Editor's note: this post was originally posted in Sherryanne Meyer's ASUG blog on Sept 8, 2016. Refer to that original post for comments. Following the heightened interest in this topic and discussions in the LinkedIn Global SAP and SuccessFactors Community, we are reprinting it here within the HR Community to ensure members are informed.
SAP's commitment to innovation only in their cloud product portfolio has left some of us losing sleep with nightmares about rebuilding our on-premise payroll solutions in the cloud product, SAP SuccessFactors Employee Central Payroll. The option to rebuild payroll is second only to my desire to hang by my fingertips from the tail of a 747 jet at 30,000 feet. Let's face it - SAP's on-premise payroll solution works. So why should I rebuild it?
2025 on our minds
Oh, yes. There's that little calendar date looming - December 31, 2025 - when mainstream maintenance is currently scheduled to end for the on-premise HCM suite. But there is no simple migration path for on-premise to cloud payroll. And the risk of not paying our employees on time and accurately weighs on us more heavily than Georgia weighs on Ray Charles' mind.
Apparently that's a refrain that SAP has heard often enough to be inspired to develop some thoughtful responses.
How to get customers to move from what they know works (on-premise HCM) to what will surely be simpler, more user friendly and innovative (SAP SuccessFactors' cloud) is the challenge of the first quarter of this century. And face it - if SAP doesn't show us the way to innovation, some other (unnamed) software company will gladly take us there. You gotta admire SAP's innovative spirit and attempt to balance the competitive marketplace with their customers' needs.
SAP Managed Payroll to the Rescue!
As ASUG News reporter, Craig Powers reported at SuccessConnect 2016 in Vegas, SAP has announced a new offering to those of us haunted by the on-premise payroll debacle: SAP Managed Payroll.
The catch? SAP Managed Payroll is only available to customers who purchase Employee Central.
In this managed payroll solution, a customer can move their existing payroll to the cloud as is by subscribing to an application maintenance service sold by SAP and managed by a select partner. To date, three partners have been appointed by SAP to provide SAP Managed Payroll services: Northgate Arinso (NGA), Epi-Use and their sister company Epi-Use Labs, and Accenture.
What SAP Managed Payroll is not
This is not a Business Process Outsourcing (BPO) arrangement -- like ADP's Global View product, for example. Certainly some customers may want to further engage with their selected SAP Managed Payroll partner on that level. Epi-Use, for example, told me in a recent discussion that they will offer BPO services to customers who desire those services.
This is not a mapping exercise where your payroll solution gets mapped to a partner's SAP solution. Your payroll - customizations and all - are literally lifted from your company's internal infrastructure to a partner's infrastructure.
SAP Managed Payroll is not a replacement for Employee Central Payroll. SAP is not pulling back from their well-established plans to fully develop and market Employee Central Payroll.
As we learned in SAP's Q3 Release Update to ASUG members,
Employee Central Payroll - SAP's cloud payroll solution -
is now available in 38 localized country versions.
There are now 1,250 Employee Central Core HR customers
and - with a massive ecosystem of partners plus SAP Managed Payroll -
Mike Ettling predicts 2,000 customers by the end of 2016
SAP Managed Payroll is not a replacement for either SAP HCM on-premise payroll or SAP SuccessFactors Employee Central payroll.
What SAP Managed Payroll is
SAP Managed Payroll is an option for customers to more quickly realize the benefits of cloud without fully disrupting payroll. It bridges the gap in which customers may find themselves after opting to move to Employee Central. So much is at stake in migration of critical core HR data and pay data. SAP Managed Payroll allows customers to first focus on implementing Employee Central core HR with a longer, phased approach to implementing Employee Central Payroll - while still enjoying the benefits of cloud for payroll.
So - basically - SAP Managed Payroll is a new business model for running your existing SAP on-premise payroll.
It is a licensing, hosting and application maintenance subscription package, with a one-time service component to "lift and shift" a customer's on-premise payroll solution to a certified cloud platform.
So, what's really new for customers in SAP Payroll?
We do have fellow ASUG community members - who have previously turned to a cloud infrastructure for their HR and/or Payroll solutions. That sounds an awful lot like the SAP Managed Payroll solution - right? I've been quoted in ASUG News: 'This isn’t necessarily a brand-new offering, as Sherryanne Meyer, ASUG HR community advocate, points out: “This is SAP endorsing what companies were already doing for customers.”
