Manage Subsidiaries More Simply and Effectively Implementing … Bydesign/documents/2-tier...

SAP Business ByDesign

Manage Subsidiaries More Simply and EffectivelyImplementing a Two-Tier ERP Strategy with SAP® Business ByDesign®

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2 / 9 © 2015 SAP SE or an SAP affiliate company. All rights reserved.

Table of Contents

3 Typical Business Goals for a Top-Performing Subsidiary Network

7 The Two-Tier ERP Strategy

8 Using the Two-Tier ERP Strategy

13 ReducingComplexityRequiresSimplifiedProcesses

3 / 13© 2015 SAP SE or an SAP affiliate company. All rights reserved.

management, organizations must put strategic goals in place. The following goals are among the most common.

EFFECTIVELY MANAGE BOTH SUBSIDIARY AND CORPORATE PRIORITIES

The top priorities for subsidiaries include responding quickly to changing business conditions, speeding innovation, and delivering products and services that are tailored to local requirements. Subsidiaries must be dynamic, nimble, and highly sensitive to the needs of their customers. Their ability to preserve the dynamics of a small company, while leveraging the strength of a large organization behind them, can be a key competitive advantage.

As more of their growth and profitability come from subsidiaries, many enterprises seek to manage their subsidiaries more effectively – with the same level of control as for the larger corporate organizations. This control can often be achieved with a two-tier strategy that combines a corporate backbone enterprise resource planning (ERP) solution with a second ERP solution tailored to meet the needs of subsidiaries.

Top-performing organizations manage their subsidiaries as a cohesive network, not as a collection of individual companies. To achieve optimal efficiency and cost-effective

Typical Business Goals for a Top-Performing Subsidiary Network

Continued


Top-performing organizations manage their subsidiaries as a cohesive network, not as a collection of individual companies.

To maximize this advantage, the supporting corporation must provide the tools its subsidiaries need to succeed. It must also maintain appropriate business and financial controls across the subsidiary network and manage a constant flow of information to, from, and among its subsidiaries. And it must minimize the effort and expense required to add, divest, and manage these subsidiaries.

MINIMIZE THE COMPLEXITY OF MANAGING NUMEROUS APPLICATIONS

Most companies have built their subsidiary network through acquisitions, joint ventures, and internal startups. Each new addition brings an IT and application landscape

that can be difficult and expensive to manage and maintain. Over time, there can be hundreds of applications to support, hundreds of yearly upgrades to manage, and hundreds of vendor contracts and relationships to maintain – leading to higher IT costs that eventually become unsustainable.

ESTABLISH CONSISTENCY AND CONTROL ACROSS SUBSIDIARIES

The applications that subsidiaries use to manage their financial and business processes, governance, and compliance can be very simple solutions, such as Microsoft Office applications or Intuit business and

Continued


Their ability to preserve the dynamics of a small company, while leveraging the strength of a large organization behind them, can be a key competitive advantage.

financial software. Or subsidiaries may have homegrown business software or an outdated ERP solution. This wide range of applications often means that each subsidiary has established its own set of business processes, stan-dards, and governance.

The result can be a subsidiary environment that is difficult to manage. It may be challenging to implement service-level agreements and ensure that appropriate financial controls are in place and operational. The parent corporation must drive the establishment of standardized financial processes, controls, and governance. The corporation must also help its subsidiaries operate consistently by establishing best practices and simplifying operations across the subsidiary network.

ENSURE VISIBILITY AND INSIGHT INTO SUBSIDIARY PERFORMANCE

To manage a subsidiary network more effectively, the parent corporation requires timely insight into subsidiary activities across the globe. This applies equally to financial analytics, operational analytics, and the related key performance indicators. It requires subsidiary applications with strong analytics capabilities and ready interfaces between the analytics applications of the parent corporation and those of its subsidiaries.

Continued


LEVERAGE CORPORATE SERVICES, CAPABILITIES, AND IT INVESTMENTS

Many companies have made significant investments of time and money in implementing ERP software and establishing business processes for services that range from human resources and payroll to procurement. In addition, manufacturing companies have invested heavily in manufacturing infrastructures and supply chain expertise. Parent corporations can drive com-petitive advantage and improve economies of scale by making these resources available to their subsidiaries. Effective integration between a parent organization and its subsidiaries can help to standardize processes and make it possible for the subsidiaries to use corporate resources more completely.

