Outsourcing as a practice had gained tremendous traction in the past few years. Historically most businesses have acknowledged the need to outsource the implementation of ERP systems but they do not realize that it is just as complex to manage these applications. During and after the Erp system implementation, organizations try to integrate the system in its daily activities and maintenance issues related to usability, performance measurements, infrastructure related support, up gradations arise.

Outsourcing ERP helps organizations realize the true potential of their investment in the system. There are very compelling benefits for an organization to outsource its Erp maintenance. For the business to achieve these benefits it is necessary for stakeholders to understand the following core drivers for outsourcing and identifying the right service provider.

1.Reducing downtime
2.Cost optimization
3.Resource optimization
4.Performance optimization
5.Inadequate support models

A Stitch a Time Saves Nine - Reducing Downtime

ERP applications have a direct relation to the business process and hence are mission critical in nature. When the ERP system is unavailable or under-performing productivity is impacted – employees, suppliers, and customers are all standby until it is resolved. A typical case of replacing failed equipment or lost data, or bugs in the interfaces can contribute to an increase downtime and can spring up unpleasant financial surprises.

Research studies have revealed that only 5% of mission critical applications achieve a level of availability that produces less than 9 hours of downtime per year, and that 70% of the companies desiring this level of availability will not be able to justify the cost to achieve it.

It is imperative that the ERP system is supported with the highest service levels, which brings about the need for doing a range of maintenance activities ranging from corrective to adaptive maintenance.

Outsourcing the maintenance of ERP system to service providers with predefined service levels agreements (SLA) that mandate metrics would ensure that the ERP system is managed with maximum efficiency.

LEVELLING THE MORNING AFTER…” - PERFORMANCE OPTIMIZATION

Implementing the ERP is only the first step. However the real challenge lies in the successful execution of a quality assurance plan, otherwise known as a post-implementation plan. To obtain the full benefits, operational synergies and an optimal on investment (ROI) from the system, organizations look beyond going live and focus on improving performance. Performance optimization is the “enabler” for a company to reap the benefits of an ERP system and achieve organizational efficiency.

Optimization is the “morning after” effort to evaluate the success of the implementation and maximize ROI by flattening the learning curve for the new system. Optimization should be planned and executed with the same diligence and accountability that was accorded to the initial system implementation.

Too often this is an area that is not given due diligence because of shortage of internal IT staff. External service providers with experience, strong methodology and proven expertise can help organizations to fine-tune their applications thereby ensuring optimal performance.

“THE LAW OF ELASTICITY” - Resource Optimization

It is accepted wisdom that ERP success depends on staffing the project with the best and brightest from the business. Losing key ERP personnel in the volatile IT market is a major threat for smooth continuity of operations. This poses challenges in scalability and retention.

ERP applications require flexibility to scale resources to meet the changing business requirements as the organization’s processes evolve. When an ERP application stabilizes it is possible to maintain it with fewer resources. This implies that the resources that were initially maintaining the task might not be required for a continuous period if there is high productivity efficiency and hence need to be re-deployed into other initiatives.

Maintenance is an extremely demanding and very mundane activity that requires constant vigil, and a service driven approach. These results in a scenario where an organization invests in high cost staff, that is relatively scarce to get and deploys them in mission critical but low-end work, which could result in losing the resources!

The solution is therefore to balance the availability to balance the availability of internal resources for business critical and higher value-add work. Service providers with teams of specialized and experienced professionals would be able to meet the fluctuating demands without compromising on the service levels and also guarantee continuity.

“SAME FOR LESS” - Cost Optimization

The maintenance phase of any ERP system unlike the implementation faces specific issues due to its recurring costs. Maintenance expenses are usually underestimated, an often end up costing far more than the initial purchase. Cost escalations really hit home when and after implementing ERP. According to a research, licensing represents only seventeen percent of ERP costs. The rest is split between related hardware upgrades ( 14 percent ), internal staff costs (23 percent) and professional services for implementation and maintenance (46 percent).

ERP outsourcing relieves the cost pressures from organizations by weeding out unnecessary recurrent costs. By negotiating with outsourcing service providers for fixed charges that are lower than the internal IT costs organizations can not only efficiently reduce costs but also effectively create the time and money needed for the projects they really need or want to put in place.

… And Inadequate Support Models

Many companies that have implemented ERP have realized that the high level of customization of the product blocks support from the ERP vendor. This makes maintenance an extremely expensive affair. Performance problems in online/batch processes that are a result of basic ERP design and implementation issues detected in post-implementation scenario make it difficult and time consuming for the maintenance team support the ERP.

By outsourcing to an external vendor organizations can free themselves of addressing requirement and version changes and instead focus their efforts on new initiatives.

Outsource And Rest In Peace

Outsourcing ERP provides peace of mind as it is entrusts in the hands of specialists who have invested in a comprehensive security, backup, disaster recovery and advances technology.

Today there are multiple delivery and business models such as a onshore outsourcing, proximity model and offshore outsourcing. Choosing the right model and service provider to outsource your ERP maintenance is an important step. Out of these models offshore promises to deliver the right mix of cost, availability and expertise.

Traditionally offshore outsourcing has been associate with software development and maintenance custom applications. Organizations need to consider offshore as a suitable model that provides them the best of the both worlds.

Specific Benefits Include:

1. Optimizer IT spending
2. Maximize ROI
3. Lower total ownership costs as 40 to 60 percent
4. Reduces the time and cost of managing mission critical business applications
5. Implode application performance
6. Provides competitive advantage through low operational costs
7 .Relieves organizations from shocks of fluctuating resource demands
8. Enables the businesses to redeploys the IT staff in strategic initiatives
9. Improves service levels through performance optimization
10. Avoids the need to attract and train specialized technical talent

The success in achieving these benefits lies in identifying the right service provider. Both the organization as well as the service provider need to invest time and efforts to establish a smooth transition and management as it involves managing business critical system. This requires for a partnership approach rather than a vendor management model.

In essence ERP Maintenance is an idea whose time has come with offshore posing a new model for outsourcing. Organizations need to evaluate this seriously to benefit fully from it.

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