The Ultimate Guide: SAP HCM & Payroll options for existing customers

Reviewing the journey and options for customers as they migrate from On-Premise SAP HCM and Payroll to SAP SuccessFactors and the cloud.

Author
Danielle Larocca

Senior Vice-President of HCM Solutions Danielle Larocca has worked in the SAP HCM space for over 20 years. An SAP Mentor and featured speaker at numerous conferences, Danielle has authored four best-selling books on SAP, is the Technical Editor for the SAP Professional Journal, and often the Voice of the Expert on SAPInsider’s Ask the Expert series for HR.

 
 
In this guide, Danielle Larocca reviews the journey and options for customers as they migrate from On-Premise SAP HCM and Payroll to SAP SuccessFactors and the cloud. Danielle provides information on how SAP HCM has evolved with the latest technologies and enhancements, focusing on how SAP, now SAP SuccessFactors, has adapted its landscape models and product offerings from on-premise to the cloud to assist customers as they make their journey.DOWNLOAD YOUR ULTIMATE GUIDE   FAST FORWARD: TODAY’S SOLUTIONS
1986

Business as usual 

There was a long stretch of time where it was ‘business as usual’ for SAP HCM customers. Although some innovations were added, the core functionality for HR and Payroll largely stayed the same, as shown in the picture below.

1

2011

SAP Acquires SuccessFactors 

In late 2011, SAP acquired SuccessFactors which, at the time, was then the second largest cloud-based software solution next to Salesforce.com, with more than 6,000 customers and over 32 million users in 60 industries in over 185 countries.

2012

The Journey from On-Premise SAP to SuccessFactors in the cloud 

In 2012, SAP announced to its approximately 13,000 on-premise SAP HCM customers a planned movement to the cloud and a planned future cessation of its On-Premise HCM applications, including Payroll. When initially announced, customers were encouraged to journey to the cloud, adopting the SAP SuccessFactors cloud versions of the HCM solutions. SAP announced that customers had two landscape options to choose from: On-Premise SAP or Cloud, as included in their annual Roadmap update slide below.

– SAP SuccessFactors Roadmap Update 2013 (2 options available)

2013

The SAP SuccessFactors journey begins

In 2013, customers were encouraged to begin their journey to the cloud and move from their SAP HCM On-Premise solutions to their cloud equivalents, as estimated in the picture below. The word ‘equivalents’ is not entirely accurate, as it is not a one-to-one mapping from the old modules to the new ones in SuccessFactors. Former SAP SuccessFactors CEO Mike Ettling advised customers that the shift from SAP to SuccessFactors is not a simple swap, stating “...any customer who goes into the exercise of considering swapping On-Premise with SuccessFactors as a like-for-like exercise is going to be very disappointed; the solutions are designed for different purposes.”

This is not a simple swap of modules, but rather a shift from a customized system to one designed leveraging standardization and best practice. In the early days since the acquisition, it was announced that partners would be leveraged to handle any functionality not currently available in the SuccessFactors solution, as shown below.

SAP SuccessFactors silde options_4 March 2019_Page_03

– SAP SuccessFactors Landscape 2013

To explain how this missing functionality would be addressed, SAP shared the slide below showing that key pieces of functionality not available in SuccessFactors could be obtained via integration with Partners including Benefits and Time and Attendance Management.

– SAP SuccessFactors Roadmap Update 2014 (Partner Integration)

3 Options for SAP SuccessFactors Customers

The first customers to make the transition from SAP to SuccessFactors often did so focusing on the Talent modules (Recruitment and Learning for example), as their reputation for performance, user experience and success outweighed their SAP On-Premise counterparts and were often based on best of breed solutions. SAP also encouraged customers to start with an existing pain point in their organization which often concerned these talent areas.

Because of this migration to the talent modules, SAP created a new landscape model called the Talent Hybrid to categorize these customers as part of their cloud revenue. SAP then had three options: Customers were classified as On-Premise SAP, Full Cloud or the Talent Hybrid model, as shown in their Roadmap update shown below.

