By Tom Walker of Open Text
What is electronic invoicing? Just a simple search of the Internet provides several answers. What is the correct way to write the term … spell it out or abbreviate with a big E or little e? Does this relate to outbound invoices or inbound invoices? Is this just electronic data interchange (EDI)? I ask for your comments based on my observation below; when you hear e-invoice…what comes to mind?
For my comments, I will use e-invoice and assume it relates to inbound invoices and I will assume that SAP is the backend solution.
Invoices can be received electronically through several methods. EDI has been around for many years and seemed to have reached its peak. Most major trading partners were EDI-enabled. EDI also requires a specific internal skill set to maintain. The maturity of EDI provides a proven electronic methodology but somewhat relegated to large corporations. Both large companies and small to mid size receive invoices through direct loads from vendor website and upload of files sent from vendors. The direct link to vendors is common with purchasing cards while files uploads are common with utilities.
The thing all of these electronic methods have in common is the elimination of mail room activity and manual data entry. Another commonality is that all may still contain errors in the invoice meta data. Some consider fax or email attachment as electronic but both of these typically require first capture of the image and from that point they are handled the same as paper invoices.
There is a current trend to consider electronic invoice presentment and payment (EIPP) to be e-invoicing as provided by vendor networks. These networks accumulate invoices (typically those invoices still received by paper) from multiple Vendors and then submit them to the respective multiple clients…a many to many relationship. While these networks continue to be unique to specific providers, it is assumed they will eventually provide the ability to “roam” similar to cell phone networks.
Regardless of how a corporation receives e-invoices, it is how you process the header and line item meta data that creates significant additional value to e-invoicing. Moving from paper to e-invoice does not eliminate the vendor from providing incorrect meta data. It does not remove the labor required to correct invoice meta data, to route for approval or to report on the overall end to end processing. It does not provide the necessary process control or audit trails.
SAP not only provides the vendor network capabilities through their Crossgate solution, they also provide SAP Invoice Management which is designed to work with all forms of e-invoice.
So, not unlike the dog chasing the car, it is what you do with it when you catch it that makes the story most interesting.
What do you think?
Showing posts with label SAP. Show all posts
Showing posts with label SAP. Show all posts
Monday, November 29, 2010
Friday, October 8, 2010
Calculating ERP TCO
By Erik Kass
It's no secret that ERP is a major investment. ERP systems are company-wide and have long-term implications for the financial, human resources and information technology departments and various other aspects of the business as a whole - which is why careful upfront planning is so critical.
Total cost of ownership, or TCO, analysis can help business owners determine how much it will really take to make their ERP implementation projects a success.
Undertaking ERP implementation can be a risky decision, but TCO analysis is designed to help mitigate that risk by preparing a company for all the costs of ERP ownership - not just the obvious ones.
When done right, a good TCO analysis will help companies separate a good ERP investment from a bad one. However, a high TCO doesn't necessarily signal a poor investment if the corresponding returns on that investment are high enough to offset the expenses. The ratio between costs and rewards is more important than the numbers alone.
TCO begins with an estimate of all the direct and indirect costs associated with ERP implementation, including the cost of the software itself, maintenance costs, operational expenses, upgrades and eventual replacement. Naturally, this necessarily involves making some projections and assumptions about the future, so to achieve the most accurate predictions possible, TCO analysis includes several alternative scenarios.
One industry that is heavily invested in TCO analysis is the automotive and transportation industry. Owning a vehicle comes with a few obvious costs - the initial cost of purchasing the car, for example - and a whole lot of hidden costs that accrue over time. First, just driving the vehicle out of the dealership results in a significant loss of value, which means that even if a car owner sold his or her vehicle mere days after purchasing it, he or she would not be able to sell it for the same value the dealer did. Second, owning a car comes with a lot of responsibility. Car owners need to pay for maintenance and check-ups, buy new tires every few years and of course pay for gasoline. All of these factors combine to give an estimated TCO for the cost of owning a car - and that figure going to be significantly more than the car's MSRP on the lot. A similar line of thinking can be applied to determine the cost of a business to own a jet or a yacht, for example.
