SAP Rollouts: Global Economy, Local Requirements

There are many factors that have facilitated the organization of SAP rollout projects and made them more justifiable. They include an increasingly coherent legal system in EU countries and within other international organizations, business globalization and internationalization of business standards such as the IFRS (International Financial Reporting Standards), the ease with which we now travel, and increasing command of foreign languages.

However, not everything can be unified, and rollout projects will always require that the differences between the corporate system and the solution to be implemented at a local subsidiary be distinguished. Two major types of differences (or ‘gaps’) have been identified:

• Legal gaps – country-specific legal regulations, particularly in the financial, sales and HR areas (e.g. invoice correction in Poland vs. correction note in Germany);
• Local gaps – each subsidiary may have its own business processes in place which are not included in the template (e.g. a unique production process) or other specific requirements which are not a direct result of legal regulations but are critical to the business (e.g. a special discount system for a key client).

While legal gaps must simply be reflected in the system to enable correct accounting, payments and reporting to country-specific authorities, the other type of gaps – the different business processes – are treated differently by different companies (e.g. the local business processes are reflected in the system template or the processes are unified if possible).

Added to that is a whole plethora of differences that cannot be defined but are serious enough to make the SAP rollout projects very challenging and risky. An example of this are the differences in culture between countries, even ones that are geographically close to one another. The varying work ethics, perspectives, customs and language skills must also be taken into consideration when planning a rollout.

Competencies and Experience

SNP Poland has carried out rollout projects in a few dozen countries across four continents. Our company has supported rollout projects in most European countries, as well as in the US, Indonesia, Egypt and Nigeria.

Due to being a part of the SNP Group, most of our projects have been system transfers between subsidiaries of Polish companies, that is, transfers between the headquarters abroad into Poland and vice versa. Our ‘giving’ and ‘receiving’ clients include BASF, Mercury Engineering, Hochland, Ferrero, Schneider, Antalis and Berker.

SNP Poland often acts as a partner to Polish companies responsible for system startups in its foreign subsidiaries. In some areas (mainly finance), it is good practice to make use of local specialists who are familiar with the legal system of their country. Furthermore, each project is a good opportunity to gain new experience, allowing us to carry out new projects (such as those in Romania and Bulgaria) without the need for local support.

For the past few years, SNP Poland has also acted as a partner for a few firms in their rollout projects conducted from their German headquarters to other countries, including the US, Serbia, Finland and Estonia. For a Poland-based company, cooperating with such partners as Wirthwein or Rehau is not just a testimony to our high qualifications or an ultimate test of experience, but also proof of the trust that these foreign businesses have put in us following successful cooperation on earlier projects.

Legal Gaps

One SAP area affected by the largest number of differences between varying national legal systems is finance (SAP FI).

When transferring to Poland, particular attention must be paid to the VAT. The concept of a VAT payment date is foreign to other legal systems. In Western European countries, the VAT payment date is linked to the date of the document. This issue is quite complex and SAP consultants from corporate headquarters do not even attempt to understand it – instead they leave it to the Polish specialists.

Another distinctive feature of the Polish system is ‘invoice correction’ – a document unknown to other countries where, if need be, a new invoice is issued. The role of a Polish SAP FI specialist is vital here.

It Is Not Only That Poland Has Legal Quirks

The legal and taxation systems of countries such as Russia or Belarus are far more complex, featuring distinctive types of taxes and ways of calculating them (such as the real estate tax and amortization). Contact between businesses and state authorities is highly formalized and requirements are very strict. For example, in Russia and Belarus, the law specifies what the layout of invoices, orders, reports and other required documents should look like.

In Russian accounting, there exists the so-called red-ink correction system (a system for correcting financial documents; this entry is usually made in red). The ever-changing legal regulations in Russia (registers of VAT, sales, depreciation of fixed assets, rules for reporting to authorities, etc.) pose a further challenge.