– SAP SuccessFactors Roadmap Update 2014 (3 options available)

This Talent Hybrid scenario accounted for those customers who still used SAP On-Premise for core HR but moved at least one Talent module to the cloud. The adoption of cloud technology appeared to be slower than anticipated after its announcement in 2012, and the guaranteed support date of year-end 2015 date was extended to 2020, and then extended again to 2025.

2014

4 Options for SAP SuccessFactors Customers

In 2014, a fourth model was added to account for customers who kept their SAP HCM On-Premise but who also deployed SAP SuccessFactors Employee Central for at least one division or region or country in their organization. This new landscape model was called Side-by-Side (originally called two-tier), as shown in SAP’s Roadmap update in late 2014, shown below.

– SAP SuccessFactors Roadmap Update (4 options available)

This model allowed companies to keep their beloved SAP On-Premise solution as is, while using SuccessFactors Employee Central for new implementations of smaller regions or divisions giving them the opportunity to see the full power of the SuccessFactors Employee Central solution. At the conclusion of 2014 there were four options for customers: On-Premise, Talent Hybrid, Side-by-Side and Full Cloud.

The migration of SAP’s existing HCM customers, however, continued to be slow. I suspect much of it had to do with the perceived loss of functionality of moving to Employee Central or Employee Central Payroll, because a few of the core modules in SAP were not yet available in SuccessFactors, and customers had to leverage partners for the missing functionality like Time and Benefits. SAP SuccessFactors has made progress on this including the launch of Employee Central Time, and as of 2019, SAP now details which functionality is available within SAP SuccessFactors and which is managed via a partner integration as shown in the slide below.

– SAP SuccessFactors Roadmap Update (Partner Integration)

New customers, not currently on the SAP HCM platform, began implementing SAP SuccessFactors Employee Central. However, a large majority of existing SAP On-Premise customers opted not to move away from their On-Premise core HR, which I suspect is because they did not wish to move their Benefits and Time systems to new integration partners. Additionally, SAP’s On-Premise Payroll customers were confused about what moving to SuccessFactors Employee Central Payroll would entail. Let’s take a moment to talk about Employee Central Payroll.

Payroll Options in SAP and SAP SuccessFactors

It appeared that SAP’s approximately 9,000 On-Premise Payroll customers were most reluctant to move to the SuccessFactors version of Payroll. I speculate that there are many explanations for this, including the large investment many companies made to customize their On-Premise Payroll, the detailed complexities of its integration with other systems for the processing of Benefits and Time, and their concerns about the overall maturity of the cloud counterpart referred to as SAP SuccessFactors Employee Central Payroll.

Part of the confusion is that SAP SuccessFactors Employee Central Payroll is not a new payroll solution; rather SAP has leveraged the existing world-class multinational SAP On-Premise Payroll and has transitioned it to a ‘hosted Cloud’ environment. The core engine of Employee Central Payroll is the same as the SAP On-Premise payroll engine; however from a development, support and licensing perspective it is designated as a separate product.

No-customization methodology?

Anyone familiar with SAP, including SAP Payroll, knows that SAP has been a system that is completely customizable, and each customer has painstakingly designed the system (including its time and benefits functionality) to support their unique business processes and needs. This often translates to many customizations, user exits, custom infotypes and objects etc. In contrast, however, in line with the overall Software as a Service (SaaS) mentality, SuccessFactors is based on a best-practice methodology which is not designed to necessarily accommodate unique customizations. This would mean that existing SAP On-Premise Payroll customers wishing to move to SAP SuccessFactors Employee Central Payroll not only needed to implement partner technology, like Workforce for Time data and Benefitfocus for benefits, but they also would need to reimplement and streamline their SAP Payroll to align with a higher level of standardization compared to the On-Premise payroll solution. For example, customers moving to Employee Central Payroll are not permitted to make core modifications or changes to enhancement spots. At the end of 2018, the marketing has since shifted to say that the ideal customers for Employee Central Payroll are often those organizations with greater than 5,000 employees without complex time or benefits processing.