SUPPORT THE NEEDS OF SUBSIDIARIES WITH LIMITED IT RESOURCES

Most subsidiary organizations have a limited IT staff. While many companies consider implementing SAP® Business Suite applications at these smaller subsidiaries, the resources required for this, the time it will take, and the support services required after implementation can outweigh the benefit that these smaller subsidiaries would receive. An alternative to this traditional approach is needed.

To manageasubsidiarynetworkmoreeffectively, the parent corporation requires timely insight into subsidiary activities across the globe, including financial and operational analytics, and the related key performance indicators.


The Two-Tier ERP Strategy

Parent companies can more readily achieve these strategic goals with a two-tier ERP strategy. This strategy involves the use of two business-suite solutions. One solution serves as a backbone for global needs. A second supports the needs of subsidiaries.

Historically, many SAP corporate customers have worked to utilize the strengths of SAP Business Suite across their entire organization. They frequently find, however, that the IT environment and business processes of smaller subsidiaries may not be a good match for these applications.

SAP Business Suite is extremely flexible, has very deep functionality across all applications, and uses best practices based on the experience of thousands of SAP customers

representing more than 25 industries. The software can be customized to fit the requirements of each customer, and its integration with third-party applications is extensive. SAP Business Suite is a very good fit for corporations that have a relatively stable business environment, require deep industry functionality, need an application that can match established business processes, and have a sizable and knowledgeable IT staff to implement and maintain the software.

Many subsidiaries don’t need the full customization, industry-specific functionality, or integration capabilities of SAP Business Suite, however. They need a solution created specifically for their needs – a solution that is highly flexible, quick to implement, simple to use, and easy to maintain.


Using the Two-Tier ERP Strategy

A successful, two-tier ERP strategy will provide subsidiaries with the tools they need to succeed while giving the parent company the control and insight it requires to manage the subsidiary network more effectively.

In addition to ensuring that their subsidiaries flourish, corporate organizations must reduce IT cost and complexity and improve business control and governance across the subsidiary network. They must standardize and simplify financial and business operations, integrate new acquisitions into the corporate environment quickly, and gain better insight over the entire subsidiary network. They want a way to implement corporate-approved,

best-practice processes across all their subsidiaries. And they want to make use of capabilities and services from their operations (often referred to as “hubs”) out to their subsidiaries (usually referred to as “spokes”).

The SAP Business ByDesign® solution is a perfect fit for subsidiaries – and for their parent company. It is a complete solution that integrates and supports the core business functions of subsidiaries. It offers full mobile capabilities, embedded analytics, and a cloud-based delivery model that minimizes the need for local IT resources and hardware investments. Easy to learn and simple to use, it can readily adapt to a subsidiary’s rapidly changing business needs.

Continued


SAP Business ByDesign also does an excellent job supporting the needs of the parent company by:

• Reducing IT costs and complexity • Simplifying and standardizing key financial and business tasks

• Providing better insight across the subsidiary network • Using corporate resources for subsidiaries • Bringing new acquisitions on board quickly

REDUCE IT COSTS AND COMPLEXITY

Large corporations have hundreds of applications to manage, upgrade, and support – as well as hundreds of vendors to deal with and hundreds of interfaces to

keep current. The only answer to such complexity is standardization. Because SAP Business ByDesign is delivered in a cloud-based model, all subsidiaries can use the same application – regardless of their primary business function, such as sales, service delivery, distribution, or manufacturing.

The functionality that is required at each subsidiary will differ based on the subsidiary’s business operations. Be-cause SAP Business ByDesign is offered in the cloud, a subsidiary can choose to pay for and implement only the functionality it needs. The result is a simplified software landscape, lower IT maintenance costs, and reduced application costs at each subsidiary.

A two-tier ERP strategy involves two business-suite solutions – one that serves as a backbone for global needs and a second to support the needs of subsidiaries.

Continued


SIMPLIFY AND STANDARDIZE KEY FINANCIAL AND BUSINESS TASKS

For the finance team, SAP Business ByDesign integrates with SAP Business Suite applications to simplify the financial consolidation process. For the operations team, the standardization provided by SAP Business ByDesign is critical. If all subsidiaries use the same application, regardless of their business function, then a set of corporate-approved processes can be quickly rolled out to all organizations. The result is improved control and governance with reduced complexity across the entire subsidiary network and global cost reduction.

