Way Forward with Central services in Hybrid Cloud ERP

Welcome back to the next blog in the Hybrid Cloud ERP Deployment blog series.

Blog on Hybrid cloud is the new black introduced us to what Hybrid Cloud is and an overview of various Hybrid Cloud ERP deployments with SAP S/4HANA Cloud.

In this blog, I will take you through the Central Services, its challenges in the current environment and the benefits the business gets with Hybrid Cloud ERP with SAP S/4HANA Cloud.

Every enterprise which is going through digital transformation typically face below mentioned challenges:

1. Design of scalable business process across connected systems
2. Consolidation of business operations that are used by multiple parts of the same organization to leverage volumes
3. Organizing administrative functions with in an enterprise to optimize the available resources

Hybrid cloud deployment can help to set up Central responsibility of business functions for an enterprise to address above mentioned challenges. That also means, enterprises can think of having complete LoB spin-off running on Cloud ERP e.g. Finance or Procurement as Central services (for sure as a seperate legal entity) and rest of the business running on any ERP.

This will help the corporations with different LoB’s trying to innovate fast easy to introduce new innovations in the business without interfering with the On-Premise installation.

Finance, procurement, IT operations and HR functions are potentially best candidates to be set up as Central Services.

As shown in the above figure, the centralized approach makes the organization simpler and efficient. The organization would still need a local/regional team to support with their local/regional tasks. However, the teams would use a central system and a global process.

Let’s first talk about various central services scenarios in detail:

1. Centralized hybrid cash Central services in Finance

This scenario offers hybrid cash Central services between the Central system and Satellite system. Integration of centralized hybrid cash enables to view the central cash flow and centralized bank account management for the entire enterprise. It gives a complete holistic view of the centralized cash position and centralized BAM (Bank Account Master).

In this hybrid deployment scenario, the adoption is fast for smaller business entities in the Cloud. It helps with small and extend to full S/4HANA Cloud scope at later point in time.

2. Centralized Customer Payments central services in Finance

Centralized Customer Payments scenario of S/4HANA Cloud gives single point of access and visibility to payment processes across the enterprises and customers. Customers would be able to match invoices against payments, view their account statement, master data and make payments.

In this hybrid deployment scenario, central system and connected system can be configured in such a way that central system is responsible to manage the payment process. Customer payments app is based on SAP Cloud Platform, which is a self-service offering for customers to deploy electronic bill presentment and payment processes managed centrally.

3. HR central services

S/4HANA Cloud offers native integration to Success factors Employee Central. It provides seamless integration of employee master data. It also supports integration for the contingent workers.

Basic employee master data, such as employee name and ID, and contact details, cost centers such as workplace address, e-mail, and telephone information are replicated to S/4HANA Cloud using standard integration content.

S/4HANA Cloud also provides native integration to capture employee availability details such as work schedule, absence, employment status and then integrate to S/4HANA system.

S/4HANA Cloud allows cost center replication to Success factors employee central so that single source of information is always S/4HANA Cloud

4. Central services with Central Contract in Procurement

Central Contract Management is used to negotiate a global longer-term agreement between an organization and a supplier regarding the supply of materials or the performance of services within a certain period as per predefined terms and conditions.

Once negotiated, the central contracts are created at HQ and then distributed to the relevant systems and used for further procurement operations. Consumption at each connected systems is updated back to HQ. So, Central monitoring of contract consumption and renewal of expiring contracts is easily managed by the headquarters.

Business user responsible will creates a central contract in S/4HANA HQ system using the Manage Central Contracts application. Users can select the type of central contract from the available types of contract (i.e., quantity contract and value contract). System also enforces him to add valid values in case of mandatory requirements. After maintaining the required data and supporting general information, user can maintain the distribution entries for distributing the contract items to the connected systems. The distributed contracts can then be used as Sources of Supply in the connected systems.

