Why SAP Managed Payroll is NOT a Good Option for Most Customers
SAP and SuccessFactors Payroll is something that is near and dear to my heart and an area where I have focused a majority of the past 19+ years as part of 35+ payroll implementations. It’s important for customers to make smart and educated decisions with how they spend their HR/Payroll budgets and I wanted to shine some light on a “new” offering that SAP announced in Las Vegas at SuccessConnect 2016 called “Managed Payroll”. Here are my thoughts on some of the most frequent questions I have gotten from 46 customer calls over the past 12 months:
What are the payroll options that SAP offers?
This picture shows the options that currently available. As you can tell there are lot of choices and with choice often comes confusion which I will try to clarify in the article below.
What is SAP SuccessFactors Managed Payroll?
This is from SuccessFactors:
“Managed Payroll will enable SAP On Premise Payroll customers to transition to the Cloud with a new subscription offering that allows them to have their SAP Payroll hosted and managed in the Cloud and move their core HR to Employee Central”
Some of the items a SAP Managed Payroll subscription will include:
· Hosting of the customer’s existing SAP On Premise Payroll
· Application Management Services/Support
· Single Support experience
· Opportunity to move from a CAPEX to an OPEX model
· On SAP “paper”
· SAP responsible for delivery
It is important to note that existing SAP Payroll customers can also use standard integration provided by the vendor with SuccessFactors Employee Central and another option for customers moving to Employee Central is consider Employee Central Payroll so moving to Managed Payroll is just one of many options available.
Does the new SAP Managed Payroll mean I will be outsourcing Payroll?
The decision to call this Managed Payroll was extremely poor and has already caused a LOT of confusion with customers. Mike Ettling, President of SAP/SuccessFactors agreed and added some clarity here by saying:
“I think the name “Managed payroll” is creating confusion as this is not a Managed payroll in the sense of what a traditional Payroll bureau provides. Managed Payroll is essentially when the service provider is “operating” or “managing” the client’s payroll. This offering is more akin to the concept of “payroll bureau” where the service provider (in this case SAP) is providing a payroll software solution which includes infrastructure and application management but the client is still “operating” and “managing” their payroll every pay period. Today we talk about “Cloud payroll” but there are still subtle differences between “Cloud payroll” and “Payroll bureau” in terms of the layer of services wrapped around each offering”
Is SAP Managed Payroll a New Offering?
For me this is a yes and no answer. Companies offering solutions based on SAP Payroll have been in existence for many years but there are some components that SAP considers to be new with the biggest being this offering is on “SAP Paper” and responsibility for “Delivery”. Jon Reed had a very good interview with Mike Ettling, President of SAP/SuccessFactors in which he outlines his thoughts on this offering:
“SAP has never taken this on before. It’s kind of the core of what ADP does. This is a totally new offering with a totally new risk profile”
Sherryanne Meyer, ASUG HR community advocate has an opinion that more aligns with my view:
“This isn’t necessarily a brand-new offering “and “This is SAP endorsing what companies were already doing for customers.”
Steve Bogner, Managing Partner at Insight Consulting said:
“Let’s clear this up, Managed Payroll is not Cloud Payroll. It’s the same old geeky, quirky, reliable payroll we all love.”
What are the differences between SAP Payroll and the “new” SAP Managed Payroll?
Here is SAP’s view of how the two offerings differ from the presentation below.
Which partners are available if customers are interested in SAP Managed Payroll?
SAP is subcontracting with NGA and Epi-Use to operate SAP Managed Payroll. SAP is taking the risk of delivery, and their plan is to let the customer choose which partner they want to subcontract to. On a side note, Accenture is in the process of getting everything in place to support this offering as well.
August 9, 2017 Update – Accenture still has not released their offering and there is no indication if they will move forward with it given the lack of demand. NGA now appears to be up for sale and Epi-Use is doing everything possible to try to convince customers this offering is good 🙂
What items should a SAP Payroll customers get answers to prior to considering SAP Managed Payroll?
