Augmenting your ERP system with cloud services has its advantages and may be more cost-effective than programming additional functionalities directly in the ERP system. This is particularly true of customs software. The cloud-based apps on the market here have an excellent track record interacting with SAP and even with solutions from other ERP providers.
Can you also benefit from embedding your ERP system into a hybrid system environment? What are the critical cost factors to keep in mind? What other criteria should you look for? Our five checklists are designed to help you make the right decision for your company.
What costs come into play when integrating cloud services?
Use the following categories to see what kind of costs you might expect:
- Implementation costs
Service costs for both internal support and external consultants.
- Hardware costs of IT infrastructure such as additional servers or switches for running the on-premise system.
- License and transaction costs
Traditional ERP systems such as SAP® typically include license fees in the purchase price. Cloud software providers offer various pricing models. Volume-based billing on top of a base fee is the typical model.
- Maintenance costs
These include both functionally driven and IT-driven updates. Functionally driven updates include the integration of data services or new features. IT-driven updates include security patches or new software versions whose purpose is to enhance performance or fix bugs.
- Operating costs
Find out what exactly your team needs. Many businesses unnecessarily invest a lot of time up front developing a functionality that a specialized provider may already offer in a standard package.
On-premise vs. hybrid: a cost comparison
Over a period of five years, PricewaterhouseCoopers analyzed the cumulative total costs (ongoing costs plus one-time costs) of selected customers to determine how the costs of an on-premise system stack up against those of a hybrid system. The following graphic illustrates that hybrid system environments proved much more cost-effective than on-premise systems.
What should I keep in mind during integration into the system environment?
Compatibility is everything in a hybrid system environment. Verify ahead of time that all the individual solutions fit together:
The following illustration shows an example of a system environment enhanced by cloud applications:
- How can the various applications be interconnected?
- Besides the on-premise ERP and cloud solutions, do the cloud solutions themselves – the customs solution and the export controls solution, for example – also work well together? Here it might be beneficial to model an entire process with applications from a single provider.
- Are the cloud-based add-ons also compatible with new or future SAP® and ERP technologies – such as SAP®S/4 HANA?
What aspects of functionality and usability do I need to keep in mind?
Not every cloud-based solution fits every company. Use the checklist below to determine whether the software is a good fit for you:
- Can you modify the process workflow and functional details to adapt the software to your individual needs?
- Can the application be deployed internationally? Are international data services available, for example? Can the interfaces be internationalized?
- Can the processes be streamlined, and is it easy to maintain the necessary master data or automatically update it through a data service?
- Are the process steps user-oriented? Do the components work together as a whole, or do you need to log in separately to individual applications?
What do I need to keep in mind when it comes to the quality of service and expertise of the provider?
Not all service is created equal. Use the checklist below to determine whether the software provider/developer is a good fit for you:
- Does the provider offer the necessary expertise and professional service from a single source? Because the best solution is not useful if you do not have access to good support and service when problems arise.
- Is the provider knowledgeable about IT and ERP applications with expertise in the areas that are important to you – such as global trade and logistics? Because technology without services to back it up will not work.
- If you plan on implementing specialized process requirements in your central ERP system: Does your provider offer the necessary maintenance and support for the solutions – for customs-related master data, for example?
How can I ensure the security and privacy of my data?
Businesses must ensure the best possible security – especially if they work with sensitive data. Before you sign a contract, clarify the following points:
- Does the cloud provider use the latest security protocols in its solutions?
- How is the data center protected against fires, floods, and other disasters? Get to know the provider, and ask to see the data center.
- Where is the data center located, who has access, and where is the data stored? Contact your own data privacy officer and ask to speak with the provider’s data privacy officer during your contract negotiations.
- Sign a data privacy contract, and agree on the terms under which data may be processed by third parties. Make sure you’re in compliance with international law, and eliminate any ambiguities before you sign.
- Obtain confirmation that the data will not leave the EU/EEA – otherwise, fines and penalties may be imposed.
- Make sure the provider is obligated to notify you promptly of any changes – if there are plans to move the data center offshore, for example.
- Monitor compliance with the contracts.