These large and small country-specific solutions make SAP projects in Russia substantially risky. This is why the SAP FI module for Russia is, for the most part, completely different from SAP FI modules for the rest of the world – it contains more extensions and additional programs to account for the legal differences. Additionally, in its standard version, it offers a large number of predefined ready-to-print documents in Adobe Forms (e.g. invoices, tax return forms, reports for authorities, etc.). However, not all documents are defined.

Maciej Gerke, Project Manager at SNP Poland: “I regard the complexity of the Russian tax system in the context of SAP implementation as very high, and the requirements imposed by various authorities and institutions may surprise everybody. The number of documents required by law is enormous, and they are very complex. The unique types of charges and taxes, and the extremely detailed requirements that regulate financial reporting, significantly complicate system configuration. This translates to a higher risk and bigger budget for SAP FI rollouts. We have similar experiences from our project in Belarus. Therefore, if planning a rollout in Russia or Belarus, one ought to seek support of an experienced partner, such as SNP”.

In addition to finances, another issue to consider in Russia is the custom identification number (GTD). It is mandatory to have this number, and a lack of it or mistakes in documentation may cause serious problems at the border, both in export and import situations.

Let us move on to the US now – its financial law and taxation system differ completely from their European counterparts. Beata Niemiec-Siwek, Project Manager at SNP Poland, says this about her experiences with Wirthwein: “The SAP FI rollout project from the German headquarters to a plant in North Carolina required the introduction of a time-dependent taxation policy and a reflection of the differences in calculating tax between the state, county and metropolitan jurisdictions. Moreover, in the US there is no VAT; instead, there is the Sales and Use Tax, calculated according to completely different rules. Having learnt these rules, the next challenge was to transfer the knowledge we had gained to the headquarters in Germany and translate it into a system configuration”.

Another example of country-specific legal solutions are the laws regulating the ‘special goods’, such as alcohol and tobacco (e.g. excise duty, special tax, etc.). These needed to be taken into account during corporate SAP rollouts for the Heineken corporation in countries like Bulgaria and Romania.

Business Processes – The Same But Different

Although legal regulations in particular countries greatly differ, they are paradoxically the easiest to implement during the rollout. Beata Niemiec-Siwek says: “The law imposes various solutions and local versions of the system give us the tools to implement them. This needs no further consideration. The effect we want to achieve is known from the start, and the financial and accounting departments can check at any time if the configuration is appropriate or not. Here, an excellent knowledge of law and business – and experience – is required. However, the priority in the basic SAP FI functionality, i.e. accounting and financial reporting, is the correctness of tax settlements”.

The situation is quite different in logistics, production and sales, where there may be many significant differences between business processes applied in subsidiaries in various countries when compared with the strategy of the headquarters (either reflecting local specificity in the system or unifying the process).

A good case in point is purchases. If this process is not centralized within the corporation, then each local branch will carry it out in a slightly different way. A similar issue lies in determining the final price for the client. This is a result of using various discounting policies for clients or suppliers, calculating the profit margin, using cash payment discounts, mark-ups, special discounts for key clients, etc.

Beata Niemiec-Siwek says: “German companies like to both grant and obtain cash payment discounts. In Poland, until recently, the unfavorable interpretation of regulations prevented a widespread practice of this discount method. When rolling out the SAP system from the German headquarters of one of our clients to Poland, we developed a solution that enabled cash discounts for payments made on time. Not only is this solution compliant with Polish law, but it was also developed as part of the SAP ECC 6.0 standard. UK companies also use country-specific discount practices. Their identification and determination as to whether they can be used in other subsidiaries is a stage in rollout concept development”.

Production processes are another business practice that may differ from plant to plant within a corporation. “Two production facilities of one of our clients produce oil. One plant is located in Poland, the other in the UK. The final product is the same, as are the production process and the formula. The only difference is the method of determining the best-before date. It is recorded in different formats and in different stages of the process. This seems like a minor detail, but we had to take it into account during process configuration”, says Beata Niemiec-Siwek.

