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Top 5 Reasons Why Companies are Using Brazil version 3.1 to Transition off of on-premise solutions in to Managed Service Solutions

 

In the second part of this series on using the Brazil Nota Fiscal version 3.1 changes to evaluate the strengths of cloud and managed services over on-premise solutions, I want to discuss the concept of failure points in the traditional NFe architecture.

Before I jump into the example, it is important to understand the traditional architecture that has been implemented.  This usually wasn't implemented by design, it was implemented for three specific IT realities:

  • Corporate IT desired to centralize all financial processes on a common SAP ERP platform and replace local ERP solutions for consistency and controls.
  • Because many multinationals acquired companies in Brazil to grow – there were legacy systems already in place. When the SAP transition came into play – the standard operating procedure was to integrate the existing local system. This created an integration project that was often outsourced to local consultants.
  • A common SAP maintenance strategy is known as (N-1), this means that you stay one support pack back from the latest release. And often multinationals are many service packs back because applying OSS notes to a highly customized and configured and global SAP system has its issues.

 

Combine all of that together and you get the following – three distinct silos of support and change management.  Apply Day to Day support and constant Change Management to this infrastructure and you can see why many companies are looking to Managed Service providers to completely take this problem off of their list of things to manage going forward. Why try to manage something individually that is the same across all companies – cloud and managed service providers provide expertise, lessons learned and economies of scale.

 

The Problem with On-Premise approaches – three or more failure points with the architecture that more often than not each have their own support teams. When the problem can occur in any functional area, and issue becomes a “search and rescue” mission.

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Day to Day support – Who do you to call to fix an invoice issues?

 

  • The SAP support team
  • The middleware support team or the 3rd party system integrator that built the connector
  • The local einvoicing solution support

 

If you can’t fix, shipping is delayed or worse shut down. Many companies experience shut downs for 3-7 days a year when on-premise solutions stop working due to technical issues or government changes.

 

When you consider the issues and the overall cost to support three components, you can see why companies are looking to use the Brazil NFe version 3.1 upgrade to consider managed service providers that implement, monitor and maintain all three components as a complete end-to-end solution.  When you consider that, there are three likely phone calls:

 

  • The local warehouse is calling because the DANFe is not showing up on the printer and they cannot ship
  • The local IT staff is calling the SAP COE as there is something wrong within the SAP system or the middleware and nothing is working
  • Or the data is not correct and there is something they are having difficulty reconciling during the closing of the books – the local finance team needs to ensure that what is posted in SAP and what is provided in the SPED reports is accurate.  The penalties are too large to get this step wrong.

 

With the operational and audit issues at hand, wouldn’t it be nice to pick up the phone and call one expert, rather than going on “search & rescue” missions to find and fix the problem every time there is an error. Stay tuned for Part 3 of this series where I will discuss: the issues concerning SAP customization and maintenance.

Top 5 Reasons Why Companies are Using Brazil version 3.1 to Transition off of on-premise solutions in to Managed Service Solutions: This will be a multi-part series on Brazil Nota Fiscal.

 

Brazil came out with its latest changes in July 2013 – version 3.1 of the Nota Fiscal process.  And for the local and corporate SAP teams, this is the latest (and largest) challenge for maintaining compliance with the laws and legislation for electronic invoicing in Brazil.

The question in front of IT and Finance executives now: 

 

Will you look at this latest change as an opportunity to improve your business processes and reduce your on-going support costs or will you continue to throw money and resources at on-premise solutions?

 

Now is the time to compare your internal costs to solutions that take advantage of Latin America electronic invoicing in the cloud. Now is the time to compare on-premise installations with managed service-based  and cloud solutions that can reduce your overall support costs and, more importantly, transition constant and costly projects into a fixed predictable cost.

 

We will explore each of these five reasons in detail over the coming weeks, but below are the key reasons companies are switching from on-premise solutions to SAP ERP Managed Service and cloud-based solutions.

