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Anyone working in SAP HCM today will certainly be interested in the terms Cloud Computing and SaaS (software-as-a-service). It is no secret that the interest has only grown exponentially with the acquisition of Success Factors by SAP. The fact that SAP paid $3.4 B for this acquisition only underlines how significant this area of technology is.

As an SAP HCM functional consultant I had started hearing about terms like SoA (service oriented architecture) followed by SaaS back in 2004/05, however for a long time this remained a purely academic term for me. This was primarily because I could not understand how to apply these new fangled approaches to what I did, which is help customers implement SAP HCM and its various components.

So recently I started reading more about cloud computing in order to understand what this means to me. Here, I have to admit that I am no early bird and there is plenty of information available in this forum and outside on this subject. So what’s the point of writing this?

The reason I am writing this is because I feel that like me there are many others who are not as aware and would probably like to understand more about terms like On premise, cloud, SaaS, mobile apps , multi tenancy, etc. Moreover there are a few questions I have of my own and I would like to see if we can get some answers or additional information on those.

So what’s the difference between ON-PREMISE versus Cloud or SaaS?

If I were to explain it in the context of an SAP implementation, then all traditional implementations where the customer bought the hardware and software are deemed as On premise. The customer owns the infrastructureit and is responsible for its maintenance and security.

Cloud on the other hand offers the opportunity where the software and the hardware is hosted by a vendor and provided to a customer as a service based on a subscription charge. This takes away the huge initial cost involved in purchasing the software and hardware.

More often than not cloud and Saas maybe talked about in the same breath however cloud computing offers much more than just software as in Saas. 

So what’s unique about SaaS?

The key points that stand out about SaaS are

  1. Multi tenancy: In this kind of a set up the software is shared by more than one customer. Whilst none of them own it they are all able to use it based on their subscription. The obvious benefit of this model to customers is the reduction in cost as the software is a shared resource.
  2. Single version of the software: There is only one version of the software available at any point in time. This means that all customers subscribing to the software are on the same version. This is quite different to how SAP has been delivering new functionality by way of enhancement packages. When releasing enhancement packs the onus of deployment and adoption if on the customer and we all know from our experiences that the decision to move to a higher enhancement is not a straight forward one and many a time the customer may delay their decision.Therefore in some respect the approach to implementing new functionality is becoming more ‘Active’ rather than ‘Passive’ in case of cloud. This does not mean that the new features are delivered in active mode. It just makes the decision of activating it slightly easier.
  3. Frequency of updates: Most SaaS providers in the HCM space are providing or aiming to provide newer functionality more frequently. We all know that     under the current delivery model an enhancement pack can take over a year before it becomes available as a general release. Compare this with three         updates provided by Workday – another HCM SaaS vendor – in a year. With the acquisition of Success Factors SAP is aiming to increase the number of   annual updates to four. These delta updates will also be available as an enhancement pack at a later date.
  4. Configuration as opposed to customisation: In case of a SaaS application, a customer activates and configures the software based on their individual     needs. The vendor provides several options and features that a customer may configure based on their business need. There is however little or no scope for customisation.Most of us will appreciate that this is a very important paradigm shift from how ERP has been implemented over the years. We are all too familiar with the number of times the standard features do not meet the business requirement hence leading to the development of enhancements and bespoke developments.The competitiveness of the SaaS vendor therefore obviously lies in its ability to provide the maximum number of industry standard features in a product.
  5. Reduced time for deployment: The cost and time required for implementing a SaaS based software is considerably less than an on premise                 implementation. The functionality and scope is pretty much know therefore its easier to plan and deliver in a short time scale.

Is SaaS the future for HCM applications?

Honestly, I am no expert at predicting if SaaS is the best way of implementing an ERP however one thing I am definitely sure of is that SaaS seems to be the way forward.   There has been a lot of activity and interest in the world of HCM software being hosted on a cloud.

SAP has stated clearly that Success Factors Employee Central will be the go forward core HR solution in the cloud (http://www.sap.com/news-reader/index.epx?articleID=18363) . In terms of its Talent management suite which involves E-recruitment, Succession Planning, Compensation management, Performance Mangement, Learning Solution, the solutions offered by Success Factors will be the key offering in the future.

Workday which has been founded by the same people who brought Peoplesoft to us, is gaining prominence very rapidly as a provider of HCM software in the cloud..

Success Factors itself acquired Jobs2web – another cloud based software company-  for $110 million in order to strengthen its offering in the E-recruiting space.

Oracle has responded to SAP’s acquisition of Success factors in Dec 2011 by buying Taleo – another cloud based HCM software company –  in Feb 2012 for $1.9B .

Cloud based software providers are providing easier integration with mobile apps and adapting to change rather quickly.

So is the world going to be all rosy with SaaS?

As more and more organisations look to cut their costs, SaaS definitely provides an option to most CIO’s to reduce their IT infrastructure and deployment costs by adopting a SaaS model. Its also provides for faster deployment and quicker updates.

It however also raises a few questions.

  • Does one size fit all?

Most SaaS providers will defend this and claim that the inability to customize software cannot be an impediment for adopting the SaaS model. On the contrary they advice that customisations lead to an increase in cost and complexity. The benefits will definitely appeal to small and medium businesses but are large corporations, with presence in multiple countries with varied requirements ready for this journey?

  • Security

An obvious concern for most organisations will be the security of the data residing in the cloud. Most SaaS providers confirm with industry standard security norms and certifications but will it be an easy decision for organisations to not have direct ownership of the systems which hold their sensitive data?

