One question our SAP consultants get asked all the time is, “Cloud-based or on-premise?” The bad news is that there’s not an easy answer. When it comes to making this decision, you need to weigh the benefits and challenges to find out what’s right for your business. But before we touch on the pros and cons of a cloud-based SAP setup, let’s go over the differences between cloud-based and on-premise. 

What is Cloud vs On-Premise?

Cloud-based software is software that’s hosted on a vendor’s servers and accessed through a web browser. For the most part, cloud software is priced on a monthly or annual subscription, but it could also involve other fees for support, updates, and so forth.

On-premise software is software that’s installed on your company’s computers and servers and is generally priced under a one-time perpetual license fee. Of course, there are still costs for maintaining and potentially training as well.

Benefits of SAP Cloud Solutions

Recent studies show that 97% of organizations use cloud-based software and services. One of the reasons for such widespread adoption is because of the cost. Cloud software comes with a low cost of entry versus the upfront cost of on-premise systems. Here are some of the other benefits of using cloud-based SAP: 

Shortened Implementation Time

While implementation time can vary depending on how long you’ve had your current SAP setup, the number of customizations you need to account for, change management, and so forth, implementing cloud-based SAP is often quicker and less expensive than a traditional SAP implementation. Why? Well, prebuilt tools, the ability to choose a Hyperscaler or SAP data center, and a coordinated managed service model all help to shorten project time and help reduce costs.

Increased Flexibility

Cloud software is consumed through subscriptions or pay-per-use scenarios rather than purchasing a traditional license. So if you need more bandwidth, the cloud can meet that demand immediately, as opposed to upgrading your IT environment. 

Automatic Updates

SAP is responsible for updating applications connected to the cloud, saving your IT staff time and money spent on manually updating your systems.

More Bells and Whistles

Cloud-based SAP also comes with powerful analytics tools and gives you the ability to take advantage of new technology like the internet of things (IoT) and artificial intelligence (AI). SAP gives you access to the data and helps you interpret it so you can make smarter business decisions. 

Improved Accessibility

The cloud allows you to access your SAP apps wherever you have the internet, including mobile devices. This is great for sales staff who travel, remote employees, or for better work-life balance. (It’s especially nice to know you can access SAP on your vacation to see how many more vacation days you have.)

Challenges of SAP Cloud Solutions

After reading through these benefits, you might be ready to jump in the cloud right now, which is understandable—they are pretty great! But don’t forget that you’re trusting SAP with your most highly sensitive and business-critical data. When it comes to changing business infrastructure, serious consideration is required. So, here are some of the challenges you should keep in mind if you’re considering a cloud-based SAP setup: 


Cloud solutions typically come with one-size-fits-all capabilities, so if your company requires highly customized workloads and systems, SAP on the cloud may not be the right fit. On-premise systems are easier to modify, especially if you’re in a niche industry. 


Recent studies show that nearly two-thirds of organizations see security as the biggest challenge for cloud adoption, which should come as no surprise when you think about company financials, trade secrets, employee information, client lists, and all the other critical data stored on your system. Something that should put your mind at ease, however, is that SAP is dedicated to ensuring data security and compliance, whether you’re on-premise or in the cloud. 

A cloud-based solution has made SAP software more accessible for all types of businesses, but it still comes with some challenges, like potential customization and security concerns. If you’re not exactly sure which deployment model is right for your organization, our senior-level SAP consulting team is here to help. We can help you determine your needs and even implement your SAP solution. 

Contact us today to get started.