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SAP TechEd 2018 - PostNL pushes the cloud boundaries, API development and integration

Den Howlett Profile picture for user gonzodaddy October 25, 2018
PostNL has gone all in on the cloud. It's an expansive strategy that allows it to expand its business and serve customers in ways that are not possible in the on-premise world. Here is their story.

Pist NL SAPTechEd 2018
One of the most interesting conversations at SAP TechEd 2018 was that between myself, Dick Hirsch, and representatives from PostNL, which describes itself as a network logistics provider. PostNL is a long time SAP customer that has transitioned most of its IT to cloud environments, including the startling switch from SAP's R/3 direct to Business ByDesign for finance. To put this in a scaling context:

Each day we deliver over 1.1 million items to 200 countries. In addition to our global delivery services we operate the largest mail and parcel distribution network in the Benelux (Belgium, Netherlands, Luxembourg) region.

We take great pride in our delivery quality, which is among the very best in Europe; 97% of all mail items to Western Europe are delivered within 3 days, earning us a ‘Certificate of Excellence’.

Iddo Bakker IT and integration architect at PostNL explained what will be a familiar strategy decision in this way:

The postal market is rapidly changing. Mail volumes are going down and parcel volumes are going up and in general, the cloud is better suited for scaling and we wanted to rationalize how we use IT and using your own data center is sometimes difficult where the cloud is often better suited. We think some services arfe better performed by ocmpanies that are more IT focused than a postal company. HR processes for example don't give us a competitive advantage so we wanted to take advanateg of best practices developed by software companies like SAP but provided to us as a service.

How was this executed?

We are an SAP customer since 2003 and in 2013 we decided to go all to the cloud and get rid of about 60 SAP systems including all test and development. We closed our data centers and went Salesforce, SuccessFactors, and ByDesign. We use ByDesign for finance and operational purchasing. We wanted to modernize and improve processes and get rid of all the strange customizations we'd built over the years.

Salesforce drives much of the sales order management but with Hybris for price rating which takes CPQ data from Salesforce and then once the correct rating has been calculated, the results are sent to ByDesign for invoicing purposes. Explaining the need for rating functionality, Bakker said:

We are a network logistics company and in a network company you have all sorts of events and you want to monetize them. So for example with a parcel, we scan it and have many events at a low level with condition types - for example if it is late - and we aggregate those to present in a simple invoice. In turn, the customer can look through the Salesforce portal via APIs to see why he was charged a specific amount and the events that triggered charges.

PostNL is on what it calls the 'last mile' of implementation so that by the end of Q1 2019 the company will have removed the last remnants of R/3. Achieving the integrations between these many systems have fallen to SAP Cloud Platform and TIBCO, the latter of which is used for integration between Salesforce and the logistical processes, Hybris billing and ByDesign. The company wants to keep this landscape loosely coupled to allow flexibility in changes to marketing and services.

Talking about APIs, PostNL has two classes of API, those that are used internally for passing data between systems and those that are used for customer interactions. Internally, the company keeps these as standard as possible. It is different for external use. Nicolette Pouw, who has responsibility for API management said:

Customers using our webshop get their real-time logistics data via our in-house developed API to choose things like your delivery date or time. That's one. The other is a logistic usage API where they just need labels. They do pre-announcements so that PostNL knows which parcels are coming and at what time. We are using SAP API management which provides a standardized way of using APIs.

I was interested in discovering how the switch to ByDesign was received. According to Bakker, there was a lot of skepticism because at the time it was seen as a system for small companies,

We have many legal entities so in one sense we are a good fit for ByDesign, We had a small team that implemented it and it turned out to be cheap when you compare it with a normal ERP rollout. It really was astonishing. We don't have an issue over scaling because most of the invoicing is consolidated in Hybris billing. We also had an agreement with SAP that they make ByDesign more resilient and performant for our levels of volume.

As a side effect, taking ByDesign allowed PostNL to focus implementation budgets on things that directly add value like the complex Hybris billing rules PostNL uses to optimize revenue generation and the development of APIs for customer use. In that latter context, PostNL maintains a developer portal for customer usage which provides documentation and versioning management along with code examples so that customers can build their own integrations to their systems. Pouw said:

That's where we also learn and get feedback from our customers about API usage. We are working on this now to be an online platform for feedback. We have an initial onboarding process with sandbox API keys where customers can do some development and then when they are ready to go live we have them go through a full customer onboarding process.

How about the challenges? At first, PostNL had multiple clouds but has rationalized for the most important functional areas such as Amazon, Salesforce and SAP. Says Bakker:

When we started we were a bit naive assuming that everything would just work and that's not the case but we're learning by doing. Multi-cloud connectivity is a big challenge. We are now implementing cloud peering with KPN, the Dutch telecom operator.

Today, PostNL is using AppDynamics in POC mode for monitoring and traceability so that the company can see new service impact in real-time. That led me to wonder how this works in the real world because while development in sandboxes will tell you so much, it is only in the real world that you see how well a service performs. Pouw agrees and says that in-flight monitoring is critical for success.

While the sandbox gives you some idea we are load testing with customers and that provides very good examples of what to expect at peak times. We are using a high quality monitoring company to help us with provisioning.

As for the future, PostNL believes there will be continued API growth and continues to have discussions with SAP about high availability and service quality. Pouw says:

We are part of the process of our customers so we need to have guaranteed SLAs from our suppliers. And yes it is a challenge but we are monitoring and reporting back against the SLAs. For me, the most important part of our team is the improvement of APIs.

As we closed out our conversation I wondered how PostNL learns about the way forward since it strikes me that enterprise webscale operations of the complexity described by the company is something new. It turns out the company's CIO is asked to speak at many events since PostNL is thought of as at the cutting edge of enterprise services development. Even so, the advice Bakker offers is pragmatic:

The potential we have today is much greater than if we'd stayed as we were. You should think of the cloud as the new normal but be aware of the pitfalls like connectivity, vendor lock-in, and non-IT issues. Take your time and have some momentum to change, otherwise, it won't work. But it isn't IT alone. It has to have the business support and I'd say that's the most important thing to bear in mind.

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