The SAP S/4HANA instance strategy is driven based on the business operating model, level of integration, and process standardization across regions.
A single instance is the preferred option to host the SAP solution for most small- to medium-sized companies. A single ERP instance is the preferred option for most companies since it allows all functionality to be consolidated in one place. The answer isn’t that straightforward for companies with a large geographic presence or that operate a complex subset of businesses. These companies have to consider a single versus multiple instance deployment approach in order to account for varying business processes, local legal and compliance requirements, data security and privacy issues, and so on. This blog post covers some of the key considerations for making that decision.
A single global instance is a lone database environment that contains all enterprise business information for all countries in a central repository. Multiple instances, on the other hand, mean multiple SAP environments, which contain the enterprise business information for a given geographic region or functional area.
There are many decision drivers that influence instance strategy and planning, which are categorized as follows:
- Business drivers
- Technology drivers
- Implementation drivers
- Total cost of ownership drivers
Let’s explore some factors to consider when making a single or multiple instance decision.
Single Global Instance of SAP S/4HANA
A single global instance of SAP S/4HANA provides the ability to standardize and enforce common enterprise-wide business processes across different geographic and business units. It can also facilitate a shared services model for finance, operations, or other back-office functions.
The single instance deployment option is often the preferred option because of the benefits of process standardization, cost savings, shared services, and real-time consolidated reporting. Some factors to consider when making the decision include the following.
Standards Governance and Compliance
A single instance offers a source for definition, maintenance, and governance of enterprise compliance, standards, and policies.
By definition, a single instance has a shared database (there’s a high degree of shared data). A single instance may not be feasible in organizations in which data can’t be shared due to legal structure, local country laws, or other industry-specific compliance reasons.
With a single instance, companies can perform real-time intercompany transactions. Any intercompany postings due to financial transfers, inventory transfers, and internal purchase orders automatically generate intercompany transactions.
Period closing cycles can be accelerated when the all the company codes exist in a single instance (due to simpler consolidation processes and functionality). The SAP Financial Closing cockpit for SAP S/4HANA can be used to monitor and track closing activities.
Reporting and Analytics
With a single instance enterprise, analytical reporting requires less processing and consolidation due to common data structures and processes. It can also facilitate real-time reporting, whereas in a multiple instance environment, enterprise reporting has to be consolidated in a data warehouse tool.
As compared to a multiple instance deployment option, companies incur less maintenance, licensing, and infrastructure costs when they choose to deploy all the functionality across all businesses and regions in a single SAP S/4HANA instance.
One key factor in a single instance deployment is that all regions may incur an outage at the same time during upgrades and patches. Additionally, the regression testing effort whenever new changes move to production becomes significantly larger. A change in one region/area can affect functionality in other areas. A production change control board becomes an important role in a single instance deployment.
During implementation, there’s a longer design time required when the goal is to build a global, consolidated design.
Summary: Single Instance of SAP S/4HANA
SAP S/4HANA in a single instance is a simplified deployment for a number of reasons:
- Provides improved business efficiency and data integrity.
- Supports future organization changes and growth.
- Maximizes business benefits and return on investment.
- Minimizes implementation costs and ongoing support costs.
- Simplifies future deployments and the technical environment as much as possible.
- Allows best practices to be standardized across the organization.
- Simplifies real-time replication using system landscape transformation.
- Provides a 360-degree view of real-time financial analytics.9
Multiple Instances of SAP S/4HANA
Companies choose multiple instance deployment if they need to be more flexible in their business processes and respond to localized needs. There are scenarios where the business in each region is completely different, and there may not be a need to have a single global process model. With a single global process model, companies need to have global process governance, which adds additional oversight overhead.
The multiple instance deployment option should be chosen when a company has unique processes across geographies or functions, or has a legal, regulatory or compliance reason to keep the data separate between multiple instances. The key factors to consider include the following.
Standards, Governance, and Compliance
Distributed definition, maintenance, and governance with requirements to consolidate for enterprise compliance.
With multiple instance deployment, unique master data is created in each instance. There may be a legal or regulatory need for master data to be separate. However, in most cases (even with a multiple instance deployment), companies need to standardize certain master data such as the product master record, management reporting structure, and consolidation chart of accounts. To standardize key master data and enterprise structure elements, companies have to set up a master data governance organization and process and often look at implementing SAP Master Data Governance (SAP MDG). SAP MDG can provision master data to multiple target systems serving as a common repository and source.
In a multiple instance setup, a transaction in one system needs to be interfaced to another system, which adds complexity in interfacing business processes and managing across instances.
Companies often face longer or more complex period closing cycles in a multiple instance setup due to the need to consolidate financial data across multiple systems and to carry out reconciliation. It requires individual period-end closing processes to be completed in each individual instance and then sent to a consolidation tool for consolidation reporting.
Reporting and Analytics
In a multiple instance environment, enterprise reporting has to be consolidated in a data warehouse tool for global reporting. There’s also additional effort to consolidate and rationalize data models across geographies and businesses.
Multiple instance deployments often lead to higher maintenance costs. Each instance in each region requires an IT organization (or at least a shadow IT organization) for local operations. There are also additional costs related to infrastructure and licensing.
When companies choose a multiple instance deployment, functionality within each instance becomes less complex due to a decreased geographical or functional scope. This leads to shorter design time during implementation because the design only needs to cater to the local processes within an instance.
Summary: Multiple Instances of SAP S/4HANA
SAP S/4HANA on multiple instances is often chosen when:
- There’s a risk of total system outage for all business units with a single instance.
- Application data security requirements dictate that data must be physically separated and not accessible across various company codes.
- Specific business or geographies within a company need more control over when changes to production are implemented. New changes in a single instance would require approval from the change board, slowing down the implementations of new business requirements.
- Each instance can be operated on its own time zone without any conflicts of resources and system configuration.
- Certain businesses within a company or certain geographies need greater autonomy and control of their ERP system for changes, upgrades, and maintenance cycles.
Editor’s note: This post has been adapted from a section of the book SAP S/4HANA Finance: An Introduction by Maunil Mehta, Usman Aijaz, Sam Parikh, and Sanjib Chattopadhyay.