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Your Guide to Moving from SAP ERP HCM On Premise to the SuccessFactors Cloud: Concerns and Considerations

by Satish Badgi, HCM Consultant

July 13, 2016

When companies are deciding whether to transition their on-premise SAP ERP HCM system to the SuccessFactors cloud platform there are many complex scenarios that should be considered before making a final decision. Using two different on-premise scenarios, and evaluating the drivers of the transition, learn about the different factors that should be weighed when moving to an SAP SuccessFactors cloud environment.

Many companies that are running SAP ERP HCM on premise are evaluating their options for transitioning to the SuccessFactors cloud platform. These implementations include combinations of core HR, Talent, Payroll, and Benefits as well as Time Management modules and functionality. This decision is driven by various considerations in individual business cases, such as gaining newer cloud technology, reducing IT costs, providing a better employee/user experience, adopting leading business processes, reducing traditional in-house maintenance (such as SAP ERP HCM Support Packages), and reducing the number of customized solutions that are required.

HR and IT leaders have obvious concerns about undertaking such a large transition project, and they are apprehensive about the impact of this change and its effect on budgets. Where there are applications such as Payroll, Benefits, and Time Management in scope, there are concerns about the impact on employee critical functions (for example, ensuring that payroll is delivered accurately and in a timely manner).

These considerations and challenges can have an adverse impact on timelines and plans for the transition. Some standard questions, such as What? Why?, When?, and How? need to be answered before moving to the cloud. The current landscape of SAP and non-SAP HR applications also drives the answers and decisions made during this transition.

I discuss two different scenarios for moving to the SAP SuccessFactors cloud:

Scenario 1 – Transitioning all SAP ERP HCM on-premise applications and modules to a cloud HR system. This scenario covers the options for moving all on-premise modules such as core HR (typically employee master data with associated organization structures), Talent, Compensation, Payroll, Benefits, and Time Management to the cloud. I discuss the available functionality in the cloud and the options that are available. (You need to continue to check release notes since SAP continues to enrich the functionality with every quarterly release.)

Scenario 2 – Moving only core SAP ERP HCM on premise to the cloud, with a combination of third-party and outsourced applications and modules—for example, using outsourced Benefits and Payroll systems or using a third-party Time Management application in conjunction with core HR. In this scenario, I discuss the integration aspects and options available, including potential in-sourcing of some of the applications.

Scenario 1 – Moving All HR Functionalities to the Cloud

In Scenario 1, most of the SAP ERP HCM modules are used in house. Table 1 shows a list of the SAP ERP HCM on-premise application areas for this scenario.

Functional area

SAP on-premise module

Core HR

Personnel Administration (PA), Organizational Management (OM)

Benefits

Benefits, including Enrollment and Benefits Administration

Compensation

Enterprise Compensation

Learning

Learning

Performance

Personnel Development and Performance

Succession

Succession Planning

Time and attendance

Cross-Application Time Sheet (CATS), Time Evaluation

Employee self-services (ESS)

ESS

Employee Interaction Center (EIC)

EIC

Payroll

SAP Payroll (country specific)

Table 1
Transitioning all on-premise modules to the cloud

Figure 1 shows a scenario in which all the HR functional areas (core HR, compensation, performance, training, and payroll) are in on-premise SAP ERP HCM. When the decision is made to transition to an SAP SuccessFactors cloud platform, this is a relatively straightforward journey. SAP’s side-by-side architecture gives you the option to continue with both on-premise SAP and SuccessFactors for a period of time before you fully transition to the SuccessFactors cloud platform. The example in Figure 1 shows that SuccessFactors talent modules are implemented first, followed by Employee Central (Core HR) and Cloud Payroll (EC-PY).


Figure 1
All the modules involved in the transition from SAP ERP HCM on-premises to SAP SuccessFactors Employee Central

Scenario 2 – Moving Only Core SAP ERP HCM On Premise to the Cloud

In this scenario, implementations have leveraged core HR in SAP ERP HCM while other functionality and scope are delivered via a third-party or outsourced-service provider. For example, benefits processing is outsourced or non-SAP software is used for the compensation application. This scenario can trigger debates around staying with some of the third-party products, especially if some of the systems are customized—for example, industry- or company-specific compensation plans and processes are in place. In this type of scenario, it is not uncommon to adopt a hybrid approach between SuccessFactors and the third party, or even one that includes SuccessFactors, core SAP, plus a third party.  