Am I right? Well - no. I and Jon Reed of Diginomica have been corrected as Jon reports in his article SuccessConnect first take - President Mike Ettling clarifies midmarket push, cloud payroll and S/4 Hana.
The key difference here is that the agreement to have your payroll "lifted and shifted" to a cloud infrastructure is on SAP paper. The product is sold, priced, licensed by SAP. The customer selects one of the approved partners. SAP assumes the risk for delivery.
Cloud Costs versus Benefits
Will SAP Managed Payroll be expensive? This is difficult to say - and will depend on each individual customer's scenario. What I really like about the idea is that it is a brilliant business move on SAP's part to hold customers' hands through the transition to cloud. This idea of "lifting and shifting" sounds - well - to use an over-used word - "simple!" It also provides a cloud outlet for customers who may be running payroll in one of the countries where Employee Central Payroll has not yet been rolled out.
To fully understand the cost implications, would require that we understand our actual current costs for running payroll on-premise; the costs to be eliminated by moving to SAP Managed Payroll; the subscription cost for SAP Managed Payroll - and exactly what that subscription covers - plus the one-time service fee and our own internal project costs for the lift and shift.
The key benefit here is that customers who purchase Employee Central can more rapidly realize the full benefits of cloud without having to immediately worry about rebuilding payroll. And - you know the benefits of cloud: less infrastructure overhead, increased agility for business, access to innovative solutions, etc.
What's involved in a change to SAP Managed Payroll?
The first answer to this question is: you need a firm commitment to cloud and a subscription to Employee Central. But, of course, there's more to consider.
In my mind, to fully understand the implications of moving to Employee Central with SAP Managed Payroll, there are a few questions I need answered. These additional data points are going to help me understand my IT, HR and Payroll resource requirements for the transition and following the implementation of SAP Managed Payroll and to map any process changes internally and externally.
For example, on implementation I'm wondering:
- What exactly does "lift and shift" involve? Is there a project team? What types of resources and how many are needed on the project team?
- How many resources internally would be needed for the transition?
- Is there a data migration tool? What is the timeline?
- Can the SAP Managed Payroll partner literally take your existing deployment and move it without rebuilding configuration and customizations?
- How much will the partner charge to conduct the initial transition of configuration, programming and data?
- Does the partner assume responsibility for changes to interfaces from payroll to banks and benefit providers?
- Does my self-service system need to be updated to point to a different server?
- What about my integration back to my finance system - who will create and manage that integration?
- How much testing would be done internally by our own resources and externally by the partner?
- What are the guarantees to my payroll processes? (in other words, do I have to lay awake the night of my first payroll run in SAP Managed Payroll?)
For the ongoing system management:
- Who applies and tests support packages, legal changes and notes? How often would changes be applied? Will this vary by country?
- How much system downtime can I expect?
- Does the partner take responsibility for fully testing the changes to my system?
- Who tests integration elements - interfaces, integration to Finance, rendering of payroll in my self-service solution?
- Who manages customer-initiated changes - i.e., to legal entity, personnel sub areas, employee sub-groups, union dues etc
- My W-2s and W-4's are in self-service today - how will that change? If an employee changes home addresses in Employee Central, is there logic to update local taxes?
- Time is imported for payroll from multiple places -- including SAP CATS and third-party providers. Do I need to change those data file imports?
- What about compliance reporting - how will that be impacted where data elements are needed from payroll?
- As I move to Employee Central, what are the implications (from a cost and timing perspective) to change integration pieces with payroll?
A look ahead to 2025
My key question is this: is there a commitment by SAP to maintain customers' current payroll without ever having to reimplement? I don't think we will get an answer to that. We will all have to see what the market will bear as we move towards 2025.
Here's what I do know. This is not the end of the story. Nor is 2025 the end of on-premise payroll. It is entirely possible that date may slip. But even if it doesn't, historically, SAP has continued to provide services beyond an "end of mainstream maintenance" date. The cost for maintenance generally increases beyond that date; but SAP will not totally abandon their customers at the stroke of midnight on December 31, 2025.
You want innovation - right? I do. And I would also be perfectly happy not to spend long weekends implementing support packs. Getting to that future environment may still be a bit of a challenge. But SAP seems determined to make the journey easier for customers to make. My goal, through ASUG's HR Community, is to make sure we get there well-prepared.
What are your questions and concerns about SAP Payroll?
Let's keep this conversation going. I'm all ears! And - so is SAP and their partners. Register to remain informed about upcoming town hall conversations and the chance to post your own questions directly to SAP, Epi-Use, NGA or Accenture.