The same principle goes for ERP software. The cost of owning an ERP system is likely to end up being significantly more than the sticker price on the software, but companies that understand, prepare for and budget for these expenses will find that their ERP systems save them a lot more money than they cost.
The basic tenet of TCO is this: You cannot manage what you do not measure.
There are five major components of TCO analysis - acquisition, implementation, operations, maintenance and replacement. These five components represent the five life-cycle stages of an ERP system, and each one is associated with specific costs. Understanding all of these costs - in other words, planning beyond simply the initial ERP software costs - is one of the best ways that companies can prepare themselves for ERP and better their chances of becoming an ERP success story.
A graph of these expenses often resembles the Nike "swoosh" logo. There is an initial peak in costs when the software is first purchased and implemented, a dip as it begins running smoothly, and then a steady rise as the system becomes older, requires more maintenance and is eventually replaced. This is the natural cost cycle of an ERP system, and budgeting accordingly will help businesses steer clear of any unpleasant cost surprises.
A second critical part of TCO analysis is determining the direct and indirect costs and risks associated with ERP systems, and managing and controlling these costs and risks accordingly. Direct or budgeted costs include anything paid to clients, servers, peripherals and networks, along with capital, fees and labor in each area. Indirect costs are things like downtime and service to end users - costs that can be hidden and difficult to measure.
Once all these costs and risks are known, TCO analysis conducts a series of what-if scenarios to determine the best implementation strategy that will yield the lowest cost of ownership and offer the highest potential reward with the fewest risks.
Evaluating the TCO is the first step to understanding the potential return on investment, or ROI. Once a company is prepared for all the expenses of ERP - from the software to the maintenance to the upgrades - it can begin reaping the significant financial benefits without worrying about unexpected costs.
Erik Kaas is Director of Product Management for Mid Market ERP products at Sage. He is responsible for managing the product line life cycle from strategic planning to tactical activities. Erik manages a team of product managers responsible for specifying market requirements for current and future products.
It's no secret that ERP is a major investment. ERP systems are company-wide and have long-term implications for the financial, human resources and information technology departments and various other aspects of the business as a whole - which is why careful upfront planning is so critical.
Total cost of ownership, or TCO, analysis can help business owners determine how much it will really take to make their ERP implementation projects a success.
Undertaking ERP implementation can be a risky decision, but TCO analysis is designed to help mitigate that risk by preparing a company for all the costs of ERP ownership - not just the obvious ones.
When done right, a good TCO analysis will help companies separate a good ERP investment from a bad one. However, a high TCO doesn't necessarily signal a poor investment if the corresponding returns on that investment are high enough to offset the expenses. The ratio between costs and rewards is more important than the numbers alone.
TCO begins with an estimate of all the direct and indirect costs associated with ERP implementation, including the cost of the software itself, maintenance costs, operational expenses, upgrades and eventual replacement. Naturally, this necessarily involves making some projections and assumptions about the future, so to achieve the most accurate predictions possible, TCO analysis includes several alternative scenarios.
One industry that is heavily invested in TCO analysis is the automotive and transportation industry. Owning a vehicle comes with a few obvious costs - the initial cost of purchasing the car, for example - and a whole lot of hidden costs that accrue over time. First, just driving the vehicle out of the dealership results in a significant loss of value, which means that even if a car owner sold his or her vehicle mere days after purchasing it, he or she would not be able to sell it for the same value the dealer did. Second, owning a car comes with a lot of responsibility. Car owners need to pay for maintenance and check-ups, buy new tires every few years and of course pay for gasoline. All of these factors combine to give an estimated TCO for the cost of owning a car - and that figure going to be significantly more than the car's MSRP on the lot. A similar line of thinking can be applied to determine the cost of a business to own a jet or a yacht, for example.
The same principle goes for ERP software. The cost of owning an ERP system is likely to end up being significantly more than the sticker price on the software, but companies that understand, prepare for and budget for these expenses will find that their ERP systems save them a lot more money than they cost.
The basic tenet of TCO is this: You cannot manage what you do not measure.