Sherryanne Meyer, ASUG HR community advocate did a great job of outlining some of the question customers will want to get clarity and contractual agreement prior to considering and moving forward on Managed Payroll in this blog and they include:
For example, on implementation I’m wondering:
· What exactly does “lift and shift” involve? Is there a project team? What types of resources and how many are needed on the project team?
· How many resources internally would be needed for the transition?
· Is there a data migration tool? What is the timeline?
· Can the SAP Managed Payroll partner literally take your existing deployment and move it without rebuilding configuration and customizations?
· How much will the partner charge to conduct the initial transition of configuration, programming and data?
· Does the partner assume responsibility for changes to interfaces from payroll to banks and benefit providers?
· Does my self-service system need to be updated to point to a different server?
· What about my integration back to my finance system – who will create and manage that integration?
· How much testing would be done internally by our own resources and externally by the partner?
· What are the guarantees to my payroll processes? (in other words, do I have to lay awake the night of my first payroll run in SAP Managed Payroll?)
For the ongoing system management:
· Who applies and tests support packages, legal changes and notes? How often would changes be applied? Will this vary by country?
· How much system downtime can I expect?
· Does the partner take responsibility for fully testing the changes to my system?
· Who tests integration elements – interfaces, integration to Finance, rendering of payroll in my self-service solution?
· Who manages customer-initiated changes – i.e., to legal entity, personnel sub areas, employee sub-groups, union dues etc
· My W-2s and W-4’s are in self-service today – how will that change? If an employee changes home addresses in Employee Central, is there logic to update local taxes?
· Time is imported for payroll from multiple places — including SAP CATS and third-party providers. Do I need to change those data file imports?
· What about compliance reporting – how will that be impacted where data elements are needed from payroll?
· As I move to Employee Central, what are the implications (from a cost and timing perspective) to change integration pieces with payroll?
· Does this offering support me moving Cross Application Time Sheet (CATS)? (Jarret – Recently heard this is not fully supported)
For a few of these, the two partners have provided high level answers but for a majority they would prefer you had the conversation as part of the implementation :-). Make sure you get all these (and more) answered before you sign on the dotted line if you are considering managed payroll. Smart and informed customers make smart technology purchases and here are some of the dirty consulting secrets that Luke Marson and I shared last year.
The vendors offering Managed Payroll said it is a “lift and shift” from SAP Payroll so it must be easy right?
The words “lift and shift” are used to make it sound like a VERY easy transition and that is what the marketing and sales folks always like to do. One of the most telling signs that this is NOT going to be easy for you is that it requires 16 weeks of full time work (and consulting) to cover the “standard scope” per NGA and that is just the start as ask yourself the following:
· Are you considered “standard scope” (probably not, so get ready for change orders)
· Who will handle all the items that Sherry listed above (Normally fall to customer)
· Payroll Testing is complex and time consuming (Normally fall to customer)
· Inbound/Outbound Interfaces impacts (there are always some) (falls to customer)
There are many more, but at the end of the day, customers will want to ask themselves is the cost, effort, time required to take the existing SAP Payroll system to a hosted environment at a consulting firm worth it or is it better to consider the options I have outlined below in the “options for SAP Payroll customers considering SuccessFactors Employee Central”
Who will benefit the most from moving to SAP managed payroll?
It is my view that the partners offering this will be the real winners. There are definitely some real financial benefits including new consulting revenue, inherent lock in, production support opportunity, change orders on lift and shift that is not “standard” so I can definitely see why they are so excited :-). My view has always been to look at things from a customer perspective and from that side you would want to check off all these boxes to make it a good fit in my opinion and even then given the lift and shift costs I would be skeptical:
· SAP Payroll Customer and replacing SAP HCM with SuccessFactors Employee Central
· Plans to completely retire SAP Infrastructure, data center and support (most customer run multiple non SAP HCM/Payroll offerings)
· Complex SAP Time and Benefit functionality (be ready for some pain with the shift from SAP HCM to SuccessFactors Employee Central if you are in this scenario though) 🙂
· Small number of inbound/outbound interfaces
· Very knowledgeable internal Payroll Team (who do you think has to do all the testing on the Managed Payroll project) 🙂
Here are some additional thoughts from Sherryanne Meyer, ASUG HR community advocate, that are relevant for prospective customers looking to make a business case:
“To fully understand the cost implications, would require that we understand our actual current costs for running payroll on-premise; the costs to be eliminated by moving to SAP Managed Payroll; the subscription cost for SAP Managed Payroll – and exactly what that subscription covers – plus the one-time service fee and our own internal project costs for the lift and shift”
What are some options for SAP Payroll customers considering SuccessFactors Employee Central?
