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Quo Vadis HCM – separate instance, back to ERP or towards the cloud ?



Want to get your enterprise architecture straight, not just talking about Business & IT alignment, but actually doing it? Sascha Kuhlmann is the Director of Enterprise Architecture with SAP’s Business Transformation Services.His team is working day & night to drive EA Awareness into the SAP Ecosystem and beyond.


Listening music:  

Kid Charmelagne from my all time favorites Steely Dan. Donald Fagen is just in a league of its own – watch them live if you can, still worth it. I had the chance to enjoy their performance back in autumn last year in SFO.

That was yesterday

In the late 90’s and early years of 21st century a companies IT landscape was quite easy.:

Customers used to have one or many ERP systems (by line of business, division or region), corresponding CRM and SCM systems and a few central instances – one of those central instances usually were the HR system.

The Human Resources (HR) or nowadays Human Capital Management (HCM) instance was usually split for several reasons:

  • Security – HCM related data and processes are typically seen as  sensitive and the easiest way to create this was to use a separate instance for the HCM system.


  • Global and standardized HCM processes – since HCM processes are usually support processes in a company’s value-chain, the drive towards one common process model was much further advanced than in the other ERP related processes.
    So even if a company had several Manufacturing and Finance systems, they tried to deploy HCM in a central system to reduce the cost and at the same time drive towards one common process model by implementing one central system.


  • Patching, Patching and Patching – since HCM is always underlying legal changes, you typically had to patch/update the HCM more frequent than other ERP systems. Prior ECC 6.0 and the Enhancement Pack Technology, SAP delivered in Service Packs legal changes, bug fixes and functional changes. The latter resulted in the fact that patching due to a required legal change update for HCM, would end up in an overall integration tests across all implemented functionalities and departments. 


Back to 2010

With the economic downturn and the change in technology a lot of companies are challenging the decisions they made in the past. And of course also the decision to separate the HCM system is coming up.

So what has changed in the last decade of enterprise software ?

  • Security  – despite the fact that the authorization concept in SAP was already defined well, with the requirements based on SOX , Segregation of Duty and others, you can design/deploy today an ERP system and make sure that productive, sensitive data is not accessible. This requires some planning but nothing which cannot be achieved – also make sure your refresh of the non-productive system is considered in this planning. (SAP’s System landscape Optimization Tools (SLO) can anomynize any kind of master and transactional data)


So what is the ultimate answer: it depends!

From a theoretical and systems capability you can run HCM on the same instance and for new projects this is most likely the most feasible way.

If you have an existing HCM instance and think about merging it into an existing ERP instance, additional factors have to be considered:

  • Cost of Merging the 2 instances – the actual SLO work
  • Changing the Integration to other instances (Finance, external payroll ,etc)
  • Process Changes 
  • Testing
  • Flexibility

The last bullet is for me the most interesting one – with the Cloud getting or being enterprise application ready (this is a topic for a blog of its own), HCM and other support processes are the first candidates of being sent into the unknown depth of the Cloud – cause carving out is a similar complex project then merging.

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