Walldorf, 01.09.2018 - Many companies are currently looking at the issue of how to model their human resource management processes in future – whether on premise, in the cloud or as a hybrid solution. The message from SAP is clear: its existing ERP solution for HR management (SAP Human Capital Management – HCM) will remain available as an on-premise solution until 2025. For the period after that, SAP has strategically lined up the cloud-based, software-as-a-service solution, SuccessFactors. For the German-speaking SAP User Group (DSAG), this represented a good opportunity to conduct a survey among its members*. One key finding was that many companies would like more clarity from SAP. And the software provider has responded to this request: there will now be a new on-premise solution for HR management, with maintenance and support secured until 2030. While DSAG welcomes this initial step, it will keep a close eye on how the new solution is designed in the context of customer needs.

“It is great that SAP will now offer an on-premise solution until at least 2030, providing many of our members with some real options for the first time,” says Jean-Claude Flury, the DSAG board member responsible for Business Networks Integration. He supported DSAG’s request for a clear statement from SAP on the future of all HCM modules. In response to this demand, SAP has announced it will bring a new on-premise solution to the market, available from 2023. Details were made public in the following statement: (https://wp.me/p6UXKd-AXq).

The new solution is set to run exclusively on the SAP HANA database, with all relevant services and tools made available for the migration. Furthermore, there will be a dedicated maintenance and support strategy for the new solution, as it will run independently alongside S/4HANA. Existing customers will receive a license conversion in line with current S/4HANA system conversion rules.

Survey respondents prefer on-premise models

DSAG’s request for a clear statement on the future of the HR management software was backed up by the results of a survey carried out among the more than 3,000 individuals who are members of DSAG’s HR management working group. According to the survey, which featured multiple-answer questions, around 97 percent of respondents use SAP HCM. One quarter use SuccessFactors, while 9 percent use Concur for travel management – the cloud application that SAP has selected as the future home for its HR management software.

In response to the question about which operating model their company is likely to use for SAP HR management software over the coming years, 41 percent of respondents stated that they expect their model to be exclusively or mostly on-premise. Meanwhile, 42 percent said they prefer a hybrid solution comprising an on-premise solution and private or public cloud, and around 7 percent are considering a cloud-only solution. With its interim solution, SAP is therefore meeting the needs of the 41 percent who envisage an on-premise operating model.

Cloud solution does not yet fully meet functional requirements

The skepticism of survey respondents when it came to the SAP-preferred cloud solution is no surprise to Hermann-Josef Haag, spokesperson for the DSAG HR management working group. As a user himself, he knows the challenges and obstacles customers face in implementing the SAP strategy (multiple answers were possible). “We asked specifically about this issue and more than half (54 percent) think that the new cloud-based solutions do not yet fully meet their functional requirements in HR management. Which makes the interim solution from SAP all the more welcome,” says Haag.

When asked to give a reason for their skepticism towards the cloud solutions, around 26 percent of those surveyed said they were afraid of losing control of the software – especially of individual components. For almost 27 percent of those surveyed, uncertainty around regulations, compliance and security also plays a significant role. “Where is the data being kept? Where is the data going? How do we deal with contracts? Who pays when the SAP data center goes on strike and the solution is down? These are huge questions that are making it harder for users to decide in favor of the new, cloud-based solutions. The new solution gives us more time to clarify these issues,” explains Haag.

Gaps in integration strategy

Nearly 23 percent of survey participants see licenses as a further obstacle to the SuccessFactors solution, while almost 21 percent lack information on the migration, and around 13 percent are critical of the lack of influence on the new solution’s availability and support. Around 20 percent of respondents view its capability to integrate with other software modules as insufficient. "A transition to SuccessFactors would require deploying new interfaces in the ERP solution, which contradicts SAP’s existing approach to integration. As a user community, we are missing this in SAP’s future strategy," explains Jean-Claude Flury, DSAG board member. While the DSAG welcomes this initial step, it will keep an eye on the new solution to ensure it meets customer requirements. This includes monitoring for a suitable licensing model, the necessary functionality, compliance with legal requirements, its ongoing development and integration potential. DSAG is continuing talks with SAP on these points.

The DSAG survey also found that, in particular, there is a greater need for information and action when it comes to payroll. “SAP has confirmed that it’s currently working on an entirely new solution for payroll which will run automatically, enhanced by micro services, and contain elements of machine learning, for example. SAP still needs to explain how these micro services will interact in practice,” says Jean-Claude Flury, scrutinizing the approach. But in general, DSAG is pleased that SAP is working on a long-term solution for users in payroll.

Dialog between DSAG and SAP

DSAG and SAP have been discussing these issues for some time now, with the aim of securing a commitment from SAP for the period up to 2026. “Currently, there will be no extended support for the existing ERP HCM solution after 2025, but the introduction of the new on-premise solution at least means that, for 2025 to 2030, our members have an alternative to the pure cloud solutions which are intended to cover HCM functionality,” says Flury. DSAG welcomes this outcome, but remains skeptical about the three-year migration period that SAP is giving customers. Furthermore, a few key details are yet to be clarified. For example, more concrete pricing information is required and clarification is needed on individual components or modules such as travel management. DSAG and its relevant working groups will continue their dialog with SAP in order to deliver the best possible outcome for all customers.

*About the survey

In November 2017, DSAG conducted a survey among 667 individual members from 667 companies and organizations.

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