SAP will be developing a new on-premise human capital management (HCM) product intended to be deployed alongside SAP S/4HANA. This is a significant departure from SAP’s previous plans for its human resources offerings, which were to be focused solely on the SAP SuccessFactors suite. The upcoming on-premise SAP S/4HANA sidecar will be based on the current SAP ERP HCM product and is expected to be released in 2023.
The previous road map for SAP ERP customers moving to SAP S/4HANA included a move to the cloud and SAP SuccessFactors, for at least the HR side. With SAP planning to end mainstream maintenance on all its legacy products in 2025, its customers who are reticent to move to the cloud were beginning to feel the pinch. This yet-to-be built HCM offering will come with the promise of mainstream maintenance through at least 2030.
What Will and Won’t Change for SAP HCM
The product will mimic the capabilities of SAP’s legacy on-premise tool—including time management and payroll, minus SAP E-Recruiting and SAP Learning. SAP will be offering a license conversion program for current SAP ERP HCM customers. It wants to make the switch as smooth as possible by using the same code base. Still, customers will need to take on a migration project, which won’t necessarily be easy.
“Anytime you migrate from one solution to another, the level of complexity will always affect the ease of migration to the new one,” says David Ludlow, Group VP at SAP Labs. “But it will be fundamentally the same underlying infrastructure and data model, so there won’t be a huge amount of disruption or work there. We are looking to make this as nondisruptive as possible.”
Five Years Out, Details Are Hazy
With the new HCM product not expected for five years, Ludlow understandably couldn’t offer much in the way of details. But he does expect any updated capabilities in the product to be centered on its optimization for the SAP HANA database.
The product will only be offered on SAP HANA, as it is a sidecar for SAP S/4HANA. Ludlow says that while SAP ERP HCM runs on SAP HANA, it wasn’t originally built to do so. With the new development, SAP can look at new routines, custom objects, and any capabilities that may come out of that.
As for the user experience, SAP is also looking at bringing some of the user interface features of SAP S/4HANA into the new HCM product. Some of that is already offered as part of SAP’s HR renewal package in the current product, Ludlow notes.
What About SAP SuccessFactors?
With this shift in focus, at least partially, to the on-premise world, SAP will have to pull some of its development resources from other parts of the business. The HCM and SAP S/4HANA teams are the most likely candidates, including the SAP S/4HANA on-premise HR and globalization teams, with some support from SAP SuccessFactors. Ludlow says part of the reason for the extended five-year timeline is to minimize any impact on other products.
“As anybody knows, resources are not unlimited,” explains Ludlow. “There has to be a balancing of what our priorities are versus what the market demands. I can’t say for sure that we are going to move a significant pool of resources from SAP SuccessFactors onto [the new on-premise HCM product]. The resources may also come from SAP S/4HANA and across SAP.”
In other words, SAP SuccessFactors customers who have already made the jump to the cloud will have to wait and see how this affects the development of their product of choice. Given that the new on-premise product will be built to function similarly to the old on-premise product, customers looking for more HR innovation from SAP will still need to look to SAP SuccessFactors.
Advancing the CIO’s Vision
Sherryanne Meyer, ASUG HR community advocate, notes that the new SAP HCM tool will align better with the CIO’s and CFO’s priorities at ASUG member organizations. The product is aimed directly at those companies that have made or are making the migration to SAP S/4HANA and don’t yet want to move to the cloud for HR. Meyer says those projects are taxing.
“Any upgrade in the past consumed a lot of IT resources. But replacing ECC 6.0 with SAP S/4HANA is more than an upgrade. It changes your entire IT system landscape,” says Meyer. “Now, consider that SAP S/4HANA does not include a native HCM and payroll solution. Our members are faced with an even bigger challenge: They will have to rebuild their HCM solution.”
Not an HR-Only Decision
The problem is that HR is not historically first in line for technology budgets, and Meyer said that makes it difficult to sell a jump to SAP SuccessFactors.
“Despite the fact that SAP SuccessFactors is marketed to HR to be run by HR, there is still a significant technology investment in the migration and the integration,” explained Meyer. “I don’t believe you’ll see any companies doing this without IT resources.”
That’s why it will be essential for SAP to make transitions to the new SAP S/4HANA sidecar HCM product to be as smooth as possible. If there aren’t resources to switch, then customers may write off the new tool as an option.
Bottom Line for ASUG Members
Seven years may seem like a long time, but in terms of enterprise software projects, it really isn’t. That’s why SAP customers are already looking ahead to that 2025 maintenance date, and why SAP itself sees the need to build a new product just to stretch that date out an additional five years for customers.
For customers who have already moved to SAP SuccessFactors, the only concern with this announcement should be how it could affect the development and innovation of SAP SuccessFactors products. Yet keeping up with the pace of the current update schedule is already hard for customers, so it may be that a slowdown in releases may hardly be noticed by most users. This news is really for customers who are hesitant to move HR to the cloud, but already have or are making the leap to SAP S/4HANA. They will now have another option that extends HR’s on-premise life for at least another five years. It will be up to ASUG members in that situation to decide whether that amount of time is worth the migration to the new product.