Existing SAP On-Premise Payroll customers moving to SAP SuccessFactors Employee Central Payroll

– Moving from SAP On-Premise Payroll to SuccessFactors Employee Central Payroll requires a Reimplementation

Existing SAP On-Premise Payroll customers wishing to move to SAP SuccessFactors Employee Central Payroll must complete the five steps below.

  1. Choose from two options for deployment: Customer-Managed or Partner-Managed
  2. Purchase a SuccessFactors Employee Central license
  3. Purchase a SuccessFactors Employee Central Payroll license
  4. Re-implement and simplify (remove customizations) in their existing SAP Payroll
  5. Build integrations (as needed) to partners for Time and/or Benefits processing

Why move to SAP SuccessFactors Employee Central Payroll?

One of the primary motivations for movement to the cloud is to eliminate the need for a company to maintain its hardware and software and manage local installations of client server-based technology. Customers who elect to move to SAP SuccessFactors Employee Central Payroll are essentially leveraging that benefit from the cloud by allowing SAP to host their SAP database on a server for them to access via the internet. Another benefit of the SuccessFactors’ thinking is the adoption of best practice in the design of all aspects of human capital management, which often requires a standardization of processes to a certain extent. Standardization is not often the word that comes to mind when you think of SAP Payroll, as it is often one of the most customized modules in the SAP landscape.

Most On-Premise SAP core HCM solutions are customized to a large extent, to satisfy each organization’s unique individual business needs. SuccessFactors, particularly its core component of Employee Central, does not follow that philosophy. Instead it is based on best practice. When this ‘Best Practice’ methodology was first explained in detail back in 2014, with Mike Ettling proclaiming that “…customization was a dirty word…”, many companies simply pumped the brakes and refused to abandon their large investments in On-Premise SAP Payroll. This confusion in the marketplace about Employee Central Payroll was exacerbated by some bad press from some in the SAP sphere, encouraging Payroll customers to do nothing and hold tight. (More on the topic of Payroll follows further on this page).

2015

5 Options for SAP SuccessFactors Customers

It was at this point that SAP SuccessFactors added a new option to the mix, targeted specifically for Payroll.

SAP SuccessFactors launches a new offering: Managed Payroll

Added in 2015, the SAP SuccessFactors Managed Payroll offering was created to address the needs of customers that made a large investment in their SAP Payroll who wished to start their journey to the cloud but did not want to make any changes to their SAP On-Premise Payroll.

img9

– SAP SuccessFactors Roadmap Update 2016 (Managed Payroll)

In my opinion, this new deployment and license option was created because movement to the cloud was slower than expected overall, and that reluctance was often driven by the approximately 9,000 Payroll customers who did not wish to re-implement and/or simplify their existing payroll while also building integrations as needed for partners for any missing functionality like Time or Benefits.

This new option, SAP SuccessFactors Managed Payroll, addressed the needs of customers that had made a large investment in their On-Premise SAP Payroll who do not wish to change it; however, they wanted to start their journey to the cloud.

This model allowed customers to make no changes to their existing SAP Payroll system or its processing. They simply allowed one of two certified partners to host it on their server. Because it is hosted on their server, it is considered a ‘hosted cloud’, just like the SAP ‘hosted Cloud’ option for Employee Central Payroll. The significant difference in this scenario is that customers did not have to make any changes to their customizations or their use of their existing Time or Benefits modules, and most importantly no reimplementation was required.

SAP handpicked the partner for this

SAP selected two vendors from the SAP HCM partner ecosphere who are solely allowed to offer the SAP SuccessFactors Managed payroll option. EPI-USE Labs is one of the selected partners based on our extensive expertise in this area, including our SAP HCM, automation and landscape transformation capabilities. Existing SAP On-Premise Payroll customers wishing to move to SAP SuccessFactors Managed Payroll must complete the three steps below:

  1. Purchase an SAP SuccessFactors Employee Central Payroll license and
  2. Select one of SAP’s two selected vendors
  3. That vendor will lift and shift that payroll, as is, to the “hosted cloud”.

