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Like many of you, I have had a crazy busy year at work and am finally settled down at home with some downtime to reflect on the past and plan for the future. This has been another year of significant change in technology – perhaps even a watershed moment for those of us operating ERP software as mobile applications became a mainstream method of doing business, cloud computing changed the roles of IT departments once again, and big data became the key to competitive advantage. 

 

The technology is exciting.  And yet, at times, part of me has wanted to hold back on the changes sweeping the landscape.  I grew up, a baby boomer child of a steel mill laborer / adjunct carpenter / adjunct car mechanic and a stay-at-home mom who were the original recyclers.  They could find a way to re-use or fix anything.  The spirit of innovation was alive and well as dad found new uses for our broken hair dryers, lamps, furniture, vacuum cleaners along with remnants of building projects, coffee grounds and newspaper.  Mom and dad left this world indebted to no one and with a small inheritance for each of their five children.

 

So, as an aficionado of SAP Human Capital Management, I have been skeptical about the idea of ignoring the software we already own for another version of technology to be managed in “the cloud.”  What could cloud-based software give me that my own shelf-ware from SAP could not give me?

As  I have shared with Michael Krigsman and Greg Chase at the SAPPHIRE-ASUG annual conference and Bonnie Graham, on SAP Radio’s Coffee Break with Game Changers, I think the idea of the cloud is not so startling and impossible to justify as some might think.  Haven’t we all been doing a lot
of things “in the cloud” for at least two decades?  I mean, I used to have a set of Britannica Encyclopedias (you know, the actual physicalbooks – all 26 of them) setting on my bookshelf for my school research projects.  But I get increasingly more authentic and up-to-the-minute data from applications in “the cloud” without the costs of having to replace or update my Britannica Encyclopedia book set. The data is just as good as – possibly even better than — my owned encyclopedia set.  The ease with which I can retrieve and share the information is expedited.  And the cost to me is nominal compared to the old set of encyclopedias.

I spent much of this past year exploring the option of cloud via SAP SuccessFactors for HCM Talent Management.  And as 2012 draws to a close, I have an increasing appreciation for what cloud can offer the enterprise.  What is less clear at this particular moment in time is a clear-cut value equation for cloud
over on-premise.  The answer truly is, “it depends.”  It depends much on each individual enterprise’s size, culture, balance sheet, business outlook, sales forecast, profit margin, existing technology, available resources, cost-benefit assessments, and strategy for funding technology.  In other words:  this is an individual choice, just as much as my parents’ frugality was their own lifestyle choice, choosing cloud versus on-premise should be an individual choice that the best consultants and SAP representatives will help each customer define. 

 

For small to medium sized businesses, the value equation may clearly fall in the advantages of being able to access enterprise-worthy software at lower costs since the servers and development teams do not need to be in-house.  For larger organizations, the value of cloud may be in a reduction in IT or business man-hours to develop and maintain a new system.  This, of course, will hold only if the organization resists the urge to customize the cloud product, and it is not true for all organizations, many of whom have already downsized significantly and have precious few resources from which they can garner further savings. 

 

In the case of SuccessFactors, of course, there is the question of how long SAP will continue to develop on-premise solutions, especially for Talent Management.  The reality is that if a customer owns SAP ERP, they already own an HCM Talent Management solution that is viable for at least the next seven years.  (The SAP Business Suite is supported thru 2020, at which time, it’s anyone’s guess what version of software SAP will put forth.)  And seven years can be a lifetime in technology years. 

 

So, is there a clear choice for cloud versus on-premise?  My inner baby boomer says “why wouldn’t you use what you already own?”  But the
technology geek in me wants to have my hands on the new stuff to see what it is and what it can do and what it can change for me personally, for business,
and for the world economy as we know it.

 

My expectation is that cloud software will sweep the business world just as ERP software led us all away from a myriad of software products used to run our businesses 20 years ago.  When the tipping point is reached, organizations that did not seriously consider Cloud will be left scrambling to catch up. 

 

At the same time, with finite dollars available to invest in technology, enterprises will be driven to shift investment dollars towards enabling technology
that will give them the most competitive edge, the greatest ROI and/or cost-effective efficiencies.  I look at on-premise software that is already owned and say “why not?”  And I see cloud as the next frontier we will all ride through eventually.  One thing is certain: with so much new technology at the forefront, the choice of where to invest first will require a carefully planned IT strategy.  And the time for that strategy is now.

