ERP (or Enterprise Resource Planning) was once considered those things that only large enterprises would do. In recent times it’s become a viable option for companies of all sizes. But what is ERP, and how is it outsourced? What are the benefits? What do I need to consider when looking at ERP providers?
What is ERP outsourcing?
To summarize ERP, you can simplify it into three components:
- Application hosting
- Application management
- Helpdesk outsourcing
Application hosting is what is commonly referred to as “hosting”. Hosting is the idea of purchasing space and resources from a data center to host one or more software systems. Application management is giving the task of maintaining your hosted applications by updating applications, installing patches, working the help desk, and generally being as dedicated to the application as a business can be.
Small business may have considered hosting in the past, but not necessarily considered outsourcing the maintenance of ERP software to an external service provider. External service providers are capable of being much more dedicated and focused on the management of applications than a business normally would be. This makes for more efficient business and is now a very good decision for a Small Manufacturing Business to make.
What are some of the benefits of ERP outsourcing?
Mentioned briefly in the last section, there are benefits to outsourcing ERP that make business more efficient. There are three simplified benefits that I will focus on:
- More effective use of capital
- Improved service delivery
- Ability to focus on core competencies
When outsourcing, the service provider will normally charge a set fee. This means that there are no un-predictable costs and un-planned expenses. This makes it easier for a business to invest its capital in other areas without worrying about surprise fees.
Service Level Agreements require that an outsourced ERP provider must deliver the highest quality facilities, the latest technologies, and expertise and application knowledge. All of these services combine for an improved, up-to-date, and happier end user.
The most important benefit of outsourcing ERP is that enables an organization to focus on the core of their business rather than the I.T. For example, if you’re company makes canned peaches, you spend less time thinking about the website and customer support, allowing you to focus on the canned peaches. Your product or service will become stronger and more developed as more time and resources are dedicated into it.
What should you consider when looking at service providers?
Finding a good service provider is always fun and games and isn’t a decision that should be made lightly. Like any business or service providers out there (in any field) there are good ones, and there are bad ones. A Service Level Agreement will guarantee that a service provider will have to give you the best they can offer at all times, and reviews from a service providers past clients will also shed light on the quality you will receive. The best service providers will essentially become an extension of your IT department, working in perfect harmony with your organization.
We suggest considering these three attributes to start with:
- Top tier data centers
- Well defined services delivery methodology
- Application expertise
The data center is the physical location of hosting. Obvious factors to look at will be the power supply methods, data communication methods, environmental controls (such as air condition and fire control systems) and security. Look for a Tier III or IV data center. The tier level designation ensures that the data center can provide a proven level of service based on their facilities, infrastructure and technical competency.
A service prodder that simply offers hardware, software, and support services does not offer enough. Quality service providers will offer a services based on best practice framework such as the Information technology Infrastructure Library (ITIL). Ask them for a review of their standard operating procedures before signing up for anything. If they cannot provide these documents they are not good enough.
Last, but not least, if you’re business is out sourcing the application maintenance or end user support it is vital that the supplier actually know what your business does as well as you do. They should have precise knowledge of how your systems and applications work, so that they can address problems and make updates. Therefore a supplier who works in close contact with a business is a bare minimum.