How do you justify replacing your on-premise SAP Payroll? We all know it has a limited lifetime, but no one has ever been excited about the cost of replacing payroll. Although it is strategically important (if you don’t pay people in a compliant way, bad things happen), it doesn’t lead to any strategic advantage. And since payroll departments keep getting payroll done, correctly and on time, why spend money for a new system that lets you continue to get payroll done, correctly and on time? In addition to the typical cost/benefit analysis there are other things to look at that could help make the case for an SAP Payroll system replacement.
The Burning Platform
SAP’s on-premise payroll is supported through 2040 if you eventually migrate it to an S/4HANA instance. But that will require effort to get from ECC to S/4HANA, it’s not just a simple upgrade. And then provided you don’t have anything else left on your ECC platform, you can end that license. But you will have fees for S/4HANA – will they be about the same, or not? I don’t know, it’s all so customer-specific, but that future cost is something to consider.
Maybe more important though is the longer you go, the fewer people you will have available to keep your ECC version of SAP Payroll going. This has happened before – I’ve replaced several Tesseract payrolls because customers had a hard time finding and retaining skilled mainframe resources who could maintain it. The same thing will happen for SAP’s on-premise version of payroll. And that increases your risk; reducing that risk is a benefit.
Of course you could move to a third-party maintenance firm and run the ECC on-premise payroll for a long time – but that isn’t free either.
Synergies in Implementation
If you are replacing your HR system with Employee Central, maybe it also makes sense to move your payroll to Employee Central Payroll. You can leverage change management and your consulting team to achieve some synergy or economies of scale. Maybe even negotiate a better package deal with SAP for licensing/fees.
But then, if you have several countries using the on-premise SAP Payroll, the risk of taking them all to EC Payroll, all at the same time and with a new HR system might be more risk (i.e. cost) than you are comfortable with. Maybe a phased payroll roll-out is more appropriate then.
Business Transformation
Some companies are just fed-up with running and maintaining an on-premise payroll and decide that outsourcing the whole thing is better for them. This isn’t a big money-saver, but it can be leverage for making changes. And of course, some companies are sick and tired of dealing with their payroll outsourcing provider and are ready to take it back in-house to improve customer service, cost, functionality or other things. It goes both ways.
The same argument holds true for companies that have an IT strategy that pushes as many applications as possible to the cloud. They might not be as interested in direct costs and benefits, but more so in making payroll fit an overall strategy, with cost being a secondary priority.
Or your transformation could be the result of reimplementing payroll because your current one was done 20+ years ago. The software has changed, your company has changed, and I find that many times the payroll system and practices don't change enough to keep up with that.
Business Disruption
Suppose you have 10 countries live on SAP Payroll. How long did it take to roll-out those 10 countries? It will probably take as long to migrate them to another payroll platform. So maybe you have to get started now so that when ECC goes out of maintenance you can turn off your on-premise system. If you wait too long, payroll instability and the pace of change could disrupt your business, and it's never good for the business when payroll is disrupted.
How To Proceed
In addition to your traditional cost/benefit analysis include these additional factors into the decision-making process. Tell the story of how your current on-premise SAP Payroll is becoming a burning platform and how that increases the risk of getting payroll done. Show how you can create some synergies by combining an EC Payroll implementation with your EC implementation. Or if it’s appropriate, make the case for transforming how payroll is done in your company. The story is going to be different for every company. Adding these factors into your story will make it easier for others to understand why you want to replace your on-premise SAP Payroll and help get you through the project approval process.