</font>

[Russell DeLapp]: We obviously, we still see the need for the public cloud Private Edition is what we call it, whether it's on-prem or privately hosted. It's private edition. And so if you have the IT structure and wanna maintain that cost to maintain your own edition, your own private edition, whether on-prem or hosted, then there is advantages. You control when you wanna upgrade, you control your own innovation cycles, and you have a lot more flexibility with the backend code because of those other things. What this tends to be is a multiplier of cost, both from the long-term maintenance, because you're bearing everything of the
hosting structure.

[Ralph Hess]: Right.

[Russell DeLapp]: but also the implementation, the ongoing maintenance, the center of excellence. There's so many different things that come along with that, but there sometimes is a need for that. Some industries do require you to be on-premise, for example.

[Peter Kowalke]: So you do get a little bit more control, but with a lot more headache and cost is what I'm hearing. And so if you need that absolutely, when I do the patch, if you need that level of control for a regulatory environment, or just because the leadership decides they need that, then that comes with a high cost, which is why the Public Cloud Edition came out, because most businesses don't need that?

[Russell DeLapp]: Especially in the mid-market, we see IT teams with one to 10 people. That's not going to cut it for a private edition or you're going to pay somebody else to bring it on, right? Or again, outsourcing that comes with all the fun intricacies of that. And so the other thing I want to mention is the time
to value. Right? With the public cloud, I deploy your system within 30 days. Again, you're in your starter system within 30 days using data, and we're walking you through all the functionality.

[Russell DeLapp]: It's going to take me six months to do that on the private edition side.

[Peter Kowalke]: If not more. 30 days or even six months. I know many heads of IT who would like six months even.

[Russell DeLapp]: Yeah, yeah. Exactly. And so the other thing with the public cloud, you get to realize innovation cycles quicker because of the way the upgrades are scheduled. You have two big upgrades a year, and then you'll have small upgrades intermittently through the process. So you get to realize innovation sooner. If you're on your Private Edition, it's much harder to go through that deployment cycle and upgrade cycle. It's harder to realize the recent innovations. And
as you see things coming out with generative AI and machine learning, you can't leverage that until your own systems  do that. So with the public cloud, you don't have to worry about the SAP takes care of that for you.

[Russell DeLapp]:  And then your partner actually has regression testing. At least Navigator offers that. Where we'll go through, do your regression testing and your upgrade cycles for you. And so that way you're confident that your business won't be disrupted as part of those. And I know we have another section
talking about the Business Technology Platform, so I won't get into that innovation style.

[Peter Kowalke]: We’ll do that in another video, yes.

[Russell DeLapp]: But, what I want to point out is that that strategy enables S4/HANA Cloud Public Edition to maintain that clean core. Right? That clean core is extremely important for these automatic upgrades. And people say that with the public cloud, but really without this other element, without this other Business Technology Platform, the clean core is not possible. And so you have to develop in a way that makes those automatic upgrades feasible and able to adopt that innovation.

[Peter Kowalke]: We're going to be, in a future video, talking about the Business Technology Platform. But since you mentioned it, can you briefly help me understand this “clean core” and how it relates to S/4HANA Cloud Public Edition?

[Russell DeLapp]: Yeah, the Business Technology Platform, or the BTP, essentially allows us to develop our own innovation, Navigator's own innovation, in a format that looks and feels just like S/4 outside of the core. So it has all the same user experience tools and capabilities. So it's seamless to the end user. They don't see it, and it's a loosely coupled customization. Meaning that it's an application that's deployed seamlessly. So you click your tile on your application, whether
it's part of the core offering or it's on the BTP. Again, the end user won't be able to tell the difference. And that enables those upgrade cycles to happen
essentially automatically, right? Like I said, we still do the regression testing and supporting that process.

[Peter Kowalke]: So to put it into layman's terms, the clean core is the foundation of the ERP solution. It's sort of like a web browser by default. And then on top of it, you have the Business Technology Platform, which to extend that browser analogy, would be like the plugins for the browser. And so they augment the browser, and that's a way to do customization without having to mess with the innards of the basic system. It's safe customization, basically.

[Russell DeLapp]: Yeah, exactly. And a lot of the AI that comes native, like I mentioned earlier, the enterprise type of functionality being deployed into the mid-market, where the BTP allows for that, because of the way it's structured. So we can actually leverage algorithms that are there for us out-of-the-box, and apply them to processes inside of the core product. Let's take approvals, for example. If I have purchase order approvals, the more I use it, the more S/4 learns. And then I use the BTP to use AI to then automate the confidence levels that are assigned by the ERP system, by S/4.