 

  • On-Premise NFe solutions have too many failure points and monitors
    • There are multiple components to the solutions and each has the opportunity to be a failure point. When something breaks, where do you look?
  • Day to Day support needs to be real-time: Most on-premise solutions have their operations shut down for days to weeks every year because of support challenges
    • When the Nota Fiscal doesn’t print out at the warehouse or at your logistics providers, who do you call? Companies with on-premise deployments are forced to go on “search and rescue” missions while they figure out if the problem is in their ERP, the eInvoice solution, the middleware or the communications. And during this process, the truck sits at the warehouse and their customers turn to other providers to receive their supplies.  .
  • No SAP system is configured the same—on-premise solutions force your SAP COE to alter their SAP global upgrade strategies every time there is a change.
    • 80% of the costs to maintain SAP in Brazil are due to one simple fact—no SAP ERP system is configured the same. If you put 10 companies in the same industry in a room that all ran SAP—all would have major differences in their process designs and in the version they are running (some companies are still 4.7). This is the power of SAP—the ability to use industry best practices but also configure them to meet your internal needs and your customer requirements.  And many companies are moving to a single instance or at minimum regional instances of SAP ERP via consolidation projects.  Brazil support issues become global SAP support issues.
  • Change management involves too many people, different groups and different system developers
    • Did you realize you are staffing SD, MM, FICO Analysts, Business Users, Middleware Architects, Subject Matter Experts and ABAP developers just to maintain compliance? Yes, just maintenance—no business innovation—just maintenance.
  • Lack of coverage and functional capability
    • Brazil has many integration issues (Goods at the State level, Services at the city level, CTe, MDFe, eSocial, SPED reports) and by the way—in 2014, Mexico has similar e-invoicing mandates along with Argentina, Chile, et al—Latin America requires a regional solution, not a country-specific solution.


Companies that are turning away from on-premise solutions and replacing them with native SAP ERP extensions and managed services are:

    • Reducing their SAP ERP support costs in Latin America by upwards of 70-80%
    • Increasing the productivity of their line of business users by 25-40%


With the scale of the changes in Brazil, I encourage you to use the upgrade as an opportunity to re-evaluate your solution direction for e-invoicing in Brazil as well as across Latin America.

Every year, the Brazilian Tax Authority releases a number of new changes. In 2014, the changes are quite significant. Instead of once again just installing more patches and support notes for  current solutions and throwing more money at the same old problems, many multinationals are using the changes to re-evaluate their options.

 

Companies that are transitioning away from on-premise Nota Fiscal applications are reducing their annual support and maintenance costs by over 80% while increasing their end user productivity by 25%. With these types of gains to both the business and IT, looking at SAP Hybrid Cloud alternatives makes sense.  Especially when you consider that more changes are coming in 2015: eSocial SPED, MDFe, further mandates of the Destinatario process across states for invoices over 100,000 Reais.  You should not go through another maintenance “fire-drill” in Brazil before you look at your alternatives.

Below are the top 5 reasons companies are switching from on-premise solutions to SAP ERP Managed Service and Hybrid Cloud based solutions.

 

  • On-Premise NFe solutions have too many failure points and monitors when you consider there are SAP configuration requirements that hamper your SAP upgrade strategies, middleware issues that create road blocks and visibility black holes, and local boxes that are not synchronized with SAP acting as your system of record.  If you spent so much on SAP ERP, shouldn’t the ERP be the system of record and not the local box?
  • Day to Day support needs to be real-time: Most on-premise solutions have their operations shut down for days to weeks every year because of support challenges
    • When the Nota Fiscal doesn’t print out at the warehouse or at your logistics providers, who do you call? Companies with on-premise deployments are forced to go on “search and rescue” missions while they figure out if the problem is in their ERP, the eInvoice solution, the middleware or the communications. And during this process, the truck sits at the warehouse and their customers turn to other providers to receive their supplies.  .
  • No SAP system is configured the same – on-premise solutions force your SAP COE to alter their SAP global upgrade strategies every time there is a change.
    • 80% of the costs to maintain SAP in Brazil are due to one simple fact -- no SAP ERP system is configured the same. If you put 10 companies in the same industry in a room that all ran SAP – all would have major differences in their process designs and in the version they are running (some companies are still 4.7). This is the power of SAP – the ability to use industry best practices but also configure them to meet your internal needs and your customer requirements.  And many companies are moving to a single instance or at minimum regional instances of SAP ERP via consolidation projects.  Brazil support issues become global SAP support issues.
  • Change management involves too many people, different groups, different system developers
    • Did you realize you are staffing SD, MM, FICO Analysts, Business Users, Middleware Architects, Subject Matter Experts, ABAP developers just to maintain compliance? Yes, just maintenance – no business innovation – just maintenance.
  • Lack of coverage and functional capability
    • Brazil has many integration issues (Goods at the State level, Services at the city level, CTe, MDFe, eSocial, SPED reports) and by the way in 2014 Chile has similar e-invoicing mandates along with Argentina, Mexico, et al…Latin America requires a regional solution, not a country specific solution.

So as you move into the summer months and project plans are solidified, what will your organization do? Are you going to slap on another Band-Aid or are you going to take this opportunity to make strategic improvements to your Brazil infrastructure?