Why outsource ERP?

High costs, a dwindling resource pool and the need for companies to be freed up to focus on core business are the principal driving factors for outsourcing Enterprise Resource Planning (ERP) software. This is according to Stephen Green, Technology Manager at Baan SA.

"While it is true that ERP systems form the core of a company `s business and are thus sensitive. Outsourcing is beginning to be considered to save costs through the pooling of skilled ERP consultants who are made available to the company without any additional staff costs," says Green.

"The issues that drive ERP outsourcing impact on all companies. Those particularly germane to smaller companies are the high initial setup costs for hardware and networks. Larger organisations are faced with changing technology and need the ERP outsourcer for insurance against major changes in software that affects their competitiveness," adds Green.

While the benefits of outsourcing ERP can be numerous, there are factors that could make outsourcing to go awry.

"It is critical to make sure that corporate cultures and the attitudes of the companies are similar. Different work styles, business practices and even ethics can have a profound influence on the success or failure of the business relationship," warns Green.

Once a decision to outsource had been made, there are still crucial contract-negotiation matters to be considered as the ERP implementation winds down.

"At this stage, the business has to clearly define what their requirements are from the outsourcer, both in terms of the system architectures and platforms as well as ERP applications," says Green.

ERP outsource two Other issues that need to be covered are the areas of expected service and support requirements, the questions of managing staff that are not yours-the roles and responsibilities of each party.

Questions around change control, upgrades and bug fixes as well as testing and implementation must also come to the fore.

Asked about concerns that ERP outsourcers typically offer little or no support for modifications.

"Basic modifications to the standard applications is part of the implementation process. However, after this, additional modifications can be applied as required" responds Green.

In choosing an ERP outsourcing partner, businesses must invoke some criteria. For Green the most important should be good systems integration skills for integrating to the Internet and legacy systems during and after an implementation.

"Over and above this they should have the necessary system and platform skills to provide guidance in the selection of the correct hardware, operating system, database and network systems required to meet the companies needs."

As companies of all sizes and industries installed ERP software, handing off all or part of the responsibility for implementation and maintenance is increasingly a viable option for ERP customers.

However, in any decision to outsource, business executives must ask themselves as to what type of company they intend to become and which partner is suitable to collaborate with for realising their vision.