[Peter Kowalke]: So, first of all, I'm hearing that there's the S/4 HANA Cloud Public Edition is basically taking what the enterprise has, by and large, putting it on a public cloud and making it available to smaller organizations. Taking a lot of the advantages and learning that SAP has. But where I'm still, I guess I'm still a little confused is, how does that relate with products such as SAP Business ByDesign? SAP Business One Is for small business. SAP Business by Design has been
that fast-growing, midsize offering. So how does a business know whether to go S/4HANA Cloud Public Edition or to go to Business ByDesign?

[Ralph Hess]: So I think that there is obviously, there's different options for companies that have different approaches to where they're headed, and what
their aggressiveness is in terms of deploying technology, and what they're looking for as an outcome. So if we look at ByDesign, that's what we would refer to
as a suite-in-a-box. So it has really everything that a business would need, all delivered as one subscription. So everything from CRM and marketing automation,
through the order to cash, procure to pay, all full supply chain. And it does that to a level of complexity that addresses the needs of a number of different
businesses. It will work for a company until it gets to a certain level of either complexity or business volume.

[Ralph Hess]: For those companies that have very high aspirations in terms of hockey-stick growth, that is a solution that may limit or require a change over the course of time. Certainly, it's going to be available to start on ByDesign, and then follow that up in three or four years with an implementation of S/4. And SAP is working, and we're actually working with them, on a migration strategy from ByDesign to S4. But now, we have a number of customers, and I think Russell would agree with this, that we've sold in the last, you know, two years, that if S/4 Public Edition was available to us at the time, we probably would have positioned that.

[Ralph Hess]: So, there is still a place in the market for ByDesign. And we try to take an ERP-agnostic approach when we're talking to customers, and trying to have them settle on a solution that's right for them.

[Peter Kowalke]: Well, how does a business know whether to go Business ByDesign or SAP, Excuse me. S/4HANA Cloud Public Edition? What are the considerations when knowing one or the other?

[Russell DeLapp]: The simplest way to describe it is, ByDesign is going to be a mile wide and a half mile deep. S/4 might be a half mile wide and then a mile deep, but then it has a strategy to then plug into like Ariba, or SuccessFactors, or SAP Analytics Cloud. Right? So it's more geared towards industry best solutions rather than that half mile wide deep that covers most of the mid-market anyway that ByDesign does. But when you reach a point where you want to go, you know, a mile
deep into the functionality, that's when you might want to either integrate ByDesign or potentially look at a migration to S/4. We see that a lot specifically
around warehouse management. ByDesign has plugins for warehouse management. S/4 has embedded extended warehouse management.

[Russell DeLapp]: Right? So it depends on the industry depth that you're looking at. And there's so many different factors, Peter. Um, like I said, the best way I can describe it is that mile wide, half-mile deep, or half-mile wide mile deep.

[Peter Kowalke]: So what I'm hearing is, Business ByDesign is more self-contained. If you want to go really deep on a certain functionality, you might need S/4HANA Cloud, Public Edition. It sounds like that's the enterprise offering that is available now for mid-sized businesses.

[Russell DeLapp]: Yeah.

[Peter Kowalke]: So you don't need that for a lot…most businesses. So that's where Business ByDesign makes sense. But if you do need those things, you don't have to be a large enterprise. You can get those with S/4HANA Cloud Public Edition.

[Russell DeLapp]: I think you said it well. I just want to give one more example. Let's take employee expense management. SAP has a product called Concur that specializes in this. And that's a best-of-breed application. So S/4 strategy is that we would sell Concur as part of the solution. If you want the best-of-breed
expense management, because it has so many more bells and whistles. Whereas, ByDesign has a basic expense management that suits the purpose for a lot of small to medium organizations. But then when you want some of the more advanced features, we can also integrate ByDesign to Concur. But it's out of the box with S/4. So it's already there.

[Russell DeLapp]: That integration is already done.

[Ralph Hess]: Yeah, really the concept that SAP has taken, Peter, is I mentioned the term “suite-in-a-box” with ByDesign. With S/4, it's called what we refer to as a “federated suite,” meaning that SAP has a lot of different functionality that's sitting in other solutions that they own, that plug seamlessly into S/4 to accomplish deeper levels of functionality and some of those other line-of-business solutions.