There are five major components of TCO analysis - acquisition, implementation, operations, maintenance and replacement. These five components represent the five life-cycle stages of an ERP system, and each one is associated with specific costs. Understanding all of these costs - in other words, planning beyond simply the initial ERP software costs - is one of the best ways that companies can prepare themselves for ERP and better their chances of becoming an ERP success story.
A graph of these expenses often resembles the Nike "swoosh" logo. There is an initial peak in costs when the software is first purchased and implemented, a dip as it begins running smoothly, and then a steady rise as the system becomes older, requires more maintenance and is eventually replaced. This is the natural cost cycle of an ERP system, and budgeting accordingly will help businesses steer clear of any unpleasant cost surprises.
A second critical part of TCO analysis is determining the direct and indirect costs and risks associated with ERP systems, and managing and controlling these costs and risks accordingly. Direct or budgeted costs include anything paid to clients, servers, peripherals and networks, along with capital, fees and labor in each area. Indirect costs are things like downtime and service to end users - costs that can be hidden and difficult to measure.
Once all these costs and risks are known, TCO analysis conducts a series of what-if scenarios to determine the best implementation strategy that will yield the lowest cost of ownership and offer the highest potential reward with the fewest risks.
Evaluating the TCO is the first step to understanding the potential return on investment, or ROI. Once a company is prepared for all the expenses of ERP - from the software to the maintenance to the upgrades - it can begin reaping the significant financial benefits without worrying about unexpected costs.
Erik Kaas is Director of Product Management for Mid Market ERP products at Sage. He is responsible for managing the product line life cycle from strategic planning to tactical activities. Erik manages a team of product managers responsible for specifying market requirements for current and future products.
Monday, July 5, 2010
How to communicate without saying a word
Posted by Tom Walker, portfolio manager, SAP Accounts Payable Solution, Open Text Corporation:
How to communication without saying a word?
This can be a difficult challenge in the world of Accounts Payable when working to post invoices accurately and quickly. Just accurately and quickly alone is a major task but when you add “quietly”…is it really possible?
Think of all the people involved…Accounts Payable Professionals, Approvers, Corporate Procurement, Field Procurement, Receiving, Contract Management, Master Data Management, Tax Professionals…just to name a few. There are a number of Vendors offering solutions to address the accurate and quick...although in many cases you have to decide…do you want it accurate or quick…one or the other but not both. Yet very few address the quietly issue.
Why is this important? For invoices that are received and immediately posted without any human intervention due to issues such as problem resolution or approval, communication is not a critical factor. Yet when that 80/20 rule kicks in where 20% of your invoices result in 80% of the problems, the Accounts Payable Professional must reach out and communicate. They need to communicate with the individuals that have both the knowledge and security authorization to resolve / approve invoices as required by best practice separation of duties.
As an example, in an ERP such as SAP this communication is often started by running a report such as MRBR to find invoices blocked for payment. Without a solution that includes “quietly” as a building block, the first communication triggers a barrage of activity including but not limited to emails, phone calls, entries into spreadsheets for follow up, follow up calls, making copies of invoices and pulling contracts.
So how do you add “quietly” to the process flow? You must examine the entire process flow from how you receive the invoice, how you capture the meta data at the header and line item level, how you determine if there is a problem and then who must be involved to resolve / approve. Equally important is anticipate what that person requires to complete the task…such as…access to invoice and related document images, history of others that have worked on the process including their comments, transactional data such as purchase order, goods receipt, prior postings to purchase order and options to resolution / approval.
One excellent example of a “quite” solution is provided by SAP with their SAP Invoice Management and optional OCR.
One last thought…quiet extends to reporting also…you need to anticipate the need for information related to the invoice. While invoice payment status is certainly important you must also anticipate others will want to know trends such as invoices paid without problem and if a problem…what type of problem is most common. Yet a truly quiet process goes beyond the expected reporting…the invoice occurred because of a purchase…the purchase occurred due to a larger business process such as a building project and so on. You must anticipate that others must be able to see the invoice as part of the bigger picture.
This bigger picture is ECM. You would expect that a large ERP would anticipate this more holistic requirement and SAP has also done that by providing an ECM solution through it partnership with Open Text that takes the invoice and quietly makes it available as part of the ECM big picture. This allows you to see for example all the invoices from one vendor on one project in one virtual view or to see all the invoices related to the project regardless of vendor. No longer is it required to communicate and ask the Accounts Payable Professional to accumulate all the related information and wait for a response…it is already waiting for you to access immediate and quietly.