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13 Comments

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  1. Luke Marson

    Hi Sherry,

    Great insights and I agree wholeheartedly that organizations need much more focused and carefully planned strategy than before. However, shouldn’t organizations be looking at a HR strategy rather than an IT strategy, since SAP’s new breed of HCM solutions (SuccessFactors) has much less reliance on the IT team than before and puts the power into the hands of the HR user. I say this only because I see a fear from IT practitioners that the Cloud will reduce the business’ reliance on IT departments and thus jobs will go.

    Of course the Cloud isn’t for everybody, but I believe that the Cloud is helping HR to move to the point where it has the power to make the decisions that are in its best interests and not in the best interests of the IT department. For organizations already using SAP HCM then this is not so relevant, unless they are looking at Talent Management with SuccessFactors.

    SuccessFactors definitely adds a new dimension into the world of SAP HCM and I am looking forward to how things progress in the coming year and thereafter.

    Hopefully we catch up in person at HR2013 to discuss this ๐Ÿ™‚

    Best regards,

    Luke

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    1. Former Member Post author

      Hi Luke. 

      I want to address your comment about an “HR Strategy” versus an “IT Strategy”.  You need both to succeed.  I recall the era pre-ERP systems where HR (not too much unlike other business units) purchased a variety of different software that was not well integrated across HR processes or into the rest of the enterprise and not well managed from a lifecycle perspective.  I would hate to see us go back to that environment.  Including IT in the equation forces a broader perspective and tends to take into account cross-functional needs.

      As we move forward on this technically-enabled journey, I am conscious that business led projects can tend to be micro-focused on the business problem at hand, therefore lacking a balance in addressing overall needs of a large organization.

      ERP based systems have given organizations the ability to break down barriers that separated business units, processes and countries.  Ideally, organizations will take the best of that forward into any cloud-based, mobility, big data or other technology strategy.  

      Budget constraints will keep me from attending HR2013 this year.  And that is unfortunate because the conferences are the best opportunities to learn the truth behind the solutions and to gain the insight of other valued professionals like yourself.

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      1. Luke Marson

        Hi Sherry,

        I think organizations need to be focused on a HR Technology strategy more than anything else – which takes both HR and IT into consideration but with the focus on HR getting what it needs and not necessarily what IT wants to provide. I think I was unclear about this in my post, but it led to some good discussion ๐Ÿ™‚ .

        I think it is a tough balance to produce a strategy that addresses the overall need of an organization, but I don’t know if IT will be the right “referee” here because affects them in an adverse way. This is one of the biggest challenges I think that organizations will face when defining their strategy/strategies.

        I’m disappointed that you won’t make it to HR2013 because there will be some great sessions on SuccessFactors. I’ll be making sure that I try to cover the conference as much as possible, starting with Jeremy Masters‘ jumpstart session – which I’m sure will be a great start to the range of SuccessFactors sessions ๐Ÿ™‚

        Best regards,

        Luke

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        1. Former Member Post author

          Hi Luke – I’m disappointed as well that I won’t be there.  But trust that I’ll be following all of you.  It is a tough balance to strike – and I don’t believe IT should be the referee.  Perhaps, however, this is one of the great examples of “collaboration” that is needed in the new workforce — in-person, non-social-networked, plain old fashioned talking and understanding each other.  ๐Ÿ™‚

          I see our SAP HCM space now as one where thought leaders, business analysts and communities like SCN help to guide the direction of that collaboration.

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    1. Former Member Post author

      Hi Jeremy.   Great to hear from you.  I wish I could be at HR2013 with you.  This is definitely a hot topic; and I’m sure your jumpstart will be at overflow capacity. 

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  2. Former Member

    Great blog Sherry! I see your points about reusing what you have, making sure the tech fits/satisfies a business need first and so on. The decision really is specific to the customer and their culture, environment and goals. Change for the sake of change is going to be hard to fund – just as always there needs to be some value in the change and cloud software doesn’t always provide that.

