The decision for the extension model in S/4HANA should be based on the nature of the extension required. Developer Extensibility (in-app extensibility) is suitable for data-intensive extensions that need to operate within the context of S/4HANA. This is because it allows for direct access to S/4HANA's digital core and leverages the power of the HANA database. It is the recommended approach when the extension requires tight integration with core data and processes, ensuring high performance and data consistency.

On the other hand, Side-by-Side Extensibility on SAP BTP ABAP Environment is recommended when the extensions need to utilize additional SAP BTP services such as advanced analytics, machine learning, IoT services, or when creating new user experiences with SAPUI5. This decouples the extensions from the S/4HANA core, which can be beneficial in terms of flexibility, agility, and reducing the impact on the core system during upgrades.

References= These practices are supported by SAP's extensibility guide for S/4HANA, which explains the two extensibility models and their appropriate use cases. SAP documentation on ABAP Platform extensibility options provides further insights into when to choose each extensibility approach. SAP Best Practices for Extensibility in SAP S/4HANA guide provides a comprehensive view on how to extend the digital core effectively while maintaining system integrity and upgradeability.