SAP Business ByDesign for Subsidiaries

Feature Article | April 22, 2013 by Holger Eriksdotter

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Is it worth installing SAP Business Suite software for a subsidiary with only a few employees? Definitely not, says Martin Petry, CIO of Hilti Corporation. “SAP Business Suite cannot be scaled downwards at will. It has high, quasi-fixed implementation costs, and requires intensive training for employees – so it’s not worth it for smaller companies,” he explains.

A lot of companies are in a bind when it comes to connecting small subsidiaries to their central ERP solution. Using a number of smaller systems from different manufacturers, or even homegrown ERP solutions, is not a viable alternative to this problem, because they prevent central administration and maintenance, make system modifications more difficult, and are dependent on local support.

A good alternative to SAP Business Suite

Hilti, a machine tools and fastening technology specialist, deploys SAP Business Suite at its headquarters in Lichtenstein, in all eight Hilti factories, and at 50 sales offices around the world, in a total of 28 languages – which sometimes leaves Petry feeling a little uneasy. He still thinks the SAP system is the perfect choice for large corporations, but points out that “had there been a good alternative for our smaller foreign subsidiaries back then, we would have chosen it instead.”

–      What the alternative to SAP Business Suite is

–      Where Hilti is rolling out SAP Business ByDesign

–      Why the need to localize

–      What SAP plans next

Next page: An alternative to SAP Business Suite

Hilti has since found that alternative: It will soon implement SAP Business ByDesign, SAP’s on-demand ERP system, at its “small” national sales offices. SAP Business ByDesign has been in the market since 2007, but was initially offered exclusively as an ERP/CRM all-in-one solution for small and midsized enterprises. Analysts at the time complained that SAP was slow to expand on the software as a service (SaaS) concept and did not offer enough language and country versions of the software. They suspected that SAP was only half-heartedly committed to cloud computing; after all, its rise to the top of the ERP market had been driven by the license business.

Two-tier ERP suits Hilti perfectly

It was only at the SAPPHIRE NOW customer convention in Orlando at the end of 2011 that SAP launched its cloud ERP system with a “two-tier ERP” model: In other words, for scenarios with a central ERP system and SAP Business ByDesign for national and regional subsidiaries. SAP’s recent acquisition of SuccessFactors, a cloud-based Human Capital Management provider, and SAP’s wide range of SAP Business Suite enhancements in the cloud model, are clear indications that cloud computing now plays a key role in SAP’s corporate strategy. It has already put even its youngest and favorite “child” – the SAP HANA in-memory database – into the cloud, complete with development tools.

Next page: Where Hilti is rolling out SAP Business ByDesign

Hilti went live with SAP Business ByDesign in the second half of 2012, connecting its subsidiaries in Slovenia, Croatia, Bosnia-Herzegovina, Serbia, Montenegro, and Albania with its central ERP system via cloud ERP. They primarily use the CRM, Marketing, and Sales functions of the software. Petry praises the fast installation and seamless integration of the solution with the central ERP system. The two solutions have an identical architecture in terms of structure, data formats, and exchange format IDoc, which means that conversions and interface programming are for the most part unnecessary.

Petry is also happy with the solution’s unmatched ease of use, which means less training for employees. He reckons users need up to four weeks of training for SAP Business Suite, but only a few days to get up to speed with the cloud system. Hilti plans to introduce SAP Business ByDesign in 15 more countries before the year is out, starting with Kazakhstan, Ukraine, and countries in the Gulf region.

Cloud both a blessing and a curse

The fact that SAP Business ByDesign is a cloud solution turned out to be both a blessing and a curse during the implementation. “We are glad that we no longer have to deal with the technical aspects of operation, maintenance, and upgrades,” says Martin Nemetz, the solution’s project lead at Hilti. The smaller subsidiaries abroad don’t have local IT staff, so technical support for an on-premise system would have been much more expensive and time-consuming.

Next page: Why the need to localize 

From a legal aspect, however, the project presented some contractual hurdles due to the fact that the individual countries all have different laws when it comes to data security and data protection. Major changes to the software contracts were necessary, because the system is run from the SAP data center in Germany, which is also where the data is processed. “We worked intensively with SAP in adjusting the contracts and reached an agreement on all points. We were able to ensure a legally compliant handling of data in all of the countries in which we operate,” says Petry.

Hilti’s efforts in the smaller countries in southeastern Europe were virtually groundbreaking – and not just in terms of data protection. SAP Business ByDesign, for example, is currently available in 15 country versions (including Australia, Canada, China, France, Spain, and USA), with four more versions planned for next year (including Japan, Singapore, and South Korea). Yet the smaller and less economically-significant countries in southeastern Europe are not on the list.

Localized currency and tax rates a “must”

Nevertheless, country-specific amendments were essential for all contracts, so Hilti and SAP are working on a co-innovation project to “localize” the software. At a minimum, the system has to be adapted to the applicable national currency and local tax rate, and all key forms, letters, and mailings must be in the language of the country in question. “We’d like to keep this localization as “light” as possible and run the system in English,” says Nemetz, “but that naturally depends on the individual situation and requirements on site.” What’s more, adapting the system to the country-specific financial and payroll accounting regulations requires a more intensive localization effort.

Next page: What SAP plans next

The collaboration between SAP and Hilti could result in further country versions of SAP Business ByDesign. “Whether we offer a separate country version for a country or not also depends on the demand, of course,” says SAP’s Rainer Zinow, who is responsible for the strategic management of SAP’s on-demand solutions. But seeing as the smaller countries in southeastern Europe are not exactly economic powerhouses, this demand is likely to remain fairly limited for the time being.

One thing is for sure: SAP plans to enhance SAP Business ByDesign next year with integration scenarios for subsidiaries and more ERP functions, and integrate it with the SAP HANA platform. The aim is to make cloud ERP more interesting for the upper midsize market and to attract several thousand additional users. Integrating SAP Business ByDesign with SAP HANA will boost the on-demand system’s performance enormously, far past its original 200-user capacity. SAP recently announced, for example, that the Australian state of New South Wales will go live with the biggest SAP Business ByDesign installation in the world, with 8,500 users, in January 2014.

200 to 300 users is “cut-off” size for Hilti

But that is irrelevant for Petry, who has a clearly defined target architecture: SAP Business Suite on premise at Hilti’s headquarters, plants, and “larger” subsidiaries, and SAP Business ByDesign for Hilti’s small and medium-sized subsidiaries abroad. But when do you stop using SAP Business Suite and start using the cloud software? Petry thinks 200 to 300 users seems to be the general “cut-off size” but notes that this threshold will be decided on a case-by-case basis, depending on the individual process requirements.

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