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Building A HCM Roadmap for Existing SAP HCM Customers Part 1

For the last five years, human resource (HR) departments across the globe have been challenged to remain relevant and up-to-date with their HCM processes and technologies. This trend shows no sign of abating. The HCM marketplace has seen an extraordinary amount of acquisition and consolidation activity in the last couple of years. Since the time SAP purchased SuccessFactors for $3.4 billion (app. 10 times of the SuccessFactors 2011 revenue) towards the end of 2011. Others like Oracle jumped into the fray two weeks later by spending $1.9 billion to acquire HCM solution provider Taleo. 

For the last five years, human resource (HR) departments across the globe have been challenged to remain relevant and up-to-date with their HCM processes and technologies. This trend shows no sign of abating. The HCM marketplace has seen an extraordinary amount of acquisition and consolidation activity in the last couple of years. Since the time SAP purchased SuccessFactors for $3.4 billion (app. 10 times of the SuccessFactors 2011 revenue) towards the end of 2011. Others like Oracle jumped into the fray two weeks later by spending $1.9 billion to acquire HCM solution provider Taleo. 

The propelling factor for SAP purchasing SuccessFactors was the tremendous growth that Workday, Cornerstone on demand and SuccessFactors had in a short period of time. So SAP and other on-premise ERP vendors were losing their license money as clients were moving away from license based model to a subscription based model.

Before we analyze the trend it is good to have the right perspective of the SAP HCM market. It is undisputed that SAP offers the best and broadest on premise based core HCM (HRIS, Time and Payroll) functionality in the market. The solution is used by 7600+ customers and the largest BPO providers of all sizes and in all industries all over the globe. SAP Globalization Services and SAP Partners are offering a localized payroll in 53 countries that can be run from a single instance.

The biggest challenge for the existing On-premise HCM customers with significant investments in the on-premise core HCM solution is to decide how and when they should make the move to cloud. There is no denying that most of the HCM community are in the early stages of their multiyear shift from client server OnPremise software (i.e. SAP HCM, Oracle EBS, PeopleSoft) to the next generation of cloud based offerings (i.e. SuccessFactors, Workday, Oracle Fusion).

Why HCM? Why is it that the HCM cloud-based solutions such as Workday, CornerStone on demand and SuccessFactors seem to have taken off so fast? Why not another area, like core financials, for example?

Probably the answer lies in the maturity of the solution, degree of integration between the solution and the core business. Take for example SAP FI/CO which has been strong and matured product in all areas with little to no integration required for outside 3rd party products. There's no denying that this solution is tightly woven into the core business of the organization. You can say the same thing for production planning, Sales and Distribution (SD) etc. 

But when you look at SAP HCM then the immediate thought that comes to mind is that though SAP HCM did very well in the core products such as Personnel Administration and Organizational Management (HRIS), Time Management (Time and Attendance), Multi country Payroll and Enterprise Compensation Management (ECM) but was very weak on UI, ESS/MSS,HCM Analytics and Talent Management. In other words unlike Financials HR has struggled with the challenge of tightly integrating itself into the fabric of the business. Hence you would need one or more 3rd party solutions in the above mentioned areas to complete the process. Talent Management which is volatile and rapidly changing is becoming more and more relevant in last few years. The cloud products with 4 quarterly release and multi-tenancy fits the bill perfectly. And that is another reason why HCM like CRM is a better fit for cloud adaptation.

So the future of HCM is definitely cloudy - it's inevitable that SAP customers will adopt cloud HR technology, in this case mostly SuccessFactors because it's from and supported by SAP. As we all agree that move to Cloud HR is undeniable. We will explore in this article what is the pace at which various customers may adopt Cloud HCM technology. 

SAP has a interesting situation with their HCM customer base. Some want Cloud HCM now - even yesterday - and if they don't get it from SAP they will go elsewhere. Some are very content with their on-premise HCM software and don't see much need to change. And then there is a big group between those two extremes that is going with hybrid solutions - it's not 'either/or' for them but 'both/and' when it comes to on-premise and cloud. 

Basically for the existing SAP HCM on-premise customers there are three possible choices:

HCM Enterprise Cloud

In this case client moves all its HCM processes e.g., core and Talent into SuccessFactors HCM solution.

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In the Hybrid option the core is in On premise HCM and the Talent Management is in the SuccessFactors.

Side-By-Side (Two-Tier HCM)

In this case the smaller subseries or countries with lesser number of employees are in the cloud but the parent company where most of the employees are in the on premise SAP HCM solution.

Now that we are clear about possible deployment options let us explore how to decide your right cloud solution. We will try to find out the right mix through the following questions:

Do you have a cloud strategy for your Organization? 

As we have discussed previously that there is no denying that cloud is not about "if" but it is more about "when" and "how". If the organization already has a cloud strategy then it is important to know the roadmap for the entire organization and when HCM comes into the picture. It is always better to plan it out either as a big bang move or a move which is more strategic and sequential.

If the organization doesn't have one then probably the time is right now to build a roadmap to the cloud for the entire organization or for HCM as the case maybe.

