Blog SAP Community

Internal Dispute

Officially, SAP CEO Christian Klein still believes in "cloud first" and hopes for "cloud only." However, his experts and thousands of SAP customers know better: cloud computing remains out of reach for ERP in the medium term. As of the latest SAP financial market report, Christian Klein is beginning to accept reality: the private cloud as an on-prem operating model will be the ERP architecture for years to come.

I am writing here about cloud computing in the complex ERP environment, as represented by the R/3, ECC 6.0 and S/4 applications for many years. This discourse on cloud cuckoo land does not refer to email hosting, Google search, ChatGPT, Amazon Storage or cloud native applications from Salesforce (CRM) and Workday (HCM), but exclusively to a multi-tier, complex SAP architecture. Nor does it take into account the concerns and plans of SAP’s new customers, who are marching blithely and hopefully into the public cloud without any legacy issues.

SAP’s directional battle is about six months old and has been raging between experienced SAP executives and the executive board. The starting point is trivial: the best of all the world’s ERP systems is based on a well-thought-out and complex architecture. Many decades ago, Professor Hasso Plattner and his then Chief Technology Officer Peter Zencke invented the three-tier client-server model. It consisted of a central database server, several application servers, and hundreds to thousands of clients. This architecture was later virtualized, and there is nothing to stop the client-server model from being successfully transformed into a cloud.

“Cloud only”

The cloud transformation of an operational SAP system is costly and complex to plan, but as an operating model, it is almost trivial—which has ultimately led numerous SAP executives to keep dreaming of “cloud only”. Christian Klein cannot be faulted for thinking the way he does. He’s not a technician.

The SAP CEO sees the supposedly low cloud prices for his customers and the high margins for SAP. But things are not that simple in the SAP universe, which has led to some SAP managers anxiously knocking on Christian Klein’s door, trying to motivate him to adopt hybrid, if not on-prem, operating models.

For a long time, Christian Klein remained stubborn. He insisted on “cloud only”, but then, under pressure from the SAP community, took a first step in the direction of “cloud first”, and finally began speaking about hybrid scenarios in fall of last year.

Financial reality

The latest financial market report now revealed the state of the cloud at SAP: company revenue is expected to increase to more than 37.5 billion EUR by 2025. Previously, the target was 36 billion EUR. The expectations for cloud revenues, SAP’s growth driver and Christian Klein’s favorite topic in recent years, have been reduced to 21.5 billion EUR from the initially planned figure of more than 22 billion EUR. Accordingly, total revenue is expected to rise, while cloud revenue is expected to fall—a radical change of direction, is it not?

An SAP ERP system consists not only of operational parts, which may well be in the cloud, but also of upstream systems such as development, quality assurance, and transportation. Customers don’t pay for licenses for these systems because they serve to support the operational ERP. Perhaps that is why they are not the focus of the SAP board? The fact is that it is essential to maintain an end-to-end overview of ERP Landscape Management (LaMa) and Application Lifecycle Management from the perspective of SolMan (on-prem) and ALM (cloud). The internal dispute at SAP relates almost exclusively to the fact that the server architecture for development, quality assurance, transport and operational ERP is far from cloud-ready. Here is an example: automated testing is an indispensable necessity for the public cloud with its regular and dynamic updates. SAP wants to offer this function in partnership with Tricentis. What may work on a very small scale for an operational public cloud is still far from available for a complex SAP system landscape. Experienced SAP managers are thus urging Christian Klein to pay increased and sustained attention to on-prem operating models, where stable SAP Basis operation is possible with SolMan and many other IT tools. It may be that automated testing will also become possible in a few years.

Danger is not imminent, however. As can be seen from the financial market report quoted, Christian Klein and the SAP Executive Board are beginning to accept reality. The private cloud as an on-prem operating model will remain the only logical ERP architecture for years to come. SAP has already started talks with leading IT server providers to offer corresponding private cloud offerings to existing customers. The battle over which direction to take will continue for a few more months.

Any questions, comments, or concerns? Feel free to let us know in a comment below.

E-3 Magazine June 2023 (German)

About the author

Peter M. Färbinger, Editor-in-Chief

Peter M. Färbinger is Editor-in-Chief and Publisher at E-3 Magazine, AG, Munich, Germany. He can be reached at

1 Comment

Click here to post a comment

  • Along this line of thought, what is the roadmap beyond S4HANA on prem/private cloud. There is no migration path from on prem /private cloud version to the multi tenant S4 HANA cloud product. There is not even the same functionality between products as the cloud only multi tenant is very limited. Ten years from now, are S4HANA on prem/private cloud customers going to have to address migration to another SAP application yet to be developed with a difficult transformation path like there is now. Sounds like SAPs ‘future proofing’ theme at Sapphire is really making customers go through this type of painful and expensive transition again down the line in 10 years.

Sign up for e3zine´s biweekly newsbites

Please do not use administrative mail adresses like "noreply@..", "admin@.." or similar as these may get blocked for security reasons.

We use rapidmail for dispatching our newsletter. By signing up, you agree that the data you have entered will be transmitted to rapidmail. Please take note of their terms and conditions and privacy policy.termsandconditions.

Our Authors