[Ralph Hess]: I think there's also another part that we really haven't talked about, which SAP is, again, a very innovative company. They're known for innovating in ERP, But they’re also innovating in sustainability now. And so, as we take a look at S4, we're not just talking about an ERP, we're not talking about the general ledger, the financial ledger.

[Ralph Hess]: We're also starting to talk about the green ledger. And so, built right into the foundation of S/4 is this ability to be able to keep carbon ratings on your own products, be able to measure your suppliers, your customers, et cetera, to start to be able to capture what the carbon ratings are of the various elements of your business.

[Peter Kowalke]: So one of the things I’m hearing is, it gives you a lot of the same functionality you get with the largest enterprise offering. I'm hearing that it's better for sustainability. What are some of the other value propositions of S/4HANA Cloud Public Edition?

[Russell DeLapp]: One of the biggest ones is that it is going to be future-proofed in how it is designed. So, I mentioned that clean core before. So you're not going to need to select another system. You can't outgrow SAP, in other words. Right? The other one is: it's scalable. It's not just for large enterprise.

[Russell DeLapp]: As Ralph likes to say, it's not your grandfather's SAP. This is a modern user interface. It's a modern experience, with modern training and support tools throughout the process. And finally, you're getting the refined, out-of-the-box, best business practices that are there for you. Like I said, within 30 days, which used to take six months, a year, just to start seeing your first transactions.

[Peter Kowalke]: That's really huge, because configuration and setting up those processes, that's a pretty big part of an ERP rollout. So to default to really the standard best way to do things, that's a pretty big value proposition really.

[Ralph Hess]: It is. It speaks to that time-to-value that Russell had referred to earlier, right? that’s…so, not only you're saving money by deploying this way, but you're also ingraining best practices or standards within your organization. And once you have in place those best practices or those standards, it's easier to manage because there's less negotiation, shall we say, about the change. It is what it is.

[Russell DeLapp]: We don’t talk about it that much anymore because the public cloud offering’s become a lot more mainstream. But, you know, five, 10 years ago, when the cloud was relatively new, we had to talk a lot about security. And especially with everything going on in the world right now, security is more and more important to different organizations with the different... you know, blackmailing organizations, releasing their data, things like that. So SAP has a world-class data security center. They work with Google. They work with Microsoft.

[Russell DeLapp]: It's a joint effort to secure data, and the breach of SAP is unheard of, right?

[Peter Kowalke]: You mentioned that you can’t outgrow SAP. How does the S/4HANA Cloud Public Edition play with the Grow with SAP program? My understanding is, relatively recently, SAP's rolled out almost a new model with the Business Technology Platform, and having an offering for every stage, and a clear migration path. So how does S/4HANA Cloud Public Edition play into all of that?

[Ralph Hess]: Well, really it is the offering that SAP is bringing to the market for their Grow methodology. So, you will see even on their order forms internally, they have started to call the S/4HANA Cloud Public Edition, the “Grow Edition” rather than the on-premise or Private Edition, as it's appropriately
referred to, as being the “Rise Edition.” So Really as SAP is talking to companies and talking to them about growth, and about their growth aspirations and outcomes they want to achieve, they are positioning S/4 as really their flagship product for those types of organizations. Again, not to diminish the role of ByDesign. It still has a role for companies where it fits.

[Ralph Hess]: But as you're looking at high-growth type companies, that's where Grow with SAP is coming into play.

[Peter Kowalke]: So if I'm hearing correctly, when we're talking about S/4HANA Cloud Public Edition, really there are many offerings for SAP. Small business, you've got SAP Business One. As you get larger, or you're a fast-growing small business, you've got SAP Business ByDesign. Also, if you're really moving fast, you just wanna go right to the next step, knowing that... you're going to be there soon. It sounds like now we have S/4HANA Cloud Public Edition. And then of course,
there's also the private cloud Private Edition if you're already a Fortune 500, large enterprise, or for some reason you, because regulatory needs, cannot be in the public cloud.

[Ralph Hess]: Yes. Peter, I think that's a good recap of the ERP portfolio that SAP has to offer. Again, we support here at Navigator Business Solutions, we support all of them.

[Peter Kowalke]: Well, thank you very much for talking with me, Ralph and Russell. I really appreciate it.

[Ralph Hess]: We've enjoyed it. Thanks Peter.

[Russell DeLapp]: Thank you.