Such examples are abundant in logistics processes. A standard element of the Go Forward rollout methodology within projects carried out by SNP is the Fit & Gap analysis. It aims to identify legal differences as well as differences in business processes between the corporate SAP template and the needs of a local subsidiary. The analysis covers all areas of the system to be implemented at the local subsidiary.

Communication is More Than Language

The most common language of communication in business and IT ventures is English (or occasionally German). It may happen that the project participants’ language skills – particularly in the client’s working groups – are insufficient.

“During the rollout in Nigeria, we met with system users at the client’s plant in Lagos. The differences in the command of English between the participants was one thing, but their accent was quite another. Nigeria has around 250 ethnic groups speaking various languages. Our Nigerian colleagues’ English was sometimes hard to understand due to the differences in pronunciation and accent. Incidentally, we had similar problems in one project with a Scottish colleague. We had to ask him to repeat a sentence on numerous occasions as his Scottish accent was very difficult for us to understand. Luckily, we have email, and besides this, business language and SAP language are universal enough to be understood in every corner of the world”, Maciej Gerke adds.

SNP’s rollout methodology quite specifically details the rules of documenting work progress. However, our day-to-day approach to this issue is quite pragmatic.

In IT projects, a large part of the communication is formalized in project documentation: the project description and rules, the concept, the test scenarios, the schedule, the risk register, the list of open subjects, the activity report, minutes from meetings… there are quite a lot of documents.

Maciej Gerke says “SNP’s rollout method quite specifically details the rules of documenting work progress. Nobody likes paperwork, but it can be useful because the projects can take a few months to complete and can involve as many as a few dozen people – human memory has its limitations. However, our day-to-day approach to this issue is quite pragmatic. We have many ready templates in place, we communicate through SharePoint and make sure that the documentation is useful and not a burden”.

SNP’s project managers agree that the level of project formalization often depends on the country in which (or from which) the rollout is carried out. Beata Niemiec-Siwek summarizes this: “The business maturity of Western European countries and the US means that more trust is given to the business partner. Oral arrangements are as important as written ones. Unforeseen difficulties that may affect the schedule, for instance, are communicated openly, which causes both parties to seek a solution. However, things are different in Eastern Europe and Russia – in those areas, all arrangements must be confirmed in writing”.

Practical-minded Americans have a different approach than Europeans to role and responsibility allocation within a project; the consultant – a system specialist – largely decides on the final shape of the solution. This high degree of trust (if the consulting company has appropriate competencies and experience) translates into a lower workload for the client’s employees.

Every country has its customs

Communication is more than language. Certain customs, practices and ways of doing business may seem so obvious that we forget that an outsider may misunderstand them or not understand them at all. Beata Niemiec-Siwek experienced this when she made an appointment with Wirthwein’s project team. “The meeting was to take all day, from the morning. For us, the Polish, this meant 9 a.m., whereas our American colleagues were ready at 7 a.m., which is when they usually begin their working day. Such misunderstandings do take place and are usually a subject of jokes”.

Maciej Gerke points to yet another aspect of communication: “In Nigeria, I was touched by the openness and enthusiasm of my client’s employees. Competencies are a key requirement, but where people are eager to work (and to understand why they are doing it), and when personal gains in the form of new competencies are noticed, work is easier and more effective. Their zeal was contagious”

A Rollout – Just a Project?

The SAP system is universally met with approval – it can be successfully launched and used in virtually every country. A great aid in rolling out corporate solutions in any country is the Globalization Knowledge Database, made available by SAP, which lists notes describing the differences in local solutions, annotations and aids.

Maciej Gerke says: “The Globalization Knowledge Database is a great aid in rollout projects – in many cases, it is a good guide for functionality configuration. However, without business knowledge, project experience and understanding of different realities, a solution cannot be tested and corrected. SNP’s experience gained in more than a hundred rollout projects is to our advantage. With or without the cooperation of a local consultant, we have the competence to transfer SAP from the headquarters in any location to virtually any country in the world”.