There are 3 options that I believe are a LOT more viable and strategic for SAP Payroll customers than considering Managed Payroll and they include the following:
· Continue with SAP Payroll, invest in the Payroll Control Center, and used SAP delivered integration with SuccessFactors Employee Central.
· Implement SuccessFactors Employee Central Payroll along with move to SuccessFactors Employee Central
· Wait for next generation payroll to be built by SAP as it was announced that this is an upcoming research project with this very good article by Phil Wainewright called Digital Payroll Futures. It was great to see SuccessFactors formally give the go-ahead to talk about this more publicly as heard about it under NDA at the SAP/SF analyst Summit last April. My thoughts are that SAP Payroll while a very strong and global solution is getting long in the tooth so excited to see that SAP is finally moving forward with this initiative and it will be interesting to get a sense of the roadmap so customers can do the appropriate planning.
On a side note, there are multiple customer already live and using deployment option 1 and 2. Given that the managed payroll is new, I would highly recommend even if you are considering it to wait until there are at least 4-5 referenceable customers from your chosen provider and be sure to talk to at least two of them directly. Since the “claims” are that it only will take 4 months to deploy, customers should not have to wait that long to have a reference call :-).
It’s important to note that all SAP Payroll and SuccessFactors Employee Central customers should be considering the Payroll Control Central. I have been fortunate to partner with SAP when they were building this offering, be on the ASUG influence council, as well as work on this offering for customers but resident expert is Imran Sajid who has some very good blogs and articles below.
Learn about the Payroll Control Center for SAP Payroll & SuccessFactors Employee Central Payroll (Non Technical)
Is Managed Payroll Currently available?
Yes, and was part of the price list and available in Q4, 2016.
Sept 18, 2017 Update – Interesting that there have been no announcements of any customers going live even though this is “sold” as a “lift and shift” and has been on the market for almost 12 months.
Is there other information available on SAP Managed Payroll?
All about Payroll (Podcast that includes all things SAP Payroll and Employee Central Payroll related)
Managed Payroll – SuccessConnect (17 Min Mark – My initial view when I was not as informed as I was writing the article above)
10 minutes with SAP SuccessFactors Resident Payroll Guru Mary Sidlauskas: Q&A on the Why, What, and Who of Managed Payroll (thought this was well done)
10 minutes with SAP SuccessFactors Resident Payroll Guru Mary Sidlauskas Take Two: Q&A on the Migration Process of Managed Payroll (If you think “lift and shift” will be easy for you check out this)
A Step-by-Step Guide to Payroll Migration (Check out how much work is involved for a “lift and shift” and 16 weeks appears to be best case)
I have worked with SAP Payroll since 1998 as well as been involved with multiple SuccessFactors and SuccessFactors Employee Central Payroll projects so this is a space I know very well. At the end of the day I would strongly recommend SAP Payroll customers really do a deep dive and take the time to try to build a business case for this “new” SAP “managed” payroll offering before considering it. I can only see a few specific scenarios where it will be a good strategic decision longer term for existing SAP Payroll customers. I have done several calls over the past few months, but always open to have a short call pro-bono call with any SAP Payroll customers, to help walk you through this, so you can make an informed decision.
Sept 18, 2017 – Update – I have had 46 calls with SAP Payroll customers since this offering was announced and pretty clear in my discussions with them, that once there is a deeper understanding of the pros/cons (outside of the marketing material), that it is not a very good fit for most mid sized or large existing SAP Payroll customers especially with a next generation payroll research project underway by SAP/SuccessFactors. On a side, this was announced over a year ago and last I heard that were NO live customers which is not quite what one would expect from a “lift and shift” offering 🙂