So…accurate…quick…quiet…yes it is possible!
How to communication without saying a word?
This can be a difficult challenge in the world of Accounts Payable when working to post invoices accurately and quickly. Just accurately and quickly alone is a major task but when you add “quietly”…is it really possible?
Think of all the people involved…Accounts Payable Professionals, Approvers, Corporate Procurement, Field Procurement, Receiving, Contract Management, Master Data Management, Tax Professionals…just to name a few. There are a number of Vendors offering solutions to address the accurate and quick...although in many cases you have to decide…do you want it accurate or quick…one or the other but not both. Yet very few address the quietly issue.
Why is this important? For invoices that are received and immediately posted without any human intervention due to issues such as problem resolution or approval, communication is not a critical factor. Yet when that 80/20 rule kicks in where 20% of your invoices result in 80% of the problems, the Accounts Payable Professional must reach out and communicate. They need to communicate with the individuals that have both the knowledge and security authorization to resolve / approve invoices as required by best practice separation of duties.
As an example, in an ERP such as SAP this communication is often started by running a report such as MRBR to find invoices blocked for payment. Without a solution that includes “quietly” as a building block, the first communication triggers a barrage of activity including but not limited to emails, phone calls, entries into spreadsheets for follow up, follow up calls, making copies of invoices and pulling contracts.
So how do you add “quietly” to the process flow? You must examine the entire process flow from how you receive the invoice, how you capture the meta data at the header and line item level, how you determine if there is a problem and then who must be involved to resolve / approve. Equally important is anticipate what that person requires to complete the task…such as…access to invoice and related document images, history of others that have worked on the process including their comments, transactional data such as purchase order, goods receipt, prior postings to purchase order and options to resolution / approval.
One excellent example of a “quite” solution is provided by SAP with their SAP Invoice Management and optional OCR.
One last thought…quiet extends to reporting also…you need to anticipate the need for information related to the invoice. While invoice payment status is certainly important you must also anticipate others will want to know trends such as invoices paid without problem and if a problem…what type of problem is most common. Yet a truly quiet process goes beyond the expected reporting…the invoice occurred because of a purchase…the purchase occurred due to a larger business process such as a building project and so on. You must anticipate that others must be able to see the invoice as part of the bigger picture.
This bigger picture is ECM. You would expect that a large ERP would anticipate this more holistic requirement and SAP has also done that by providing an ECM solution through it partnership with Open Text that takes the invoice and quietly makes it available as part of the ECM big picture. This allows you to see for example all the invoices from one vendor on one project in one virtual view or to see all the invoices related to the project regardless of vendor. No longer is it required to communicate and ask the Accounts Payable Professional to accumulate all the related information and wait for a response…it is already waiting for you to access immediate and quietly.
So…accurate…quick…quiet…yes it is possible!
Wednesday, May 19, 2010
Removing the Model T mentality from SAP hosting
Posted by Mark Brousseau
At one time or another, most people have heard Henry Ford’s famous quote about his revolutionary Model T automobile: “Any customer can have a car painted in any color so long as it is black.” Today, we look upon his inflexible, non-customer service-oriented attitude as quaint, a mindset from a bygone era that would never fly today.
But the reality is that attitude is still very prevalent. Not in our vehicles, thankfully – you can get a car or truck painted in just about any crazy color, or combination of colors you want. Instead, it’s the common mindset for IT hosting in the SAP world.
Dan Wilhelms (dwilhelms@sym-corp.com), president and CEO of Symmetry Corporation (www.sym-corp.com), explains:
By now you’ve probably seen all the articles and heard the Webinars talking about IT infrastructure as a commodity rather than a strategic advantage. They tell you how, in this day and age, managing your own infrastructure makes about as much sense as manufacturing your own electricity on a day-to-day basis, and that you’d be better off moving to a hosted model. And they tell you how IT costs to manage SAP average three percent to five percent of revenue, whereas an integrated technical managed services solution incorporating hosting reduces this figure to only one percent of revenue. All of which is true.