The licensing for this option was done solely on SAP paper; however, the migration work is scoped directly with the selected vendor. This gives the customers the benefit of leveraging their On-Premise investment and all of its customizations while also enjoying the benefits of hosting and management in the cloud. EPI-USE Labs has performed many HCM carve-outs globally. This option, like On-Premise SAP includes guaranteed support through calendar year-end 2025, or 2030 for those customers on HANA. To account for this new model, SAP SuccessFactors offered a fifth landscape model called Core Hybrid, to the existing four: On-Premise, Talent Hybrid, Side-By-Side and Full Cloud.

img8

– SAP SuccessFactors Roadmap Update 2016 (5 options available)

Customers then had at least three options for what they could do with their SAP Payroll, as detailed in the picture below.

SAP SuccessFactors silde options_4 March 2019_Page_11

– SAP SuccessFactors Landscape 2015

With five landscape options that evolved over a four-year period and three Payroll options, it’s fair to say that there was quite a bit of confusion in the marketplace. Adding to that confusion is that there are additional Payroll options available to customers which include working with a partner – often referred to as Business Process Outsourcing (BPO) – or even outsourcing the Payroll altogether either to a partner or another vendor as shown in the picture below.

SAP SuccessFactors silde options_4 March 2019_Page_15

As customers evaluating these various options began their journeys to the cloud, many were still inquiring about the guaranteed end of support date of 2025 for the various options, as shown below.

img8

2016

As customers either began their investigation or actually commenced their cloud journeys, there were no big landscape related announcements in 2016 or 2017.

2018

6 Options for SAP SuccessFactors Customers

The guaranteed support date for On-Premise HCM was extended a couple of times giving customers ample time to migrate to the cloud. As mentioned earlier, I suspect that the largest resistance came from the approximately 9,000 Payroll customers who often asked SAP SuccessFactors to continue to extend the guaranteed support date beyond 2025.

SAP SuccessFactors launches a new offering: SAP HCM Side Car for S/4HANA

In January 2018 SAP SuccessFactors offered a new model, extending support for any existing On-Premise SAP HCM customer through calendar year-end 2030 if they upgrade any existing Business Suite license to SAP S/4HANA On-Premise. This brings the total number to six possible landscapes, as shown in the picture below. The new landscape option was titled the SAP HCM Side Car for S/4HANA or Side Car for short.

img11

– SAP SuccessFactors Landscape Models 2018

To include this new offering, I have updated my landscape model overview to include all six payroll options as detailed below. I have also added new partners and modules updated over the years to provide a complete picture of the landscape for customers as it appeared in 2018.

SAP SuccessFactors silde options_4 March 2019_Page_15-1

– SAP SuccessFactors Landscape 2018

2019

Payroll options for SAP SuccessFactors Customers

There have been a few attempts to create decision trees to assist customers in making the appropriate decision for their payroll, including the samples from ASUG and SAP SuccessFactors, shown below: 

img11 img11
img11 img11


 The latest version from SAP (February, 2019) is shown below:

Cloud deployment options – Proven options for SAP ERP HCM customers Quick guide on recommended payroll options


Here at EPI-USE labs we also made an effort to create a quick reference for the options as shown below:

Payroll_Options_February_2019

Ultimately, there is no one-size-fits all for SAP’s existing HCM and Payroll customers, as each will have their own requirements, roadmaps etc. to consider. What you can be sure of is that SAP SuccessFactors will continue to adapt along the way to ensure that there is no interruption of your critical HR and Payroll processes, as they have to date, as shown below.

img11

More importantly, EPI-USE Labs is here to help you regardless of which journey you take.

Recommended solutions for your challenges

EPI-USE Labs solutions have universal value regardless of your landscape model to assist you in getting to an intelligent HR and Payroll.