    The overall trend in HR software is to move it to the cloud, but it will take a while. Remember the transition from mainframes to client/server? It took years for SAP to come out with a fully-featured, stable product in R3. Some customers moved to it sooner than others. We are *still* replacing mainframe HR/Payroll systems, so these transitions take a while. But, in my opinion, the move to cloud software is undeniable – it’s a matter of time.

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    1. Former Member Post author

      Hi Steve.  Merry Christmas and Happy New Year.  We will all certainly follow the trend….the question is when and how we will get there.  I grow concerned when sales people can influence a buying decision alone without the organization fully assessing the facts.  I think each organization should follow their own roadmap – – not the one they are sold.

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    2. Former Member

      >>>the move to cloud software is undeniable – it’s a matter of time

      That would be true only if SAP stops supporting/enhancing OnPrem solutions. The timeline is anybody’s guess.

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      1. Luke Marson

        I actually agree with Steve that eventually it will be inevitable for anybody except those that wish to remain legacy or have an overly strong input from an IT department that is reliant on legacy/on-premise to survive.

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  3. Jarret Pazahanick

    Very good blog Sherry and hopefully you can expand on this during another visit to the Insights Podcast early this year as it is a great topic and one that many customers are wrestling with.

    I love that you looked at this from both angles as I believe that the decision to be fully OnPrem, fully in the Cloud or use a hybrid approach is a customer by customer decision that should be taken with a lot of care and a full set of information so that the right option is selected based on your business requirements. One thing to be on the lookout for regarding “the best consultants and SAP representatives will help each customer define” is that only a handful of consultants worldwide REALLY know both SAP HCM and SuccessFactors and many SI’s are predominantly a SAP or SuccessFactors shops (although they will say both) ๐Ÿ™‚ so customers will have to understand these potential biases going in. As far as SAP reps my understanding is that it is pretty clear on what they will recommend based on the already published roadmap.  The bottom line is a well informed and diligent customer will make smart decisions and there are a lot of sources of information in the marketplace (ie SCN, ASUG, Videos, Podcasts, Linkedin Groups) to help spread information.

    Looking forward to seeing you at HR2013 or Sapphire.

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    1. Former Member Post author

      Hi Jarret.  At this point, it looks like I won’t make it to HR2013.  I had a proposed and accepted abstract, but due to confidentiality concerns I could not make the material available in time for HR2013 publication deadlines.  I love that you “got” my comment “the best consultants and SAP representatives will help each customer define”…..

      This, in itself, defines one of the major challenges each company will have as they embark on a cloud, on-premise or hybrid solution.  And it supports my belief that IT professionals ARE, in fact, needed in a cloud model like SuccessFactors.  In fact, what is needed is a rapid ramp-up in education by IT professionals within each organization so they can guide these decisions as thought leaders. 

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  4. Former Member

    Hello Sherry, and Happy New Year! I hope your holidays are being restful and relaxing.

    It is great reading you, and I loved your personal voice. It is so fitting the HR subject.

    Many great points made, and a great discussion ensued your post.

    The debate on HR Needs vs. IT Wants is as old as IT. It has been an open item for years – who owns the budget, who takes the decision, who provides the priorities? and what are the priorities based on? It sounds like we are back to square one, with our classing “it depends”.. If HR Needs must be the motive, the engine that churns, IT can bring in the perspective to support the right decision… and we are back in a situation where 2 service functions need to walk hand in hand. That means relying on a few individuals, with experience and understanding in both areas – growing these precious individuals so that they are ready for the technology changes, grabbing the relevant, acting as an internal consultant, being best placed to know what the organization truly needs.

    The other point that resonate with me is the decision making. Perhaps we should make t-shirts printed with “it depends”… if it is true that only a few consultants truly understand both world of On Prem and Cloud today, that number is growing. It has always been mission critical to find the right employees/consultants to support decision-making, and that is not different today. Working at stretching the understanding of both worlds (including the gray areas in the middle) is what makes us all credible and reliable in the long run. It is a learning path for all of us – customers, vendors, consultants.

    We are geeks because we love learning; my guess is that 2013 will be a fulfilling year, full of teachings, learning and thinking.

    I for one, can’t think of anything better.

    Wishing all a successful New Year 2013!

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