SAP_central_finance_build_or_buy

3rd Party Data Solutions for SAP Central Finance: Build or Buy?

The first post in this series discussed the 5 types of data integration and the impact of data sources in enabling SAP Central Finance. This post considers the build vs. buy decision required to enable 3rd party data in SAP S/4HANA Central Finance.

The allure of SAP Central Finance (or SAP S/4HANA for Central Finance Foundation, as it is formally named) for Finance organizations to completely reimagine business processes for the digital age is compelling. SAP rightly claims some significant benefits from Central Finance and the impact of pulling together all financial information as a single source of truth is strategic and powerful.

In moving forward with your Central Finance implementation, you will quickly discover that SAP does not provide source system connectors so the question of how to integrate ‘external’ source data quickly becomes a hot topic. Any company considering Central Finance has certainly done many system integration projects before, and at first glance it may seem natural to tackle this project as a typical in-house (or system integrator-led) custom development effort, but with a little consideration, you will see that is it not so simple, and that in fact, custom development is fraught with risk!

“It’s just Data Integration, how hard can it be?”

A common conclusion amongst companies that have tried to build custom connectors to non-SAP data sources is that IT IS NOT EASY! In fact, in many cases, it has proven to be non-viable. Let’s look at some of the reasons why:

Source system complexity: Most companies have multiple source systems (Oracle EBS, JD Edwards, PeopleSoft, Microsoft Dynamics, Infor, and many more). Each requires an automated connector to identify relevant journal entries, extract them, transform them into the required SAP SLT format and then load them into the SAP SLT staging area for load into Central Finance. This requires an intimate knowledge of the source system – the physical and logical way transactions are stored in the system as well as how they are managed and updated over time. Exponential complexity! But it doesn’t stop there:

  • Consider that all this may change during source ERP upgrades, requiring new connector rewrites when new releases are implemented.
  • Do you know how to apply CDC (change data capture) on each source system?
  • Do you know how summary and detailed financial postings are handled in each system? (hint: nearly every system is different!)
  • What about how tax information is treated?
  • What about something as seemingly simple as date types? (Hint: Different ERPs actually handle dates differently!)

Multiple transaction types: To the layman, a journal entry is a journal entry – right? There are a range of journal transaction types that must be supported – from sales invoices to purchase invoices, from materials transactions to transfers, depreciation to retirement and revaluation and a whole lot more. Each has its own nuances in how they are recorded and represented in each source system, and each must be correctly mapped into the required SAP format. We have found that on average, there are 23 transaction types that must be understood, developed and tested per source system. And here are a few more even less obvious issues to consider:

  • The maximum document length in SAP is 999 lines, so if you have more, you have to split the document
  • SAP holds 2 significant figures (digits past the decimal point) which can cause reconciliation errors that must be resolved
  • Entries must be validated prior to load or risk creating errors in SAP
  • Balances migration – initial balances must be migrated to set-up SAP – non-standard and non-trivial integration task
  • Tax codes often have to be standardized (max 2 characters in SAP)
  • Performance & throughput – requires specialized optimization for SAP Data Services to manage over 1 million journals/minute

Target system (SAP) evolution: SAP Central Finance is a relatively young product that is still growing and changing, so changes to the load formats are by no means unheard of. This means that connectors must change too, in order to deliver the right information in the right format. But it’s not just change that creates complexity. Here is a sampling of other issues to consider:

  • SAP Central Finance has a data extensibility framework – does your integration environment synchronize with the extended structures?
  • Voided documents and reversals requires special treatment (due to duplicated document IDs)
  • Credit documents require special treatment
  • Withholding tax requires special treatment
  • Maximum document name length of 10 often requires special handling

Specialized skills: Clearly, building all this requires specialized skills in multiple areas: integration work, source and target system knowledge, and functional interpretation of the transactions, to name a few. Most companies do not have these skills, and if they do, they already have a job, so cannot be immediately reassigned to this project. New hiring takes time, and is of course an additional cost. Even experienced system integrators struggle to assemble the broad set of functional and technical expertise required across all source ERPs, the SAP target ERP, and technologies involved.

Conclusion

Developing these integrations is not easy work, and some early companies who tried to do so, found out the hard way that the 4 to 6 month development task that they had anticipated was actually much more – a reality that not only inflated costs, but also pushed out go-live dates. This realization only reaffirmed what these companies already knew – that they didn’t really want to be in the software development business in the first place!.

Why buying is the right choice

The good news is that SAP anticipated these issues and reached out to Magnitude Software to co-innovate a solution. Magnitude has over 20 years of experience in system connectivity for financial reporting and has used that experience to develop Magnitude SourceConnect – a family of solutions designed to solve the problem of integrating non-SAP source systems and data.

Magnitude Source Connect is an off-the-shelf solution that has:

  • Pre-built Source Connection: Covers the most common ERPs, with integration via flat file also supported
  • Broad transaction support: Supports the 23 most common transaction types
  • Near real-time operation: Source system change data capture updates Central Finance in near real-time
  • Fast go-live: Most source systems can be integrated and brought on-line in 2-3 weeks
  • Built on architecture validated and supported by SAP

And perhaps most important of all, it lets you focus on implementing and using Central Finance to drive your business – not getting distracted by getting into the software development business!

Find out more about Magnitude SourceConnect: