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.