Figure 2 presents the available final state options. Which option is chosen depends on the organization’s HR and IT visions, as well as its ability to shift out-sourced service delivery models to in house (shown in Option 1).


Figure 2
SAP ERP HCM and third-party options when moving to SuccessFactors cloud platform

Key Points to Consider When Making the Decision to Move to the Cloud—Or Not

There are some key considerations to keep in mind when making the decision about whether to transition from an SAP ERP HCM on-premises system to the SuccessFactors cloud platform. The three most important are technology, people, and processes. 

Technology considerations:

  • Integrations: What is the impact of the transition of the integrations? (This is always a major consideration with a change of systems and technology).
  • Data: Can the historical and current data be converted, and how?
  • Customized functionality: Will the legacy applications with heavy customization be available in the new cloud platform?
  • Release impacts: What impact will the SuccessFactors quarterly releases have on testing? (For example, although the quarterly releases enrich the functionality, there is always the need to perform regression testing. 

People considerations:

  • Employee experience: Which system provides a better employee experience?
  • Mobile: Does the system have the ability to implement new technology? 

Process considerations:

  • What impact will changing the process have? How will changing the process impact training?
  • What are the potential service delivery model changes that will occur if moved to the cloud? 

Tables 2, 3, and 4 present a comparison of the drivers between an on-premise system (SAP ERP HCM) and the Software-as-a-Service (SaaS)-based SuccessFactors system. The tables are presented with three standard dimensions that were listed earlier: technology, people and processes.

On-premise solution (SAP ERP HCM)

SaaS (SuccessFactors)

The user interface (UI) looks and feels like mainframe computing unless there is a good portal or ESS layer on top.

Out-of-the-box portal and UI that can be configured very easily.

Lacks mobile solutions.  

Offers easy mobile apps with the ability to run transactions from mobile devices.

Has a complex workflow configuration that requires more effort.

Workflow management is easy to configure and easy to maintain (for example, proxy assignments).

Analytics functionality requires development and needs tools that leverage SAP BW.

Offers its Workforce Analytics module with pre-built dashboards and metrics packs that are aligned with application functionality as needed.

Platform technology uses SAP Process Integration (PI), ABAP, and Basis.

Platform technology uses BizX, SAP HANA, and XML.

Support Packages and upgrades have to be planned internally by IT.

Upgrades are released quarterly by SAP SuccessFactors.

Has an internal IT infrastructure that requires more resource and budget commitments.

Cloud model reduces IT costs.

Offers the ability to customize.

Customization is not encouraged or not possible in most cases; offers the ability to stay with multi-tenant cloud.

Table 2
A comparison of technology aspects (SAP ERP HCM versus SuccessFactors)

On-premise solution (SAP ERP HCM)

SaaS (SuccessFactors)

The newer generation workforce (Gen-X and Gen-Y) expects the UI to be similar to mobile phone apps. As a result, they tend to view the SAP ERP HCM guided user interface (GUI) as outdated.

Newer, more modern look and feel; more intuitive. Offers mobile-based transactions. As a result, there is quicker acceptance of the new solution and the transition is easier.

Access is restricted by SAP GUI/Web GUI. Some transactions need an SAP GUI desktop-based approach.

Offers the ability to access the system anytime, anywhere.

Mainframe-like look and feel; does not offer an intuitive user experience.

    

Offers users an experience that is more aligned with modern-day technology (i.e., it offers an experience that is similar to other applications that they use in their day-to-day lives).

Provides rigid workflows that are difficult to change. As a result, changes in organizational structures require larger maintenance budgets. This rigidity can also cause disruptions in established business processes.

Provides adaptable workflows that are aligned with ever-changing organizations.

SAP BI/BW requires customization and also a third-party tool for presenting reports and analytics.

The Workforce Analytics module offers easy-to-use outputs (such as dashboards and daily headlines).

Table 3
A comparison of people aspects (SAP ERP HCM versus SuccessFactors)

On-premise solution (SAP ERP HCM)

SaaS (SuccessFactors)

Traditionally, on-premise SAP ERP HCM implementations made customizations to the product rather than changing processes.

Multi-tenant SaaS model encourages the adoption of leading-practice processes; typically, customization is discouraged.

