Best-run businesses stay that way by aligning their workforce strategies, processes, goals, and objectives with their business strategies, processes, goals, and objectives. This is called human capital management (HCM). All of the SAP functionality for human capital management is provided as part of the SAP® ERP HR management software application. SAP ERP enables human capital management by putting HCM functionality at the core of a complete and highly integrated suite of business applications – SAP Business Suite. SAP Business Suite is a comprehensive, integrated family of business applications that helps companies, institutions, and other organizations run their businesses better. These applications can be purchased as an entire suite or individually.
Each application is based on the SAP NetWeaver® platform, which reduces total cost of ownership across the entire IT landscape and supports the evolution of SAP Business Suite to an enterprise service-oriented architecture (enterprise SOA). This approach combines industry best practices with real business integration – not only within SAP ERP (complete and integrated functionality for next-generation analytics, human capital management, financials, operations, and corporate services), but also across all business processes, including supply chain management, customer relationship management (CRM), and supplier relationship management.
Integration
Integration is one of the most important business strategies to emerge with Internet driven technology. It brings into focus the many challenges that face companies of all sizes, and it is a requirement of conducting business in today’s economy.
It is important to note the difference between “integrated” and “interfaced.” Interfaces are developed to pass data from one application to another, or to enable a user to move quickly from a function within one system to a different function in another. Interfaces are also commonly used to make systems appear integrated by developing a single user interface that sits on top of any number of applications.
The challenges of maintaining an interfaced solution are many, and the consequences of not having a real-time, fully integrated solution can be severe. Some challenges, such as separate design teams, independent product objectives, different technologies, and separate warranty programs disrupt business and are expensive.
Custom code must be written to integrate multiple systems, and new products cannot be enabled to create value until that code is written. Companies then are bound to applications that can become outdated quickly. Upgrading heavily modified software is a technically and politically difficult as well as an expensive exercise in most IT organizations. There are other considerations as well, such as multiple copies of master data files, which trigger ongoing reconciliation, and release upgrade incompatibility. These challenges create a financial burden that you can avoid with an integrated solution.
For your employees, integration means a single user interface with one logon. It means real time data, with no waiting for interfaces to run and no waiting for batch programs to update critical information overnight or over a weekend.
As a truly integrated solution, SAP ERP can save not only money, but also valuable time and resources that can be deployed for more strategic projects. SAP ERP helps you streamline and accelerate business processes while reducing the total cost of ownership.
Enterprise Integration with SAP ERP
SAP ERP is at the core of SAP Business Suite, a family of business applications that enable real-time business processes. Integration starts with SAP Business Suite, where high-level, applicationindependent settings apply across the enterprise.
The enterprise-foundation integration points for SAP Business Suite include countries, geocodes, currencies, calendars, and time zones.
Integration of Functional Areas with the Enterprise Structure
The enterprise structure within an organization or a business entity defines the specific organizational structure of your business, as shown in the figure below. This structure integrates all standard functional areas supported by SAP ERP, such as financials, human capital management, procurement and logistics execution, sales and service, and corporate services.
The enterprise structure becomes the base for integration across the enterprise, with the following key elements creating this integration:
- Financials
- Company codes and business areas
- Functional areas (sales, production, marketing, and so on)
- Controlling areas
- Personnel areas
- Personnel subareas
- Human capital management
- Organizational units
- Positions
- Jobs
- Tasks
- Employee groups
- Employee subgroups
- Procurement and logistics execution
- Sales and service
- Sales organizations
- Distribution channels
- Sales offices
- Sales groups
- Corporate services
- Service organizations (internal and external
- Real-world data (such as data from sensors and process control systems)
- Organizational units
- Objects on loan
The organizational structure as defined by a company is the foundation for all master data integration as well as HR process integration and the workflows required to complete those processes. The organizational unit is a keystone of the organizational structure and represents relationships across the enterprise.
Either it can have a one-to-one relationship with the financial structure, or the financial structure can cut across all HR structures. Elements such as jobs, positions, and cost centers can be defined within the organizational unit; all can be linked by relationships.
Ongoing compliance with the Sarbanes-Oxley Act dictates that enterprises consider centralizing processes for simplified control. Enterprises must also consider the provision of control procedures that affect jobs (for example, job descriptions, procedures and controls that must become part of performance metrics, and so on).
Master-data integration affects authorizations to view sensitive data, to create or change data such as salaries or bonus levels, and to execute sensitive reports; it also affects how workflow is executed. Time capture and evaluation must be considered, as this flows into payroll runs, an area where there could be Sarbanes-Oxley related violations as well.
HR-process integration affects and ensures compliance for processes such as the new-hire transaction, where the manager should be prompted to add the appropriate authorizations; and the termination event, which should automatically remove the person from a position, prompt the manager to recall assigned assets, and ensure that the person does not receive any unwarranted paychecks.
HR-process integration offers opportunities to increase HR value through payroll and compensation processes (determination of eligibility for benefits, for example) and benefits payment processes. Integration also enables workflow for the automatic routing of transactions, such as online salary administration by line managers, position qualification requirements, and professional certifications.
