6.5    Project Services

Although the order-to-cash process covers the sales and distribution of material products, SAP S/4HANA Cloud also provides for sales and management for project-based services as well. To handle project-based services, SAP S/4HANA Cloud allows you to contract projects and to plan, deliver, and then bill for these projects. For project management and billing, time-management functionality is also provided. Billing options are provided for fixed price, time and materials, and periodic invoicing contracts. The application also covers both customer projects and internal projects.

In this section, we’ll divide the discussion of project services into three sections. Section 6.5.1 covers the processes of planning and controlling project tasks. Section 6.5.2 covers the process of linking a customer project to a contract, which will ultimately lead to revenue for the company. Finally, Section 6.5.3 covers time and expense management, critical for project controls and invoicing.

6.5.1    Project Management

Project management is not an end in itself, but it is required to deliver a project successfully. Effective project management ensures getting the right work done at the right time by the right people. The project management functional hierarchy contains the necessary scope items for managing both customer and internal projects and the human and material resources required for those projects. The project management functional hierarchy is as follows:

The primary scope item in this grouping is customer project management. This scope item covers all the major steps involved in planning, resourcing, tracking, and billing a customer project. Creating a customer project is extremely straightforward with the Create Customer Projects app (see Figure 6.47).

Creating Customer Project

Figure 6.47    Creating Customer Project

Master data for the customer and the company organization must be set up already in the system. From there, the project planning starts at the top down and works down; in other words, start and end dates are provided, then work packages are defined for the project, then roles assigned to the work packages, then resources assigned to the roles. As of release 1702, work packages are a two-tiered structure, with multiple work items underneath work packages (see Figure 6.48). Although additional tiers and links (or dependencies) aren’t available in this release, the two tiers still can handle effective planning for defining a project from the top down. It’s also important to note that SAP has an API for exporting project data. With the ability to export, extensive projects that require more detailed WBSs can be planned and accounted for correctly within SAP S/4HANA Cloud and then exported to a bottom-up-oriented tool for detailed planning.

The work item tier is defined by creating roles to complete the work items (see Figure 6.49). As a role is created, it’s associated with a work item and effort. In the example shown in Figure 6.49, a junior consultant is needed for four different work items under the discover work package. With master data set up for the definition of a junior consultant in the selected delivery organization, the standard costs and revenue can be determined and are provided. Multiple roles can be set up for any work item. Note also that required skills can be indicated for the roles.

Creating Work Packages

Figure 6.48    Creating Work Packages

Creating Work Items

Figure 6.49    Creating Work Items

Resourcing the roles (which is both within the customer project scope item and its own standalone scope item) is extremely simple as well. Clicking the Staff hyperlink opens a resource selection screen (see Figure 6.50) showing team members and their availability. The Search Relevance stars are determined based on availability and skill match, helping to identify the best resource to staff.

Resourcing Project Roles

Figure 6.50    Resourcing Project Roles

Once resources have been requested, the resource manager can review and confirm them for the project. At this point, the customer project is planned, estimated, staffed, and ready to roll.

With the project established and running, SAP S/4HANA Cloud provides analytic capabilities with rich and flexible graphics, using the margin and utilization analysis scope items. Both analysis scope items make use of the analysis path capabilities discussed in Section 6.4.2. Figure 6.51 provides an example of a margin analysis path. Project profitability can be viewed by project, by customer, by planned versus billed work for a project, and more. Utilization analysis looks at both billable and nonbillable utilization across similar parameters. Figure 6.51 shows one graph from an analysis path, but on the left of the screen additional graphs are provided. Note that graphs can be added or removed and presented as tables instead of graphs, and the analysis path can be saved for easier access in the future. Because billable utilization and profit margin are the lifeblood of services companies, this rich analysis capability is invaluable.

Margin Analysis Path

Figure 6.51    Margin Analysis Path

The customer projects scope item continues with steps for entering time, billing, and more. Because these steps are also addressed in distinct scope items, they’ll be addressed separately. Before we do so, however, it’s important to note that SAP S/4HANA Cloud has a separate scope item for internal projects. The general process is the same, but different applications are used, because the accounting is different and doesn’t require billing. One of the common steps across the two is service and material procurement for projects. Projects often require procurement of supporting materials, such as hardware, but the requirements (accounting and tracking for projects) are different than for procurement for products. There are three types of scenarios this scope item covers:

  1. Outsourcing of a service for a project
    In this scenario, a third party is required to perform a subset of work for a project (like subcontracting the roofing for a new house). SAP S/4HANA Cloud accounts for the service order and the supplier invoice and subsequent payment.
  2. Materials required that will be consumed by the project
    In this scenario, consumables for the project, such as office supplies or other materials required to complete a project, are requested, ordered, received, and invoiced/paid for.
  3. Materials/products from a third party necessary for the project (e.g., hardware to support on-premise system implementation)
    The materials are purchased and accounted for within the project but shipped directly to the customer.

Additional shared steps/scope items are covered in the next section and Section 6.5.1.

6.5.2    Contract-to-Cash

The contract-to-cash functional grouping contains many sections, but only four scope items (one of which is custom project management, discussed in Section 6.5.1). The grouping hierarchy is as follows:

Within this grouping, the sales order processing scope item covers everything from setting up the services contract to billing. Debit memos are used to generate customer invoices. The process then proceeds to accounts receivable.

Event-based revenue recognition often is a necessary practice for project accounting. Revenue, billed or not, may not be recognizable until certain project milestones are met. Event-based revenue recognition is available for fixed price and for time and materials and periodic service projects. An account assignment object is set up and document line items defined for the recognition event. When all assigned document line items are complete, the revenue can be recognized. The system handles reconciliation at period end.

The last scope item in contract-to-cash is intercompany processing for project services. This scope item covers the ordering and accounting for project services that are provided between affiliate companies.

6.5.3    Time and Expense Management

Of course, project management and invoicing is stymied without time and expense recording and management. Otherwise, only fixed price or periodic projects could be undertaken, and such projects couldn’t be accounted for accurately for costs and profitability. The grouping hierarchy is as follows:

The key scope item in this grouping is time recording for project-based services. SAP S/4HANA Cloud supports timesheet entry tied to project tasks via a simple, user-friendly SAP Fiori app. The exciting aspect of this functionality is that because the app is built in SAP Fiori, time can be entered from a mobile phone or any other mobile device (see Figure 6.52). Timesheet entry is a necessary evil, adored by management and abhorred by project team members. Making the process simple and mobile greatly enhances the likelihood of accurate and timely time entry.

Time Entry from Mobile Device

Figure 6.52    Time Entry from Mobile Device

Expense entry is provided through the fully mobile-enabled and cloud-based Concur Expense application. Expenses can be entered along with pictures of related receipts. A comprehensive report can be easily generated as well. This application is integrated natively with SAP S/4HANA Cloud to provide a seamless experience (for both the user and the IT department).

All in all, the project services capabilities of SAP S/4HANA Cloud have strengths in look and feel, resource management, and integration with accounting, but some current weaknesses in detailed project definition. Although these weaknesses can be worked around via integrations with more detailed project planning tools, they’ll likely be addressed quickly and continually with the regular SAP S/4HANA Cloud quarterly updates.