In follow up to my first article: SAP Hybrid Cloud Proves Successful for Latin America E-Invoicing Compliance Part 1, I wanted to go into further detail on why the Hybrid Cloud model is taking over as the leading solution choice for compliance across Latin America. Therefore, I am creating a series of blogs over the next weeks:
- Part 2 provides the background and rational on why On-Premise solutions don’t work anymore to manage e-invoicing compliance in Latin America
- Part 3 will cover why traditional Managed Services, 100% Cloud, traditional e-invoicing networks or EDI Value Added Networks leave your internal team with 80% of the work. Why outsource the easy part and create a support and change management finger pointing contest?
- Part 4 will cover – the SAP Hybrid Cloud model for Latin America E-Invoicing
The Background – Latin America regulations and process standardization create the need for the Hybrid Cloud:
- The governments in these countries mandate E-Invoicing, the XML schema and the business process.
- In each country, there are no real differences between types of companies or industries. A Brazil Nota Fiscal is a Brazil Nota Fiscal and a Mexico CFDI invoice is a Mexico CFDI invoice whether you are producing beverages, cars, stereos, chemicals, gasoline or pharmaceuticals. In other words, it’s the same for everyone.
- Because it is mandated and everyone has to do it the same way, implementing, supporting and maintaining the government connections just makes sense to use a provider that is an expert in the process. Why would you want to spend your resources to be an expert in the technical deployment of e-invoicing? Most multinationals partner with a tax consultancy to keep up with the constantly changing laws – doesn’t it makes sense for the technical implementation as well?
- Finally, over the past 5 years companies have realized that a majority of the ongoing support issues and change management costs are associated with keeping the ERP system up to date. Many companies are moving to a single instance or regional instance of SAP ERP – and constant change is not something the Center of Excellence wants to see. A lot of companies only want to do SAP ERP upgrades (at least major upgrades) once or twice a year and the overwhelming majority of SAP shops run a (N-1) ERP upgrade strategy. This means they are not on the latest service packs. This poses an issue when the country changes are always released in the latest service packs. What do you do when you run 4.7b or ECC 5.0 and the new requirements are ECC 6.0 SP 14 and 15.
On-Premise – Once the only option, now companies realize that this model can be 80% more expensive to maintain then the Hybrid Cloud model.
As more organization move business processes into shared services and look to consolidate on single instances or regional instances of SAP, they are finding that the true cost of ownership of an On-Premise Latin America E-Invoicing compliance solution is extremely high.
The reasons for the out of control costs for On-Premise solutions include:
- Managing Constant Change is expensive
- In 2014, all companies in Brazil will be faced with NFe 2.0 to 3.1 upgrades which will be mandated by December 2014.
- Chile has mandated e-invoicing by Nov. 1, 2014
- Mexico and Argentina have changes that take effect in 2014
- Centralized ERP System/Global Instance
- Many companies since 2008 have been on a mission of centralizing operations onto a common ERP platform; the problem that was unforeseen is the constant change management issues from country legislation. When the local teams managed their own systems, corporate didn’t see the constant requirements, but now a Mexico change or a Brazil change disrupts the whole COE (Center of Excellence); the speed of change is not easily applied to a centralized SAP system that needs process controls to manage.
The result: constant fire drills, risks of non-compliance, risks of operational shut downs, difficult internal support models for each LATAM country, and sky-rocketing support and maintenance costs.
Stay tuned for Part 3 of the series – where we look at why a 100% cloud or EDI Value Added Network still leaves your internal teams with 80% of the problems and costs.