Other integration benefits enabled by the organizational structure include multidimensional reporting as well as headcount planning. The structure is the basis for skills databases, resource allocation, recruitment, authorizations, organization charts, distribution lists, and a “who’s who.”
Integration of HCM Within HCM
An HCM application is one of the few applications that directly face your entire workforce. Therefore, your HR solution must be flexible enough to reflect corporate practices, and it must integrate workforce management processes into your business processes. The SAP ERP Human Capital Management (SAP ERP HCM) solution has many strengths, but most companies choose it because of its integration. There is little need for any interfacing with this complete HCM solution.
Many different costs are associated with integration strategies, so depending on the strategy selected, the total cost of ownership will change. It is difficult to produce an overall average interface cost that fits each type of strategy. If you analyze your integration project using a basic structure of complexity, you can calculate the expected labor hours as an estimate of cost, including analysis and design, development, testing and debugging, implementation, and maintenance. SAP has collected customer data from multiple implementation projects and has used this data to create the estimates shown in the table below.
With this cost structure in mind, and depending on the specifications of your system, you would need to integrate more than 85 points, at considerable cost, to achieve the flexibility and real-time processing available in SAP ERP HCM. SAP ERP HCM provides outright savings because you don’t have to interface one of the most important business functions in your organization. The number of interfaces may vary depending on the implementation plan of your company, but the benefits are clear.
For example, if you are using a separate payroll system and a separate time management system, there are significant costs involved to integrate. Interfaces must be created from HR administration records to time management, from time management to payroll, and back to HR administration – and then to all the financial systems of the corporation to ensure legal compliance. An example of this standard payroll and time transaction includes the following activities.
All employee master data must be kept up to date and in sync between each system. This can require more than one interface for the following basic master data:
- Name
- Department
- Employee status
- Rate of pay
- Job
- Position
- Recurring payments
- Absences
- Overtime
- Benefits
- Time tickets
Time transactions must be passed to the payroll system, which requires another interface. This data includes absences and attendance.
- Transactions must then be passed from payroll back to the HR system for updating.
- Payroll results must be passed to the financial system, which may require additional interfaces (financial accounting, controlling, and travel management) for the following data:
- Bank information
- Payroll amounts
- Garnishments
- Taxes
- Third-party vendor payment amounts, including employee benefit contributions, insurance coverage payments, and investment firm payments
- Travel expenses
This basic employee time and payroll process can require more than five interfaces. The cost of maintaining systems that also include legal compliance is daunting because upgrades are necessary on an annual basis, at the very least.
What happens if you have to make a change or add a new time type? This simple, common transaction can cause weeks of delay as everyone plays catch-up in each separate system.
What happens if corrections must be made due to mistakes in payroll or time tracking? Where do you make the correction? Should it be at the source, in the payroll system, or in the financial system where the end result affects the bottom line? SAP ERP HCM solves this problem by providing you with a totally integrated, real-time application that allows you to make corrections that carry through from the source through all applications, keeping everything accurate and up-to-date from start to finish in the entire business process.
Security is an additional expense and worry. What happens to security when you interface multiple systems to support what should be a simple transaction? SAP provides extensive security functionality for all its applications. The security infrastructure contains single sign on functionality, role-based authorizations, and secure communications. SAP solutions provide comprehensive security management, including user and role administration, secure system management, application-level security, trust relationship management, and a collaborative auditing framework.
This tight integration across all applications allows you to manage the span of control without duplicating security in each separate system.
There are many other examples of integration, including the integration of benefits to employee data through HR administration to payment of benefit providers; the integration of travel administration to manager self-service applications for authorizations; and talent recruitment with the SAP E-Recruiting application to locate talent internally or externally. Training management is also totally integrated, enabling you to continue to improve the skills and competencies of your workforce without the additional cost of interfaces. These critical areas of human capital management expand the responsibility of HR to encompass the entire enterprise. Because this complex functionality is integrated, maintenance can be done once, eliminating the need for separate upgrade schedules.
Integration of SAP ERP HR management software with SAP ERP Cross-Application Tools
SAP ERP delivers cross-application tools and services that provide strategic measurement, decision support, and personalized data input to executives, managers, and employees. These tools bring value (a lower cost of ownership) because they are comprehensively integrated throughout the enterprise. This enables employees to successfully achieve business objectives. Timely information is crucial to your company’s success. The ability to access the data you need quickly and share it with key people throughout your company’s value chain has become one of the most vital necessities of your company. Without support for this capability, your ability to compete is seriously compromised.
Enterprise-wide integration offers the ability to share corporate vision through portal technology and provides access to the employee self-service and manager self-service functionality of SAP ERP. All of those benefits create an environment that is productive and less costly to achieve and maintain.
Transactional efficiency helps to lower the cost of ownership. According to the joint SAP and ASUG benchmark study mentioned previously, a typical 10,000 employee company runs more than 1 million employee-related transactions per year.
Contact SophLogic today to discuss the right SAP HR management software solution or SAP Professional Services for your business.
