There is a lot of discussion around cloud versus on premise. And there are a lot of definitions for a new trend –“The Hybrid Cloud”. Some analysts will say that it is a Platform as a Service play – meaning that you can distribute processing over multiple data centers. However, my meaning in this series of blogs is more specific:
‘A solution that combines on-premise SAP extensions to manage the customization and integration requirements with a cloud based service that offers economies of scale. Now for this definition to work as a business solution, the provider needs to implement, monitor and maintain both the on-premise extension as well as the cloud service. ‘
Why the rise of Hybrid Cloud solution offerings from vendors versus purely on-premise or purely cloud offerings? Two reasons –
- Executive teams want to take advantage of economies of scale of cloud providers. Why try to be an expert on something that is virtually the same for all companies. Turning to a provider that focuses on that subject and manages that process for hundreds of companies can drastically lower the total cost of ownership.
- However, the fatal flaw with purely cloud based solutions that are deeply tied to internal SAP processes is you still have to connect the unique and highly customized internal SAP system to that cloud. This integration effort and ongoing support & maintenance of that integration can carry huge costs making the transition prohibitive.
A Hybrid Cloud solution provides a native integration within the SAP system to the cloud. It is one solution implemented, monitored and maintained by a service provider that contains some on-premise components and some cloud components. Now when I say native integration, I am not talking about a file transfer – or someone maintaining a web service interface. I am speaking of a native SAP extension that must:
- Provide the end user with a simple User Interface directly inside the SAP system. With a Hybrid Cloud model, all of the data and interactions with the cloud are done directly from within the SAP system. This means that an end user doesn’t have to check two, three or four places to do their job or resolve errors.
- Absorb the “Delta” of the internal SAP system with the Cloud requirements. Because organizations, especially those running single instances of SAP ERP, do not want to be constantly updating the SAP ERP core system, any data extraction issues, potential extended attributes (i.e. in Latin America e-invoicing you have import numbers – Mexico Pedimento and Brazil FCI that need to go on the gov’t invoice but are not part of the traditional INVOICE IDOC), unit of measure transformation, master data transformation, etc… Just because the cloud has a fixed defined XML data mapping doesn’t mean that it is easy to get your SAP system connected. Actually that is often the most difficult part of the integration.
- This SAP extension needs to be supported and maintained by the provider for this to work. Hence the term Hybrid Cloud (an end to end process that has on-premise components to simplify the user experience and absorb the unique customization or gaps of each companies SAP system while taking advantage of economies of scale of a process managed in the cloud).
So why is an SAP ERP Hybrid Cloud becoming the gold standard for Latin America E-Invoicing Compliance. I will cover this in more detail next week but the simple answer is:
- You have a constantly changing business process that is the same for every company (i.e. mandated by the government)
- The SAP ERP system is not easily integrated because of each customers unique configurations and customization
- The governments in each country are constantly changing so a solutions must address the SAP configuration issues with the cloud (i.e. you can’t just upgrade one without the other to stay in compliance)
- This is a mission critical process, so if the network is down, having the on-premise components able to automatically switch to “contingency” mode is needed to ensure you can ship your trucks or close your books. If you were to just go with a cloud provider or EDI Network provider, you would have no way to do on-premise contingency.
Because of the way Latin America mandates electronic invoicing, a purely on-premise solution provides you with no economies of scale – your teams are bearing all the costs for something that is common to all companies doing business in that country.
And purely Cloud providers leave your internal SAP teams with the headache of implementing, supporting, and changing 80% of the problem – keeping SAP up to date with constantly changing legislation.
To the rescue: SAP Hybrid Cloud solutions for Latin America E-Invoicing compliance. Eliminate the SAP configuration and maintenance issues while gaining the cost savings due to economies of scale of the cloud service. Some companies are already seeing the ongoing annual maintenance cost reduced by upwards of 80% while increasing the productivity of their internal SAP users by 25%. That is not a bad combination – cost control with end user simplicity.