S/4HANA: What’s the impact on HR?
On February 3rd 2015, SAP held a launch event at the New York Stock Exchange to announce their next-generation replacement for R/3: SAP Business Suite 4 SAP HANA, known simply as S/4HANA for short. CEO Bill McDermott, co-founder and Chairman of the Supervisory Board Hasso Plattner, and Member of the Executive Board of SAP, Products & Innovation Bernd Leukert presented what they envisage as the future of enterprise software. You can watch a replay of the event here and watch some post-event interviews in this YouTube video:
What is S/4HANA?
To put it simply, S/4HANA is SAP’s next generation of R/3 and the SAP Business Suite. It leverages new SAP user experience technology (SAP Fiori) and in-memory processing and database technology (SAP HANA), as well as introduces a new concept of guided configuration. As such, it improves simplicity, reduces processing times, and offers greater functionality than is available in R/3. The focus of S/4HANA is on Finance and ERP (CRM, SRM, SCM, PLM, and BW), with the Finance component consisting of SAP’s recently released Simple Finance application. Further functionality currently available on SAP ERP is being built out.
- SAP’s S4/HANA master plan: The lingering questions (ZDNet)
- SAP Clarifies S/4Hana Release Dates, Licensing Terms (Information Week)
- SAP S4/HANA – the user, analyst and partner views (Diginomica)
- First Take – SAP launches S/4HANA – The good, the challenge & the concern (Holger Mueller)
- S4 HANA: It’s not R/3, and it’s not 1992 either (part I) (Joshua Greenbaum)
And let’s also not forget the S/4 HANA website.
What’s in it for HR?
Well, in the short-term there is not a whole lot of difference. Customers will use either SAP ERP HCM or SuccessFactors Employee Central for their HR processes; they can also connect with non-SAP Core HR systems. While S/4HANA can be deployed in multiple ways (private cloud, public cloud, or on-premise), SuccessFactors can still only be deployed in a public cloud.
S/4HANA will feature a simplified HR mini-master but no HR data management features so the HR data must be replicated from whatever HR system of record the customer chooses to use (for example SAP ERP HCM or SuccessFactors Employee Central). This is similar in the way in which SAP ERP HCM and SAP ERP FICO integrate now, so for most customers it’s not really a change; it just highlights that the HR data model can more easily and natively store data from Employee Central, which makes sense given that it is the next-generation core HR system from SAP.
SAP are planning productized packaged integrations between SuccessFactors Employee Central and S/4HANA in Q1 2015 to populate the mini-master, although they have no plans at this time to provide productized integrations between SAP ERP HCM and S/4HANA. However, an open SOAP inbound interface in S/4HANA allows employee and employment data to be sent to S/4HANA from any system – including SAP ERP HCM.
Since Simple Finance is part of S/4HANA, it will leverage the packaged integrations used to integrate Employee Central and S/4HANA.
So what does this mean for HR?
HR can continue to use their existing SAP Core HR software – whether SAP ERP HCM or SuccessFactors Employee Central – but will most likely need to migrate to SuccessFactors Employee Central in order to get the benefits of productized packaged integrations. Although there is no direct migration path package (e.g. process maps, field mapping, permissions mapping, etc.) available at this time, there is a Rapid-Deployment Solution (RDS) for data migration from SAP ERP to Employee Central and SAP’s Side-by-Side deployment model is aimed at enabling customers to slowly migrate HR processes to the cloud without disrupting core HR processes or discarding significant investment in SAP ERP HCM. Additionally, some partners are able to support cloud migration efforts. SAP ERP HCM customers will be able to continue to leverage their investment in core HR when they move to S/4HANA, but the thought of building integrations that might only last 2 or 3 years might be enough for some customers to consider a move.
Since SuccessFactors plans to be available leveraging Fiori designs this year, this means that from a user experience perspective S/4HANA customers can maintain a common user interface across their business applications, whether on-premise or in the cloud. This will improve and align the user experience, which will already be enhanced for users of S/4HANA by the improved processing times of the underlying SAP HANA technology.
Unfortunately HR customers will not benefit directly from the guided configuration of S/4HANA for HR processes, although some related processes – such as timesheet, project staffing, resource management, and time confirmation on projects – will be part of S/4HANA and thus leverage the guided configuration. Employee Central users can still leverage the GUI-based Metadata Framework-based configuration that is being rolled out across Employee Central’s core object model.
What the industry thinks
I reached out to several industry experts to get their thoughts on how S/4HANA may impact HR. I spoke with David Ludlow at SAP who said:
“We look forward to continuing to support customers on their migration to the cloud – at their own pace – and to provide innovative solutions for HR and Finance, leveraging the power of HANA and the benefits of cloud. Employee Central will remain within the SuccessFactors product area and will connect with S/4HANA to help ensure each functional area can innovate quickly and independently.”
I reached out to ASUG’s HR subject matter expert SherryAnne Meyer for her take on how customers might look at leveraging S/4HANA for their HR operations. She told me:
“With SAP ERP HCM, HR was able to solve the administrative challenges of having consistent data and processes available to propel business in a global economy. S/4HANA takes the best of SAPs strong capabilities to deliver globalization and localization of HR and payroll processes and marries that to a superior user experience (with Fiori) and real time analytics (with HANA). The hope is that HR can move out of the “weeds” and into the fertile ground where decisions can be made rapidly, and predictively getting HR to truly be a strategic business partner. Moreover, SAP is delivering choice for customers – on-premise, cloud or a hybrid approach, allowing HR to move along a continuum for innovation with the latest technology as they desire. This is good stuff!”
I also spoke with Jarret Pazahanick, who explained that:
“While I applaud SAP for starting to build the next generation solution to R/3 and the frankness of founder Hasso Plattner on S/4’s importance, it is obvious that this is more a marketing message than actually solution for HCM customers at this point in time. It will be important for both SAP ERP HCM and SuccessFactors customers to keep a close eye on the roadmap as well as work internally within their organization to ensure they are aligned with the other SAP teams. From SAP’s side I will be watching to see if they can deliver on their roadmap and promises in a timely manner as well as provide customer business cases to justify an additional investment required to make the move from R/3 to S/4.”
In short, there are not a host of changes for HR customers. The focus of S/4HANA is firmly on the ERP and Financials area, with added functionality for HR coming from existing HCM solutions. A simplified data model and planned packaged integrations are going to make it easier for Employee Central customers to integrate with S/4HANA, but SAP ERP HCM customers are going to have to build their own integrations or consider a migration to SuccessFactors Employee Central.
There are still some questions about the long-term impact of S/4HANA on HR that may not be revealed for some time yet, such as whether Simple Finance will be integrated – and how easily – with Employee Central or whether SAP ERP HCM customers are going to be given more migration path support to get onto Employee Central. I don’t expect answers to come immediately – since the rest of the S/4HANA suite needs to be built out – but I do expect them to be put into a long-term roadmap in the coming months.
On an ending note, I think this quote from The specified item was not found. Geoff Scott, CEO of ASUG summarizes the situation very well.
“…This is a significant announcement for SAP and continues the vendor’s progress on both the HANA and simplification fronts. The ASUG team was in New York for the launch and heard SAP’s vision first hand.
The word vision is important to use here, because at this point there are more questions than there are answers. The vision makes sense; how we all get there as SAP customers is still a little cloudy. Rest assured answers will be forthcoming quickly, and by the time we all get to ASUG Annual Conference and Sapphire Now 2015, I am sure the fog will have mostly lifted.”