More IT focused and IT driven.

More HR focused and HR driven.

In some cases, the processes are disjointed, especially when multiple technology products are adopted.

Provides end-to-end integrated processes. For example, Performance, Compensation, and employee master data change processes are seamless and integrated end-to-end.

The technology challenges play into process design; therefore, in some cases, it is does not meet product-agnostic best-process goals.

Offers ease of workflow and easy access (anytime, anywhere), and provides an easy framework for simple (yet integrated) processes.

Table 4
A comparison of process aspects (SAP ERP HCM versus SuccessFactors) 

These comparisons help answer some of the why cloud questions. They also help to establish a business case and, eventually, they can be used to evaluate monetary savings and costs based on these considerations.  

Common Challenges and Concerns to Consider When Making the Decision to Move to the Cloud

Now that you’ve answered some of the why and what questions, let’s move on to the how and when questions. Many HR users might say, “We know we want to move to a cloud model, but tell us how to get there, and I want to know more about the challenges and key considerations.” 

Challenges

There are six different areas under which these challenges fall, which I discuss in the following sections:

  • Timeline – This is impacted by the size of the organization—number of employees and diversity of businesses. In addition, timelines are also impacted by major HR events such as annual performance and compensation cycles.
  • Change management – What is the culture of the company and what is its appetite for change and transformation?
  • HR calendar – The calendar is determined based on if it is a single-country versus a multi-country/global environment.
  • The extent of the technology transition – Referring back to scenarios 1 and 2, if the cloud roadmap includes substantial change to applications and modules, then the challenge of transformation is higher.
  • The priority and sequence of HR processes – The number of interfaces and the complexity of the integration, along with changes to the tools—for example, changing ABAP and SAP PI to SAP HANA cloud integration. In addition, for global implementations, core HR processes have country localization aspects that also add complexity to priority and timelines.
  • Availability of resources – Determining what resources will be needed during the implementation and how they should be allocated. 
Timeline

The timeline for the implementation process depends on all five of these factors. Generally, though, 12 months seems to be the standard implementation timeline for reasonably-sized organizations. However, this timeframe can be expanded to 24 to 30 months for complex, large-size, multi-country organizations that are making the transition to SuccessFactors. As a result of this increased complexity, some larger companies should consider a mid-step transition (as presented in Scenario 1 above) to a hybrid landscape (e.g., on the way to SAP HCM ERP platform sun-setting at the end of the timeline).

Change Management

Change and transition are the most important considerations, and are determined based on the depth and width of the changes. Earlier, I reviewed the areas of change as regards to users, processes, and technology. These same areas need to be looked at in context to the changes that need to be managed in the implementation. Some examples of SuccessFactors-specific change considerations include:

  • Quarterly releases for the product
  • Implementation of mobile solutions
  • Implementation of analytics and dashboards
  • Self-paced training (versus old-school classroom-based training)
  • More social collaboration within the organization (i.e., encouraging more openness and collaboration between departments, rather than being secretive about your system and solutions). One example would be to leverage SuccessFactors’ JAM functionality to encourage such collaboration within the organization. 
HR Calendar

The HR calendar cycle plays a big role in determining project timelines. Annual benefits enrollment, yearly performance cycles, yearly compensation cycles, payroll year ends, and annual budgeting calendars all affect project scheduling as well as the sequencing of scope. SuccessFactors offers more flexibility to manage these timelines than does SAP ERP HCM. Some examples of timeline drivers are:

  • Compensation can be implemented ahead of Employee Central if it’s in self-standing mode.
  • SuccessFactors’ talent modules—Performance, Succession, Learning—can be implemented without having to first implement Employee Central or core HR. This is made possible by leveraging Employee Profile mini-master data functionality in SuccessFactors. (Mini-master data is the minimum employee-level data elements that are needed to run talent modules. These are populated from the core HR platform.) It is easy to leverage the standard bridge between SAP ERP HCM and SuccessFactors to populate the Employee Profile.
  • Employee Central plus Employee Central Cloud Payroll normally go together and align with the company’s annual payroll calendar, depending on the country’s tax year. 
IT/Technology Sun-Setting Schedules

IT teams have their own priorities to sun-set the legacy applications and to stop the maintenance fees. These priorities could be in direct conflict with the HR schedule of priorities. For example, IT may want to stop legacy core HR and payroll maintenance first, while HR may want talent management implemented first in response to business demands. 