Additionally, because SAP Business ByDesign is based on best practices fine-tuned by SAP over 40 years, all

organizations (both the parent corporation and its subsidiaries) evolve to the same business processes and the same business language. This can provide additional simplification and cost reduction.

EXPERIENCE BETTER INSIGHT OVER THE SUBSIDIARY NETWORK

Thanks to sophisticated analytics embedded in SAP Business ByDesign, subsidiaries can get better insight into their individual operations and make better business decisions. Ready integration between SAP Business ByDesign and the SAP Business Warehouse application enables the parent company to access all the analytics used by the subsidiary. By combining the analytics from

Gain better insight into your subsidiary network, compare operations of individual subsidiaries, and identify best practices for global implementation.

Continued


all subsidiaries that run SAP Business ByDesign, corporate organizations can get better insight into their overall subsidiary network, compare the operations of different subsidiaries, identify best practices for global implemen-tation, and improve control.

EMPOWER SUBSIDIARIES WITH CORPORATE RESOURCES

SAP Business ByDesign helps subsidiaries leverage corporate resources in several ways. The parent company can deliver various services to its subsidiaries so the subsidiaries do not have to perform these functions. SAP Business ByDesign has ready interfaces for payroll and human resources. Thanks to extensive A2X and

XML interface technology in SAP Business ByDesign, customers can also build their own interfaces to provide other corporate services to their subsidiaries.

Parent companies can also implement a hub-and-spoke model, where a portion of the order-to-cash process, for example, is supported by SAP Business Suite at the corporate level and a portion by the subsidiary’s SAP Business ByDesign solution. In the most common scenario, the subsidiary runs SAP Business ByDesign for customer relationship management, finance, and service and repair at the local level. The parent company uses SAP Business Suite for production, warehousing, and supply chain processes at the regional or global level – thereby enhancing production and delivery efficiencies.

Continued

The parent corporation must help its subsidiaries operate consistently by establishing best practices and simplifying operations across the subsidiary network.


For maximum flexibility, SAP Business ByDesign provides ready integration with SAP Business Suite to facilitate either selling from the subsidiary and delivering to customers directly from the hub or selling from the subsidiary and delivering to the subsidiary’s warehouse for subsequent delivery to the customer.

BRING NEW ACQUISITIONS ON BOARD QUICKLY

When a company makes an acquisition, two activities are critical to ensure high ROI. First, to enable integration with corporate-approved processes, the acquired company must be transitioned quickly to an application platform that conforms to the standards of the parent company. SAP Business ByDesign can help to smooth this transition.

Second, the company must increase the efficiency and effectiveness of an acquisition while minimizing the IT investment. The cloud-based delivery of SAP Business ByDesign allows rapid implementation of a complete business solution that is easy to learn and use and requires minimal IT resources.

Divestitures provide a similar IT challenge. A divested company must be taken off the corporate system quickly and easily while supporting a rapid move to independence and enhancing the value to prospective buyers. Running in the cloud, SAP Business ByDesign provides a rapid move to independence without the need for capital expenditures or long carve-out projects.

Subsidiaries need a solution created specifically for their needs that is highlyflexible,quicktoimplement,simple to use, and easy to maintain.

Reducing Complexity Requires Simplified Processes

13 / 13Studio SAP | 39959enUS (15/11) © 2015 SAP SE or an SAP affiliate company. All rights reserved.

SAP Business ByDesign incorporates best practices that have been developed over 40 years by SAP, the world’s leading provider of ERP solutions. Companies receive the biggest value by following these best practices as they were designed into the solution. When subsidiaries change their business processes to map to SAP Business ByDesign, they can simplify and improve those processes.

Using SAP Business ByDesign can also simplify change management, as users learn and accept the new processes.

Experience has shown that adopting the best practices in SAP Business ByDesign can lead to the continued propagation of processes that are easier to learn, easier to follow, and easier to manage.

FIND OUT MORE

To learn more about SAP Business ByDesign, call your SAP representative or visit us at www.sap.com/businessbydesign.

To integrate corporate-approved processes, an acquired company must be transitioned quickly to an application platform that conforms to the standards of the parent company.

http://www.sap.com/businessbydesign

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