Navigating the choices can be daunting.

Years ago, your ERP options were straightforward: Either you brought in a large-scale service provider to manage your entire shop, or you did it yourself. But today's range of offerings can be as confusing as a long restaurant menu written in a language you don't understand. You'll find it easier to analyze an outsourcer's offerings by matching them up to the characteristics of your ERP infrastructure, as measured along five axes:

Legacy or newer models? How deep are your ties to your existing ERP systems? Are you still running custom enterprise applications built years ago from the ground up, such as process control manufacturing software or drug research management? Have you switched to client-server? Or are you running so-called "Web-native" applications that are fully Web-based in the server and on the desktop? Complex legacy systems are more difficult to offload to a service provider, while Web-native systems increase a service provider's ability to provide enterprise functions to your users.

Single operating unit or cross-enterprise? If your ERP system must meet the needs of a lot of different business units, then you'll likely need complex customization that may stretch an outsourcer's abilities. For example, if you have several divisions using half a dozen different systems, turning to a service provider could be an expensive proposition. The more consistent you can make your ERP applications across the organization, the greater the likelihood a service provider can support your implementation.

Are your ERP-supported business processes highly differentiated, or do they provide no major advantage? If you can use an off-the-shelf application with little customization, investigating an outsourced offering becomes more logical: Service providers are likely to be able to maintain a plain-vanilla ERP system for less money than you can. If you've customized an off-the-shelf enterprise application to any great extent, you may feel locked into it. But it still may be worth talking to a service provider to see how difficult it would be for the provider to duplicate what you have—especially if you're reaching the point where you're no longer modifying the software to any great extent.

Managed at your site, or at a hosted site? If someone comes in to manage your existing system, you'll be transferring staff and costs onto the service provider's shoulders, which may result in substantial savings—unless you're already running a really lean operation. But if your applications can be decoupled from your infrastructure, it's more likely to transfer easily to an entirely different location, leveraging the service provider's economies of scale in providing all its customers with the same system.

Maintain ERP expertise or farm it out? If you're convinced that maintaining your ERP systems in-house is critical, you won't want to use an outsourcer's staff. But you may be able to save by leveraging a service provider's programming staff if you don't mind leaving that work to others.

Ask Your CTO:

Where do we sit on each of these five axes?

Ask Your ERP Specialists:

What would you carve out from our ERP management portfolio to offload if you could?

Tell Potential Outsourcers:

Look at our ERP systems, and tell me what model you'd use to get me the biggest savings.

This article was originally published on 06-16-2003
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