Current business, IT and HCM Landscape

This makes a huge difference. If it is a large company where a huge investment is already made on the on-premise infrastructure for ERP then it is only to be expected that there is a lot of investment that has also gone in for the integration to make sure business continuity is maintained. Normally these type of enterprise have fragmented Talent Management process but the core (which is normally responsible for 75-85% of all integration points) is tightly integrated with inside and outside world. 

These type of enterprise could be there in one country or multiple countries. The types of business the company is involved in also makes an impact e.g., manufacturing setup which is rapidly expanding into new economies. Hybrid and side by side could be a good option for them. Hybrid will makes sure that they are taking advantage of the recent development on the on-premise SAP HCM solution such as HR Renewal 2.0, Fiori, HANA use in HCM etc. but also in a position to make use of the SF Talent cloud. Side by side will allow them to expand quickly and cost effectively into new territories and also work as future case studies for the entire organization when they decide to move to the cloud.

Do not compare SAP HCM functionalities and features with that of SF but Compare SF capabilities to your business requirements

We are seeing this trend across the industry where we see organizations are concerned about how PA & OM (SAP HCM) compares with Employee Central (SF). Actually in our opinion this is not the right way of looking at it. Remember when you first time thought of moving into SAP HCM from legacy systems. At that time your main goal was to re-look at the business requirements afresh as things do change with time and then see if SAP HCM is the right software for you or not. Something similar is required here e.g., you want to move into Employee Central (EC) so your concern basically are if it will full fill your current and future business processes, if it would support your organization structure, reporting structure, workflow, internal and external interfaces and integration, overall reporting etc. then do that due diligence but you will gain nothing by comparing PA and OM capabilities to EC's functional and technical capabilities.

Is Time Management and net Payroll in house?

This is an easy option here. If you do not have Time Evaluation (clock in and out, CATS etc.) in SAP HCM and use a 3rd party solution such as Kronos etc. and if you do not process net Payroll in house then your move to Enterprise cloud with everything but Time Management and Payroll could relatively less cumbersome and business non-disruptive.

Employee central offers good possibilities to integrate EC with SAP ECC as well as 3rd party Time and Payroll solution to continue with what you had before (business as usual). This also gives you an opportunity to look at Employee Central Payroll in the cloud and explore the possibilities of looking at Kronos and other 3rd party Time solutions which are closely integrated with EC.

A serious thought about Integration in the cloud world

Integration in the on premise world was a real challenge. One would remember that during every open enrollment season some of the Benefits vendors would invariably change and as a result of that the organization now has to make sure that all the inbound and out bound interfaces are rebuild. The process of interface building has remained the same but the technology has changed. Now with cloud integration platforms such as HANA, PI, Dell BOOMI, MuleSoft, Cast Iron, Informatica cloud etc. the technology is utilizing the available APIs to make it much easier to build interfaces between cloud to cloud, cloud to on premise or on premise to cloud.

So in other words one should not fear the integration aspect of cloud computing. It may make your life a bit easier.

What about Benefits?

In North America it is not very common to see SAP HCM on premise customers using SAP's Benefits module. They may be using a variety of 3rd part vendors. The employee Benefits for North America simply put has been a real administrative burden for most of HR departments across the country. But now companies like BenefitFocus (for US) and Thomsons Online Benefits (international) is supporting the growing need for employee benefits administration and communication amongst multinational employers. These companies aimed to take the "administrative chunkiness" out of benefits. These software's would like to make it easy, they want to make it mobile, and they want to make it fun. 

The goal of these companies is to help an employer to manage all their benefits -- all types of benefits -- in one place through a web-based software platform for electronic enrollment and eligibility management.

Benefit Informatics offered by most of these web based solutions are primarily enhancing the client reporting with a very accessible set of online tools. Benefit Informatics offers clients and broker partners a value-added plan analysis solution that brings a multitude of data together into one location with access to user-friendly reporting. This will be especially beneficial for clients to help manage new reporting requirements under Health Care Reform.

Importantly companies both on premise (SAP HCM) and cloud (SuccessFactors) can take advantage of this cloud based Benefits platform.

HCM Analytics? Why should you care?

So many industry analysts report big data and workforce analytics as one of the big trends in HR technologies these days. But the adoption numbers do not show great progress over the past 15 years. There appears to be a disconnect between the prediction/hype and what is really happening. 

The world of analytics has shifted emphasis over the past two decades - from looking at the past to Looking at the future. 

Organizations that made this shift realized the basic fact that the billions and billions of pieces of information being produced every single day can be used to answer, fairly accurately, what will probably occur at some given point in the future.

Although predicting the future sounds mystical and straight out of science fiction (like in movies such as The Minority Report and Paycheck, where predicting the future for all facets of life is the norm), the reality is that we're already doing this today and you are being impacted by these predictions in almost every aspect of your day-today life - it's called predictive analytics.


Great blog, answers most of the questions in the minds of existing SAP HCM customers.

Thanks for sharing.

Very informative blog, cleared most of the doubts related to SAP HCM . Thanks for sharing!

Thanks for sharing and it was very informative

Thanks for sharing this Information, Got to learn new things from your Blog on SAP HR.

Thanks for sharing great information in your blog. Got to learn new things from your Blog . It was very nice blog to learn about SAP SF.

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