 

Your high-speed, low-risk route to SuccessFactors' Employee Central Payroll

EPI-USE labs offers an On-Premise Payroll to SuccessFactors' Employee Central Migration Service called PRISM. PRISM is a boutique combination of proprietary EPI-USE Labs solutions and EPI-USE Payroll experts to migrate your existing SAP HCM On-Premise Payroll to SuccessFactors Employee Central Payroll (ECP). EPI-USE Labs has the proven software products including Data Sync Manager and Variance Monitor to facilitate a painless and automated migration whilst EPI-USE has the world’s best Payroll consultants to migrate the Payroll.

LEARN MORE ABOUT PRISM



Keep your existing SAP Payroll solution

SAP SuccessFactors Managed Payroll allows you to lift-and-shift your existing SAP HCM On-premise Payroll to the cloud, without a costly, lengthy and risky reimplementation. It is designed for customers who have made a large investment in their on-premise HCM solution, and want to leverage that, while also enjoying the benefits of hosting and management in the cloud

LEARN MORE ABOUT SAP SUCCESSFACTORs MANAGED PAYROLL


Solve your biggest SAP HCM Challenge… Reporting

The largest challenge for SAP On-Premise HCM customers is that multiple tools (Ad Hoc Query, SE16, Custom ABAP, Wage Type Reporter and others) are required to report on critical HR and Payroll data. Often this data is collected via these multiple tools and consolidated offline in an application like Excel, Access or BW, requiring a large amount of manual effort and consuming both valuable time and resources. This also poses security and data integrity risks as the data is taken outside of your SAP system. Query Manager™ solves this challenge. The brilliance of the Query Manager solution is that it provides access to all of the data users need in an easy-to-use format, so that end users can be empowered to create reports on their own, live in SAP, without reliance on technical resources.

LEARN MORE ABOUT QUERY MANAGER

 

Work with your SAP HCM Data Live in Microsoft Excel

With Query Manager’s Microsoft Plug-in, you can refresh, analyze, share, and present your critical SAP HCM data, live in Microsoft Excel. What is unique about this web app is that once you have built an Excel worksheet with all the formatting and formulas that you need, you can simply click a button to refresh your spreadsheet with live data from SAP. This functionality, which is delivered with Query Manager 4, allows you to automate your Excel reports; no more uploading and downloading data between systems. It also negates the need to send the latest copy of data to recipients; they can simply open up their Microsoft Excel and click the "Refresh" button to see the latest live data from your SAP system. The Microsoft Plug-In works with Excel for Mac, Excel for Windows and Excel for the Web.

LEARN MORE ABOUT THE MICROSOFT PLUG-IN FOR QUERY MANAGER


Automate the generation of richly formatted documents and employee contracts and letters

Employers send thousands of letters to employees each year including Benefits Confirmation Statements, Employee Paycheck Explanations, Total Compensation Statements, Annual Review Letters, Employment Contracts, New Hire or Offer Letters, Training Completion Certificates, Recognition Service Award Letters, W2 address confirmations etc. The creation of these letters is manual, time-consuming and error-prone. Document Builder enables you to design, generate and distribute professional HR documents automatically, live from your SAP HCM system.

LEARN MORE ABOUT DOCUMENT BUILDER


Highlight inconsistencies in your ever-changing HCM data and ensure all your HR, Payroll and Time data is accurate

Variance Monitor gives you the ability to compare HR and Payroll data between systems and across periods. And because it’s automated, it eliminates manual comparisons, speeds up your processes and enables your managers and test teams to be much more productive.

LEARN MORE ABOUT VARIANCE MONITOR


Enjoy convenient, secure copying of SAP® HCM data

Data Sync Manager™ (DSM) for HCM empowers all SAP® HCM users to copy and scramble HCM production data in non-production systems for testing, training and support. DSM gives you the data you need, when you need it. This SAP-certified solution allows you to select and transfer specific HCM data objects easily and accurately, as needed, and to mask sensitive data for confidentiality, security and governance compliance.

LEARN MORE ABOUT DATA SYNC MANAGER FOR HCM