Top 5 Reasons Why Companies are Using Brazil version 3.1 to Transition off of on-premise solutions on to Hybrid Cloud and Managed Service Solutions
If you are managing Brazil compliance on-premise, did you realize you, not your provider, are staffing SD, MM, FICO Analysts, Business Users, Middleware Architects, Subject Matter Experts, ABAP developers just to maintain compliance in Brazil? Yes, just maintenance – no business innovation – just maintenance. Below are all the costs that you need to take into consideration when looking at the real cost of maintaining compliance in Brazil with an on-premise solution.
As Brazil is mandating a new schema (Brazil NFe 3.1), now is the opportunity to review your compliance strategy in Brazil. Companies that are transitioning to Hybrid Cloud providers are reducing their maintenance costs in Latin America by upwards of 80%. Below I cover many of the overlooked costs; however, if you would like a copy of the (Brazil NFe 2014 – TCO Calculator) that outlines your current cost structure as well as your upgrade costs – please feel free to reach out to me directly.
Cost always overlooked include:
- Total Implementation Costs of Annual Updates
- Research and implement the latest OSS notes from SAP – for most SAP companies they are not on the latest version, so this is not as easy as it may seem
- SAP Functional Team – Orders To Cash, Procure To Pay, Financials
- ABAP developer
- Middleware Architect
- Local user costs for testing
- Project manager
- Subject Matter Expert (Design and deploy SAP configurations based on the legislation – most companies spend weeks trying to figure out how to get their SAP system to work with government requirements and customer requirements at the same time)
- Set up costs for the local provider to test your files
- Overlooked data center costs
- Cost of the middleware (for SAP PI this is usually the cost of non-SAP integration data charge)
- Maintenance on middleware
- Hardware for middleware
- Hardware maintenance for middleware
- Minimum deployment across a three –tier SAP deployment (PROD, TEST, DEV)
- Ongoing Support costs to include
- Annual cost for compliance server
- Cost for Technical Support
- Someone has to monitor and manage the middleware issues
- Someone has to monitor and manage the SAP system – an invoice isn’t done until it is posted or acknowledged in the ERP system
- ABAP developer
- Changes based on the law 2-3 times per year, per country
- Changes based on customer requests
- Could affect SAP master data, middleware, PDF output or distribution rules
- Annual cost to upgrade the system based on government changes
- Look at a percentage of the functional analysts, middleware architect, project manager and SME (subject matter experts) for a time period each year
- Financial Operation Costs
- Cost of controllers to correct information prior to SPED reporting
- Audit risks of non-compliance (~500 Reais per incorrect XML that is not valid and archived, 75% to 150% fines based on incorrect taxes)
- Foreign Corrupt Practices issues – one High-Tech company is currently in a legal dispute over incorrect taxes with Brazil SEFAZ for almost 2.9 Billion US dollars
- Account Payable staffing cost for manual data entry and supplier invoice processing: SAP PO and Goods Receipt – as you don’t want to pay mismatched invoices – you are responsible for the wrong taxes
- Logistics – did you realize that Brazil Nota Fiscal legislation affects both your ability to ship outbound as well as receive goods at the warehouse
- Outbound – if you do not have an automatic “contingency process” – you most likely have had your operations shut down for days (who can afford this during the World Cup, let alone the Olympics).
- Inbound Receiving – leading organizations are reducing the cost of receiving trucks at their warehouse by over 40%. This is done by taking advantage of the government process to automate data entry and matching within the SAP system.
So when you are looking to find dollars in tightened IT budgets, look at the total cost of operating your SAP ERP across your Latin America divisions. On-premise once made sense, as it was the only solution option. However, On-Premise solutions do not take advantage of the economies of scale of the government standardization. Are you in the business of being an expert on Brazil Nota Fiscal?
The answer should be no.
There are providers that operate new business models – Hybrid Cloud models. They offer the economies of scale of the network, but also solve the internal SAP customization support and maintenance issues with native SAP extensions. This concept of Hybrid Cloud is key. It is the only business model that solves the end to end business problem and it’s why companies are turning away from On-Premise solutions.