For many medium-sized companies. With Cloud ERP, the sky is the limit. [shutterstock: 521010781, Triff]
More and more medium-sized businesses have or will have international offices. But variations in laws, accountancy and languages create road blocks. Cloud ERP solutions that consider country- as well as company-specific features and compliance regulations can smooth the way, even for M&A projects.
Both, large groups and medium-sized companies are going global by either exporting products or establishing subsidiaries or branch offices abroad. But international business also poses challenges. Cloud ERP can help in this case.
Companies must adjust to different laws or accountancy regulations, foreign banking systems and languages. They also are confronted with claims by tax authorities and other institutions.
The international context also challenges the IT industry, because it must integrate locations all over the world into the existing IT infrastructure at home. That is why the cloud plays an ever more important role.
Compliance in the cloud: A piece of cake
Every C-level manager knows about the advantages the cloud can provide for his or her company. Beyond processes and data, the cloud can bring a broader scope for the development of new ideas and (sales) strategies, especially when it comes to Industry 4.0 and the Internet of Things (IoT).
We agree. The opportunities of digital transformation can be fully exploited in the cloud. You can rent your technical equipment through the cloud, so it is always future-ready.
As a wholesaler, you can trade freely in the cloud as you benefit from automated sales and services. Either way, you get standardized processes throughout the company by simply connecting your subsidiaries and branch offices to your main office’s IT via the cloud.
The readiness to use cloud ERP solutions has never been higher.
Cloud ERP covers your subsidiary needs
Current ERP solutions offer nearly every necessary function for the needs of international subsidiaries. Reducing costs and lead times, quick global reporting, automated inter-company processes with the headquarters and global sourcing are a few of the attainable improvements.
You gain transparency and you can support your subsidiary and raise its efficiency continuously without waiting for software updates.
Cloud ERP solutions such as SAP Business ByDesign are optimized for companies that have branches for sales, service and assembling processes.
They control any number of subsidiaries, each with their own structures, processes and requirements.
This allows companies to use the strengths of their entire company, in other words, resources and the stability of the parent company plus the flexibility and local market knowledge of the branches.
Beside these aspects the agility and simplicity of a cloud application are more than attractive for the Generation Y and Z employees to stay or convert into a modern company.
Cloud ERP improves security and compliance
But it’s not only about minimizing efforts and costs for incorporating subsidiaries or spinning them off. Compliance is equally important.
We can also agree that it’s challenging to meet international compliance regulations, for instance if your company tries to acquire an enterprise or merge with one. But how can compliance be ensured? Principally, it’s much easier than many people think.
According to the Global Data Protection Index by Dell EM80, 80 percent of companies that want to use at least some of the most important business applications, such as CRM, ERP or archiving solutions from the public cloud, do not need to worry.
That’s because modern cloud ERP solutions support internal regulations such as quality standards, as well as external guidelines enacted by legislative bodies.
In addition to being certified, these solutions aid in collaboration with international auditing firms.
Auditors like KPMG are not just checking whether the Generally Accepted Accounting Principles (GAAP) are achieved by the cloud ERP, but also whether the segregation of duty principles are maintained.
In view of these various demands of different interest groups, it should be possible to show proof that the company conforms to them.
Cloud solutions are pre-configured to adapt to current accounting methods, applicable tax structures and the relevant employment legislation for each company. They frequently conduct automated updates to ensure that the financial records comply with the various regulatory standards.
Moreover, they prove plausibility or data input and their workflows prevent unjustified access and modifications.
For example, it’s easy to ascertain if an employee of a subsidiary is only allowed to release orders up to a certain volume. When a trip point is exceeded, the system raises an alarm. Thus, it’s clear to see when the employee acts “out of compliance” and the reason can be validated.
A major aspect of the subsidiary model rests in its startup. When a new legal entity outside a company’s headquarters country is getting set up, the startup team usually consists of just a handful of employees.
In that situation, the segregation of duties will simply be difficult to achieve because the few people have many duties that often overlap. Of course, you can release guidelines, when headquarters management needs to be involved.
Often this strategy slows business down. But the onsite team members, who are usually loyal and proven, deserve more flexibility at the beginning.
This leads us to cloud solutions where the headquarters can steer the level of authorization within the cloud ERP. As time goes on with every new employee added, your authorization rights can be divided to meet the segregation of duty.
This process will be supported by light-oriented indicators showing where you have reached compliance and where you haven’t.
Cloud ERP as M&A promoter
Staying at the international context, let’s take a look at mergers and acquisitions (M&A). If your company wants to expand and is planning to acquire a foreign enterprise, then you need to consider a variety of aspects.
You should check both the company you plan to acquire and the selling company. Were or are there any anomalies in the shareholder structure? Are there any business activities in high-risk markets? Does a working compliance structure exist?
In summary, you must minimize the compliance risk.
I must state up front: Many companies do not have a working compliance structure. Thus, these companies do not have the ability to make an individual check of potential legal implications.
Often there is not even a working ERP system that would allow companies to carry out transactions properly and be 100 percent compliant.
Now, what do you do? In this case you should use a cloud ERP solution that can quickly be installed and is ready to use immediately.
This speeds up M&A projects and keeps the potential for being out of compliance to just a few weeks, which is the time period a modern cloud ERP solution such as SAP Business ByDesign needs to be ready for service.
In the M&A situation it is crucial to stabilize compliance within the first 100 days. Furthermore, you have the possibility to synchronize IT, deal with any legal changes and establish a uniform compliance standard corporation-wide.
The whole M&A or carve-in process is quick, structured and cost-efficient. Instead of integrating acquisitions directly into the company ERP (or sales in the buyer’s system), master data can be transmitted into the cloud ERP solution.
This enables the company to split up the data history from its IT and shorten the transition period. First, there is no need to install an IT infrastructure, because the cloud ERP solution just requires a browser.
And second, the processes can be standardized and time-consuming adaptions can be reduced to a minimum.
It is nearly the same when it comes to carve-out projects. A company that wants to sell a business unit can make the “bride” really pretty in a short period of time by giving a cloud ERP solution as “dowry.”
Bye-bye, burning platform
Here’s another example we often see at all4cloud: Your company, located in Europe, has 20 foreign subsidiaries. They are all using local ERP systems, which have to be upgraded at different points of time. In the worst case, there are 20 different upgrade dates.
As the parent company, that means you must permanently make investment decisions. Every time you need to consider if it’s profitable to make an update or not.
If you don’t upgrade, it’s possible that your software won’t run well anymore. If, however, all branches are running on one cloud ERP platform, you can feel secure, always have the latest release and say bye-bye, burning platform.