  • Integration:

While SAP is working on providing integration between its on premise and cloud offerings, it will be some time before it become seamless.

Do I need to worry?

It seems there is a lot of paranoia amongst a lot of people that they will lose their skills and specialisations to new technology offered in the cloud. My personal opinion is that we are working in a knowledge based industry and we need to be able to adapt to new technology and changes easily.  How often have we ourselves told the customer about managing change appropriately? Now it’s our turn.

Moreover the software is just a means to an end. In my view there will always be a requirement for enablers who can help enterprises meet their business needs by using different softwares.

I hope you find this article useful. As I am a novice myself in this area I will be happy for you and  thought leaders to share their views.

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18 Comments

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  1. Harish Krishnan

    Interesting blog, Vinay. Makes me also want to dig deeper in to the subject and build on the analysis provided here.

    I agree, it is now our turn to manage change and uncertainty.

    one thing I don’t understand the term “On premise” – I wonder who came up with the term “On premise” – Did they really mean “On premises”?

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  2. Jarret Pazahanick

    Good overview Vinay and there is going to be a lot of change in the coming years for SAP, Customers, Consultants due to SuccessFactors.  I read this morning that SAP in going to use all the functionality in SuccessFactors to cover their 50K internal employee which says a lot and I know that the sales team is going to push SuccessFactors very hard in the market as well.  In my opinion it is the future and have written a few articles you might find interesting.

    SAP and SuccessFactors – Five Key topics I Want to Hear About at SAPPHIRE

    SAP and SuccessFactors – New Videos and Podcasts

    SAP and SuccessFactors Roadmap Analysis

    The Future of SAP HCM Consulting and SuccessFactors

    8 SuccessFactors People to Follow on Twitter

    Keep up the blogging as great to get more content in the HR community

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    1. Vinay Naithani Post author

      Hi Jarret, Hope you are well. Thanks for your comments and sharing the links. I have read most of your articles and yes its true that there are going to be a lot of changes for all of us. What’s encouraging is that SAP seems intent on defying its critics who consider it as a bureaucratic giant that does not move very quickly. Their focus on mobility, cloud is very interesting.

      I think the amount of investment that is happening in innovating the HR services is a blessing for all of us.

      Thanks again. Your contributions are always valuable.

      Vinay

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    1. Harish Krishnan

      Ravikumar,

      Just a minor correction. The Blog above has been written by Vinay. Jarret has commented on it. Of course Jarret is a prolific and knowledgeable blogger, and I am sure all his blogs are great as well.

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  3. Arpita Bhandari

    Hi Vinay,

    Very good blog…..enjoyed reading it……. very well thought out and comprehensive for a ‘novice’  as you very humbly claim to be!

    Arpita

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  4. Srinivas Anant

    Hi Vinay

    This is a well written blog for people who are just getting a feel of SaaS and Cloud computing amongst whom I am one. The change in core HR and Talent management solutions to be driven through SuccessFactors is something we all should adapt to over a period of time.

    Thanks for posting this.

    Regards

    Sri

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  5. Harshal Soni

    Hi Vinay,

    This is indeed a very nice blog to get everyone upto basic understanding of SAP’s vision and how companies will need to proceed further…

    These days I am hearing a lot about SuccessFactors and how companies are eager to look into SuccessFactors and implement it…

    However we still need more info on what can Successfactor provide in terms of HCM services… How will SuccessFactors be better then SAP’s currentoffering… Does it make sense for the companies who already have SAP, migrate and add SuccessFactors into the equation or is it only beneficial to the companies who do not have any applications realted to the offerings of SuccessFactors…

    These are some questions which are hard to find and I know this is not a one-size-fits all solution…

    The more we read about it the better it gets…

    Once again… Thanks for this blog…

    Cheers,

    HS

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    1. Vinay Naithani Post author

      Hi Harshal,

      Thanks for your kind comments. You are right. We are standing at the threshold of an evolution when it comes to ERP in general and SAP in specific. There is a huge amount of interest in cloud, mobility and in memory processing. Yesterday at SAPPHIRE,  SAP Co-CEO Jim Snabe predicted that in 5 years everything will be mobile.

      This gives us a sense of focus for companies like SAP.

      Regarding SF, indeed there are many open questions. In my view the adoption of Talent Management suite on cloud will be an easier decision over replacing ON premise CORE HR with Employee central. As about 14 % of SF customers are also on SAP, I believe there are some integration tools already available and other being built right now.

      Watch out for the updates from SAPPHIRE attendees who will be able to share some more interesting news regarding this topic. I am esp looking forward to updates from the likes of Jarret Pazahanick,Luke Marson ,Jon Reed and others.

      Thanks

      Vinay

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  6. ABHISHEK SENGUPTA

    Hi Vinay,

      Thanks for the wondeful insight. On the details you provided about SaaS i had a query:

    • If you say that all customers will be on the same software version does this mean that there will be a single ECC system/client from the provider side for all the different customers?
    • If yes, then how would different configurations be possible(to cater tot he different customers) and how would the master data be maintained for different customers?
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    1. Vinay Naithani Post author

      Thanks Abhishek. Regarding the single instance, yes this is true of all multi tenant systems. There is usually one instance with partitions for the configurations and data of each customer. ECC is the on premise offering from SAP and SFSF will actually be the cloud application from SAP.

      If you would like to read more than I would encourage you to go through this blog from Workday. http://blogs.workday.com/Blog/10_critical_requirements_for_cloud_applications.html

      regards,

      Vinay

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