Unfortunately, they tend to leave out one small detail. The act of moving your infrastructure to a 20th Century-style hosting provider can be very expensive and time-consuming, especially for a mid-market organization, before it ever becomes smooth and cost-efficient.
The reason is that Henry Ford mentality. The typical 20th-Century hosting provider has a giant server farm full of equipment onto which it will move your applications. Essentially, they tell you that you can run your applications on any hardware you want – as long as it’s the hardware they already have. If you’re running on the same hardware – say your current system is IBM and so is the provider’s – that part will probably transition fairly smoothly. But if your applications are set up to run on HP servers and they’re using IBM, it’s going to take a lot of work to make the changeover. And guess who has to make the change?
The other big problem with the 20th Century model is sharing resources. Back in Ford’s day, when running water was still a rarity, families often shared bathwater (or even baths) because filling a bathtub was a time-consuming, labor-intensive task. They didn’t want to waste the effort on providing clean water for each bath.
In the traditional hosting world, the resources you’re sharing are servers. In order to operate as efficiently (and profitably) as they can, hosting providers try to fill every micron of disk space on every server with data. That means they’ll often mix data from two or more organizations to increase utilization.
It makes sense from their standpoint. But it’s not so good from yours. If a problem with some other organization’s application takes down the server you’re sharing, you are just as out of luck as they are – even though your applications are running perfectly fine. In addition, if you’re working with a government agency and have to show compliance with laws requiring separation of data, it’s going to be pretty tough to prove when your supposedly secure data is running alongside that of an organization with different (or no) compliance requirements.
There is a solution, however. Rather than settling for a “Model T” type of hosting environment, look instead for a provider using a 21st Century hosting model.
With a 21st Century hosting provider, you don’t have to make your applications fit their hardware. Instead, they will host your applications on whatever hardware you want – whether that means purchasing all new hardware of your choice as part of an upgrade, or actually packing up and shipping your current hardware to their locations. If you’re buying new hardware, a good hosting provider will even give you a choice of procuring it yourself or taking that burden off your hands – whatever method works best for you.
Moving to a hosted system dedicated specifically to your organization instead of one that is carved out of a general storage area network also solves the concerns regarding data separation. Since your hardware operates as separately as if it were in your own facility, there is no chance someone else’s application problems will affect your business. It also makes proving separation of data a very simple task.
A 21st Century hosting provider will also tend to be more specialized. In the early days, hosting meant setting up equipment and running whatever applications its customers sent its way. There was little on-staff expertise to draw from if there was a problem with, say, SAP or another complex system. In the new world of hosting, providers specialize in particular technologies and have deep expertise on staff, which allow them to do what you really want them to do – manage and maintain the system completely, including overcoming any issues immediately rather than having to call an outside specialist.
While moving to a 21st Century hosting provider makes sense for virtually any organization, it is particularly well-suited to mid-market organizations that are increasingly finding more time being spent on IT maintenance and less on actually deriving more value out of their applications. It’s a lot like those early Model Ts. Back then, if you were going to own a car, you had to know how to fix it, too.
Today, most car owners don’t know what’s under the hood and don’t want to know. They just want to get in and drive. Rather than adding IT staff (and finding themselves in the IT business instead of whatever business they’re actually in), these mid-market organizations can stay focused on the reasons they installed their applications in the first place.
When it comes to hosting, why settle for a Model T mentality? Using a 21st Century hosting provider will give you complete control over your environment and keep your data separate, all while saving you as much as 30 percent over traditional hosting. Even Henry Ford would approve of that.
What do you think?
At one time or another, most people have heard Henry Ford’s famous quote about his revolutionary Model T automobile: “Any customer can have a car painted in any color so long as it is black.” Today, we look upon his inflexible, non-customer service-oriented attitude as quaint, a mindset from a bygone era that would never fly today.
But the reality is that attitude is still very prevalent. Not in our vehicles, thankfully – you can get a car or truck painted in just about any crazy color, or combination of colors you want. Instead, it’s the common mindset for IT hosting in the SAP world.
