SAP HR and SuccessFactors – dilemmas and solutions

It will be easier to understand SAP’s HCM offering if we trace how it has changed over time. The SAP HR system appeared in the product portfolio in 1986. 15 years later, it was complemented by self-service applications (ESS/MSS), E-Learning and E-Recruiting. Until 2011, not much changed apart from the emergence of the SAP NetWeaver technology platform as well as the SAP ERP and SAP Business Suite 7 integrated packages. For HR, these were not revolutions, and it can be said that the current on-premise installations do not differ significantly from those from a dozen or so years ago.

The real breakthrough came in 2011, when SAP acquired SuccessFactors, the second-largest cloud HR solution after salesforce.com, with 6,000 clients and 32 million users in 185 countries. In 2012, the manufacturer announced that they planned to migrate HR to the cloud and that in the future all functionalities, including payroll, would be offered in a subscription model. Companies still had two options to choose from – on-premise (SAP HR) and SAP SuccessFactors.

SAP launched an intensive campaign to encourage its customers (13,000 organizations) to migrate their HR equivalents to the cloud, although “equivalent” is not meant literally here, as SuccessFactors is based on a different philosophy and assumptions.

First and foremost, it is a completely different user experience. Those customers who worked with the “old" SAP HR, in SAP GUI, will appreciate the difference in the interface. For the first time, the concept of employee experience also appeared here in the context of SAP solutions. SuccessFactors meets the new paradigm defined by the acronym ACE: Availability to everyone, Consumer grade technology, Employee needs first. ACE is a slogan promoted by Jacob Morgan and is a benchmark for the latest HR technology.

Customers have the option of technology-assisted migrations. This is not a 1:1 transfer of functionality, but rather a shift toward standardization and best practices. Talent management modules have a completely new look in SuccessFactors.

Since some customers still have extensive SAP HR on-premise environments and, for various reasons, are not ready for a complete migration to the cloud, SAP supports three basic architectural variants:

• on-premise,
• a hybrid (talent hybrid) model, where the system of record for employee data (the place where employee master data is recorded) is SAP HR, while talent management processes are handled in SuccessFactors.
• full cloud.

Regardless of the chosen variant, SAP’s message is clear – the target model is the cloud.

Another architectural option popular among clients is side-by-side. In simple terms, the side-by-side variant involves a different approach depending on whether it is the headquarters, a branch, or a company belonging to a corporate group.

For example, in the headquarters, the SAP HR system is used as the leading system, and talent management is carried out in SuccessFactors, while in the selected branches, SF Employee Central is the master system. Payroll accounting can be performed in an on-premise system or other local application, depending on the company. In small steps, a corporation can migrate to the cloud.

In the side-by-side variant, SF Employee Central can be a consolidating system and at the same time the main solution for selected branches. For those branches for which the master system is SAP HR, the data is replicated to SF EC. This variant is quite complicated in terms of configuration due to the frequent lack of standardization of processes and data in the group (e.g. different lists of values and processes).

In the core hybrid variant, the employee is not hired in SAP HR but in SuccessFactors. In the on-premise system, payroll (and possibly time evaluation) is calculated. However, to make this possible, most of the data is automatically replicated from SF to the relevant HR infotypes. Only data specific to the payroll portion (e.g. IT0413, IT0515…) is stored in the payroll system. According to the manufacturer’s assumptions, many core hybrid projects were supposed to lead to full migration to the cloud in the long run. The core hybrid architecture is a temporary state, giving customers time to prepare for the migration of payroll to SF EC Payroll.

Those variants that use the older generation SAP HR solution will require migration to newer systems in the near future. Why? Maintenance for SAP HCM ends in 2027, with the option to extend it for additional fees until 2030. Furthermore, this system is no longer being developed and is only updated as required by legal regulations.

In 2022, SAP added two more variants to the already complex puzzle – SAP HCM for S/4HANA PCE (Private Cloud Edition) and SAP HCM for S/4HANA on-premise (H4S4). These systems are intended to serve as a bridge, giving customers additional time to migrate to the cloud. The upgrade to SAP HCM for S/4HANA is a migration supported by standard tools. Customers who choose this scenario will need to convert their licenses.

The PCE and H4S4 systems differ in their scope – the “old" soft modules (E-Recruiting, Learning Solution, Talent Management) are not available in PCE and should be replaced with SuccessFactors functionalities. Some of the soft modules are still available to customers in H4S4, but they will not be developed.

The good news is that SAP HCM for S/4HANA has guaranteed maintenance until 2040.

The launch of SAP HCM for S/4HANA PCE is intended to enable customers to make the most of their existing investments in SAP HR while simultaneously providing them with the opportunity to benefit from the cloud. Of course, in this case, the customers will also have to face the migration to SuccessFactors in the longer term, but they are now being given additional years to prepare for the process.

If you answer “yes” to the following questions, the PCE variant is for you:

• Are you satisfied with the performance of your current on-premise SAP HR system, in particular the payroll and time management solution, and not yet ready to migrate to SuccessFactors?
• When choosing SAP solutions, are you looking for a variant that will be supported beyond 2027/2030?
• Are you open to migrating to the cloud and/or want to reduce infrastructure and server costs?
• Are you looking for the least time-consuming option for migrating your SAP HR system?
• Do you want to change your cost model from CAPEX to OPEX?

Over 10,000 SAP customers already use SuccessFactors solutions, of which 6,500 use SF Employee Central (source: SAP Value Management). The migration process itself is a relatively time-consuming project. When planning the future of an organization’s HR system, decision-makers should keep in mind that, in line with SAP’s development strategy, innovations will only be introduced in the SAP SuccessFactors solution. An additional advantage of the cloud model over an on-premise one is that new solutions can be made available to users very quickly, without the need to run upgrade projects.