During distribution, user can select Distribution type to “Percentage” or “Quantity”. If Percentage is selected as Distribution type, then user can enter Valid value “Distribution Percentage” field. However, the sum of Distribution Percentage for an item should be equal to 100 %.

Once Central Contracts are distributed successfully. Each connected system can find the contract copy in the corresponding systems. Operational procure to pay process can continue to work in connected systems.

5. Central services with Central scheduling agreements

The use of scheduling agreements can shorten processing times and reduce the amount of paperwork you are faced with. One delivery schedule can replace many discrete purchase orders or contract release orders.

In Central buyer system i.e., S/4HANA a central contract is created, which will be distributed across various connected systems. Each connected system can find the local scheduling agreement in their respective systems. Operational procure to pay process can continue to work seamlessly in connected systems.

Outline Agreement Type “Scheduling Agreement” is distributed to connected systems. Scheduling agreement with and without release information (LP and LPA) is supported to be created from the central contract. Scheduling agreement shall not be editable in the connected systems. However, Schedule lines can be manually added in the connected systems. The scheduling job ‘Schedule import of Release orders’ can be used to extract the release information for scheduling agreements as well from the connected systems to update consumption.

6. Central services with Central purchasing

Central Purchasing scenario of S/4HANA gives single point of access and visibility to Purchasing documents like Purchase Requisition and Purchase Order in the connected systems.

In this hybrid deployment scenario, central system and connected system can be configured in such a way that central system is responsible to manage purchasing documents. Operational procure to pay  activities specific to each connected system can continue to work in respective systems.

Pre-delivered job “ Import Purchase Requisitions from Connected Systems ” can be used to replicate requisitions. Similarly,  job “ Import Purchase Orders from Connected Systems” can be used to replicate purchase orders

Strategic procurement tasks (such as Supplier Management) benefit from the transparency and the ability to initiate strategic activities from a central digital procurement control center.

7. Central services with Central requisition

SAP S/4HANA offers central requisitioning capabilities where a procurement specialist can work centrally on requisitions from different connected systems.

In this hybrid scenario, central requisition trigger happens at central system. Requisition document  is always created in the connected system, but view is available at central system for managing it. Once purchase order is created in connected system, user at central system can confirm the goods/services. It is also possible to configure flexible workflow centrally to manage purchase requisitions.

8. IT Function as a Central Service

Entities within an organization have an IT team to support the business with their hardware and software requirements.

The responsibilities of the IT team can be broadly classified into 4 categories:

• IT Solution Management – Managing HR and Travel & Expense Management solution for business entity
• Finance – Financial planning and budgeting for IT, Cash Management for all the cost incurred as part of maintaining Software and Hardware solutions
• Infrastructure Management – Procurement of assets such as Laptops, Projectors etc., Asset allocation and tracking
• Customer Service – Supporting the employees with their queries and concerns around IT (can be application or infrastructure relevant)

The organization could go on a model where each business unit has their own systems and processes to handle IT or they could go for a centralized approach as shown in the figure below.

For example, S/4HANA Cloud can be used to manage all IT projects across the organization. Each business entity can create a project with their unique nomenclature. The employees within the organization is maintained in S/4HANA Cloud and this includes their availability as well. The IT Project Manager can manage the project locally using a Global system. Since S/4HANA Cloud follows the principle of one i.e. all countries can be activated on one instance. Hence, the localization-specific requirements can also be handled within one system.

In summary, central services function with SAP S/4HANA Cloud helps enterprises to optimize resources in their journey towards digital transformation.

Stay tuned for further blogs in this series… and as always, keep your feedback flowing.

For more information on SAP S/4HANA Cloud, check out the following links:

• SAP S/4HANA Cloud release info: http://www.sap.com/s4-cloudrelease
• Best practices for SAP S/4HANA Cloud here
• SAP S/4HANA Cloud User Community: register here
• Feature Scope Description here
• What’s New here
• Help Portal Product Page here

Follow us via @SAP and #S4HANA, or myself via @Prakash Karkihallimath or @shivakumar.hs