Dan Wilhelms (dwilhelms@sym-corp.com), president and CEO of Symmetry Corporation (www.sym-corp.com), explains:
By now you’ve probably seen all the articles and heard the Webinars talking about IT infrastructure as a commodity rather than a strategic advantage. They tell you how, in this day and age, managing your own infrastructure makes about as much sense as manufacturing your own electricity on a day-to-day basis, and that you’d be better off moving to a hosted model. And they tell you how IT costs to manage SAP average three percent to five percent of revenue, whereas an integrated technical managed services solution incorporating hosting reduces this figure to only one percent of revenue. All of which is true.
Unfortunately, they tend to leave out one small detail. The act of moving your infrastructure to a 20th Century-style hosting provider can be very expensive and time-consuming, especially for a mid-market organization, before it ever becomes smooth and cost-efficient.
The reason is that Henry Ford mentality. The typical 20th-Century hosting provider has a giant server farm full of equipment onto which it will move your applications. Essentially, they tell you that you can run your applications on any hardware you want – as long as it’s the hardware they already have. If you’re running on the same hardware – say your current system is IBM and so is the provider’s – that part will probably transition fairly smoothly. But if your applications are set up to run on HP servers and they’re using IBM, it’s going to take a lot of work to make the changeover. And guess who has to make the change?
The other big problem with the 20th Century model is sharing resources. Back in Ford’s day, when running water was still a rarity, families often shared bathwater (or even baths) because filling a bathtub was a time-consuming, labor-intensive task. They didn’t want to waste the effort on providing clean water for each bath.
In the traditional hosting world, the resources you’re sharing are servers. In order to operate as efficiently (and profitably) as they can, hosting providers try to fill every micron of disk space on every server with data. That means they’ll often mix data from two or more organizations to increase utilization.
It makes sense from their standpoint. But it’s not so good from yours. If a problem with some other organization’s application takes down the server you’re sharing, you are just as out of luck as they are – even though your applications are running perfectly fine. In addition, if you’re working with a government agency and have to show compliance with laws requiring separation of data, it’s going to be pretty tough to prove when your supposedly secure data is running alongside that of an organization with different (or no) compliance requirements.
There is a solution, however. Rather than settling for a “Model T” type of hosting environment, look instead for a provider using a 21st Century hosting model.
With a 21st Century hosting provider, you don’t have to make your applications fit their hardware. Instead, they will host your applications on whatever hardware you want – whether that means purchasing all new hardware of your choice as part of an upgrade, or actually packing up and shipping your current hardware to their locations. If you’re buying new hardware, a good hosting provider will even give you a choice of procuring it yourself or taking that burden off your hands – whatever method works best for you.
Moving to a hosted system dedicated specifically to your organization instead of one that is carved out of a general storage area network also solves the concerns regarding data separation. Since your hardware operates as separately as if it were in your own facility, there is no chance someone else’s application problems will affect your business. It also makes proving separation of data a very simple task.
A 21st Century hosting provider will also tend to be more specialized. In the early days, hosting meant setting up equipment and running whatever applications its customers sent its way. There was little on-staff expertise to draw from if there was a problem with, say, SAP or another complex system. In the new world of hosting, providers specialize in particular technologies and have deep expertise on staff, which allow them to do what you really want them to do – manage and maintain the system completely, including overcoming any issues immediately rather than having to call an outside specialist.
While moving to a 21st Century hosting provider makes sense for virtually any organization, it is particularly well-suited to mid-market organizations that are increasingly finding more time being spent on IT maintenance and less on actually deriving more value out of their applications. It’s a lot like those early Model Ts. Back then, if you were going to own a car, you had to know how to fix it, too.
Today, most car owners don’t know what’s under the hood and don’t want to know. They just want to get in and drive. Rather than adding IT staff (and finding themselves in the IT business instead of whatever business they’re actually in), these mid-market organizations can stay focused on the reasons they installed their applications in the first place.
When it comes to hosting, why settle for a Model T mentality? Using a 21st Century hosting provider will give you complete control over your environment and keep your data separate, all while saving you as much as 30 percent over traditional hosting. Even Henry Ford would approve of that.
What do you think?
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