Priorities of HR and Sequencing

The functional scope listed in Table 5 and the sequencing of the SuccessFactors functionality implementation are determined based on the priorities that are set by HR. The integration also needs to play into the sequencing and timing of the implementation of the application modules.  

Functional module

Sequencing comments

Performance and Goals

  • Can be implemented without core HR (Employee Central module).
  • Integration with Compensation Management is necessary.
  • Depends upon the annual performance cycle.

Career and Succession

  • Typically implemented for a select workforce.
  • Similar to Performance, it can be implemented ahead of core HR (Employee central).

Learning

  • External integrations are needed in some cases.
  • Regulatory needs might change the priority level of this implementation.
  • Typically, training applications touch each and every employee and in some cases contractors as well. As a result, this module always has a large change impact within the organization.

Compensation

  • Integration is necessary with core HR and with payroll.
  • Timing depends upon annual compensation release cycles.

Employee Central

  • Integration with payroll, benefits, and time management are necessary. Options include: SAP Cloud Payroll, out-sourced payroll, third-party time systems (such as Kronos), out-sourced benefits systems, in-house benefits applications such as BenefitsFocus, SAP, or non-SAP financials systems.
  • Since this is the core HR module, it typically has a large amount of data, which impacts the conversion process. For example, on-premise SAP ERP HCM infotypes have to be converted to Employee Central portlets. Also, access to historical data has to be addressed either by using a data warehouse or an analytics solution.
Table 5
The sequence for implementing the modules

Across all these SuccessFactors modules, the goal is to improve various business processes and improve the overall employee experience (for example, by using mobile solutions, analytics, JAM [for social collaboration], and workflows).

Resource Availability

Allocating resources that are common across different functional areas is a common challenge for parallel activities in an implementation. A key consideration in SuccessFactors implementations is also about future and quarterly release supports.

In-house HR resources need to understand the configuration of SuccessFactors modules so that they are able to handle the post go-live releases as well as to test them appropriately. Unlike in the on-premise world of technical upgrades and SAP ERP HCM Support Packages, SuccessFactors upgrades are in the SAP Data Center and key HR resources need to manage their impact. Schedules for these upgrades are pre-published by SAP along with appropriate release notes. By leveraging this information, resources need to make decisions about whether to opt in or opt out of new product functionalities. If the decision is made to opt in, then the appropriate configuration has to be carried out.

Concerns

Some typical concerns that need to be considered while transitioning SAP ERP HCM to SuccessFactors are listed below. As before, I follow the standard user, process, and technology categorizations.

Users:

  • Re-training users and managing the change.
  • Implementation of decentralized data management and transaction entry through better and simpler self-service (i.e., more accountability).
  • Conduct quarterly release testing.
  • Less dependency on IT for reporting and analytics (e.g., goal is to be more self-supporting).
  • Promoting social collaboration (the Gen-X and Gen-Y workforce generally adapt to this more quickly than more seasoned workers).

Processes:

  • Already established processes (that may leverage SAP ECC functionality and customizations) are more resistant to implementing cloud-based standard products and processes. Cloud HR pushes users to adopt standard processes. 
  • Some of the more unique requirements might cause conflicts with standard processes and require customization—for example, the transition from custom infotypes to custom People Objects in SuccessFactors.
  • Restricted availability of some functionality in SuccessFactors: Some functionalities, such as Benefits and Time management, are limited (as of this writing) in SuccessFactors.

Technology:

  • When making the transition, lost customizations for legacy platforms may cause frustration for users.
  • Potential newer integration technologies present another level of learning curve (for example, learning how to navigate JAM, BOOMI, and SAP HANA).
  • Lost IT control and re-purposing of IT roles (i.e., IT may feel a loss of power).
  • Overall change of mind-set in cloud (for example, many IT functions will no longer be in house, approvals for customizations are harder to get, and there is increased dependence on quarterly releases, which require additional testing efforts).

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Satish Badgi

Satish Badgi (saphrwriter@yahoo.com) has been helping clients implement SAP ERP HCM/Payroll on-premises and the SAP Successfactors Employee Central, Cloud Payroll, and Talent suite for more than 20 years.



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