For the hundreds of you I've spoken to over the past several years who do not want to rebuild what already works on-premise for HR and Payroll, SAP is providing a bridge solution. Right now, they are calling it a "sidecar" for S/4 HANA. And it's a promising option for maintaining your on-premise SAP HCM solution through 2030.
In case you've been living under a rock for the past five years, let me further explain the dilemma in which many of us SAP ERP loyalists -- that is those of us running SAP ERP version ECC6.0 or lower - find themselves.
The new SAP Business Suite is here to replace ECC 6.0 - and it's not your typical upgrade
The SAP Business Suite that will replace ECC 6.0 is S/4 HANA. Mainstream maintenance for the current SAP Business Suite (ECC 6.0) will end on December 31, 2025. With that date now looming just seven years away, customers are sitting up and taking notice that an upgrade is ahead of them. But this is no ordinary upgrade. The migration to SAP S/4 HANA is not a one-off project; but involves the entire IT system landscape. It's an investment for customers - of time, people and potential liability if you get it wrong. Most importantly to those of us in the HR IT space, S/4 HANA does not include a native HCM solution. Rather, the next generation solution for HR and payroll would be to rebuild this functionality in SAP SuccessFactors.
Who wants to rebuild SAP payroll and core HR?
There really are some customers who want a redo of their SAP ERP HCM implementation. Generally, these fall into two categories: (1) those who "didn't get it right the first time" and (2) those that got it so right that their solution is now overly complex and a bear in which to manage changes.
Still, the solution works. And if I'm the CFO or CIO prioritizing my scarce resources, I might just decide that I don't really want to touch what's working right now.
Enter the HCM Sidecar for S/4 HANA
During our briefing with SAP SuccessFactors, this week, David Ludlow acknowledged, "We’ve been getting an increasing number of questions with regard to what happens to the on-premise segment for HCM past 2025 – there’s no native HCM capabilities in S/4 HANA. The assumption has been that customers will leverage SuccessFactors as they move the enterprise parts to S/4 HANA. What we also know at the same time is that there are customers moving to S/4 HANA that want to remain on premise for HR for the foreseeable future."
Here's where the sidecar comes in; so we can now add this option to the four standard SAP options available to SAP's HR customers:
- Remain on-premise (until 2025)
- Move to Employee Central and Employee Central Payroll
- Continue with HCM on-premise through 2030 with the HCM sidecar
- Lift and shift your on-premise HCM to SAP Managed Payroll using one of three partners (until 2025)
- Outsource the business process and the technology to a Business Process Outsource provider.
Here's what you need to know about the HCM Sidecar for S/4 HANA
This extension of mainstream maintenance for SAP HCM on-premise is available only to customers who migrate to S/4 HANA on-premise.
What's inside the SAP S/4 HANA HCM Sidecar:
This new option is based on the current SAP ERP HCM solution and the functional code that is available in the SAP Compatibility Packs. Compatibility Packs were designed by SAP to allow business continuity for customers while migrating functions to S/4 HANA. Essentially the compatibility packs provide capabilities for on-premise functions to run with S/4 HANA. The sidecar will include Personnel Administration, Organizational Management, Time Management, Payroll - the core capabilities. Not included are e-Recruiting and e-Learning which are not included in the compatibility packs.
How the HCM sidecar for S/4 HANA works:
The sidecar will run on the HANA database only. It must be deployed side by side with S/4 HANA. It must be on a separate instance.
When will this new SAP HCM on-premise option be available:
The sidecar option is expected to be available by 2023 and through the end of 2030.
How to transition to the S/4 HANA HCM Sidecar solution:
SAP's goal is to provide a non-disruptive transition for their customers who wish to continue to run SAP HCM on-premise. They plan to provide migration tools to enable customers to easily move from ECC6.0 to the sidecar solution for SAP HCM.
The SAP HCM Sidecar and innovation:
SAP would like to include some HANA capabilities in the solution. There will also be some selective innovations in the current functionality as may be brought forward by customers through SAP's Influence programs. Important to note, however, is that enhancement capabilities are very limited in this 30-year-old on-premise design. "There's not much more we can do with it without a whole scale re-architecture," notes David Ludlow. In other words, don't expect large functional changes in the on-premise sidecar for SAP HCM.
What will the SAP HCM sidecar for S/4 HANA cost:
Commercial information is still being finalized. However, SAP has said they are not looking to make a ton of money on this new solution. They are looking to make sure S/4 HANA customers have a way forward with on-premise HR if they want to keep it there.
The Upshot of the SAP HCM Sidecar for S/4 HANA
The sidecar essentially extends mainstream maintenance for SAP HCM ECC 6.0 for five additional years as customers move to S/4 HANA. That's good news for customers.
For SAP, giving the sidecar away for free would be a financial gain - because moving customers to S/4 HANA is where the bigger advantages lie for SAP. Getting customers to experience the potential for business growth with in-memory computing, simplified processes and ease of user experience is the win that will keep SAP in the leadership position among enterprise resource planning software.
SAP Landscape Options for HR Today
You have options to navigate digital transformation your way. It is a journey you should be planning now. The chart below represents where you can take your on-premise HCM solution - and the lifespan of each potential scenario. Hopefully this helps you and your team with your own roadmap.
I hope you'll join us in discussing this and other topics in detail as users of the software. Post your questions to this blog and join our HR Community volunteer-led virtual Special Interest Group meetings by checking asug.com/events with keyword "HR".
Beginning in late February, we'll be taking our complimentary Recharge HR program on the road again with a series of stops across the US and Canada. Those meetings are your opportunity to learn from each other and to meet the experts from SAP and SAP's partners for face-to-face discussions about your needs. I hope to see you there.