What are the merits and demerits of ERP outsourcing?

ERP outsourcing need not necessarily show a rosy picture for the company. It can be a devastating process as ERP itself. The chances of success and failure are more than an optimal level because it involves the intervention of an external body in the organization. Organizations should not only worry on ERP outsourcing company but also equally weigh advantage erp outsourcing and disadvantage erp outsourcing.

Some of the merits and demerits are as follows

Merits of ERP outsourcing

Enables concentration on core areas
ERP outsourcing is a relief to companies especially those that frown upon the idea of having to break the routine until ERP becomes a routine in the company. The process might help large companies that experience great difficulty in shutting down the process and taking on ERP simultaneously. ERP outsourcing makes sure that the company needs not be bothered about having to concentrate fully on ERP because that need is taken care by an outsider namely ERP vendor. This is one of erp outsourcing advantage.

The process of ERP implementation takes months and years. There are innumerable chances for the companies to lose valuable business in the due course of time. This cannot be justified unless the company makes good the loss and potential business after ERP implementation and usage. If that does not occur then the company can neither be happy about ERP nor be prepared to accept the loss in the meantime. The company need not worry about this anymore. Moreover in this case the company is not going to decline from the current business stature even if the ERP system does not function or perform well. They can be assured of this at the least.

Makes change management easier
ERP process is unlikely to be received well in any company because people are not prone to adapting change. No amount of orientation or induction has helped companies to overcome this mindset in many cases. Even the senior managements have reacted unwisely to this issue many a times.

When ERP is outsourced to a third party the in-house personnel need not undergo much change in the organization. The changes which they undergo are only minimal and negligible. The company can even resort to ERP outsourcing when they realize that convincing the people to change the process in the interest of the company is going to prove futile or next to impossible. This is another erp outsourcing advantage.

Saving Costs
It has been largely misconceived that corporates resort to strategic maneuvers only for the purpose of saving costs. But it is not so. They don't resort to cost cutting measures as and when and similar parameters. Infact it is not professional for large organizations to be penny wise possible. They take such measures if it is justifiable in terms of competitive advantages and pound foolish. They have to seek such steps only if it helps them in the long run. On the other hand if it is going to be a mere cost cutting measures they will not definitely stick to it unless they reap the above said benefits.

In this context ERP is also regarded outsourcing is also regarded as a potential cost cutting measure though the fact remains that it is not the only reason for them to do so.ERP definitely saves the company in terms of the two valuable resources namely costs and time. It takes a very long time for the company to implement ERP in an organization that too on an experimental basis but of course on consultation with the ERP vendor.Such implementations and the resultant usage are largely on an experimental basis for the companies.

ERP failure on those occasions will mean a debacle to the company in terms of time and resources as well. If the company were to account for the time and money spent in implementing and using ERP and compare the same with that of a process done by an ERP outsource service provider it will be revealed that the later will be much cheaper. In addition the later enables the company to enjoy some non monetary advantages as well. The employer need not take care of training. This saves both time and costs. The company will be able to make use of skilled and trained manpower.

Technological advantages
The company will definitely enjoy lot of advantages in terms of technical expertise and skills when ERP is outsourced . This remains true even if the company has a full fledged IT department or even if it happens to be a software company! Firstly the company cannot handle unexpected problems like upgrading to the technology developed recently (in the due course of implementation) and getting rid of repairs and flaws in implementation process in ERP because they are not used to do so. On the other hand the company providing outsource services can handle them efficiently as it is a part of their work. They definitely have an edge when it comes to understanding and exposure to ERP systems.

Demerits of ERP outsourcing

Leads to dissemination of information
The company runs a high risk of exposing its policies, and internal matters to an outsider. The question of ERP vendor using it for his personal benefits is only secondary. No professional organization would be happy in deliberately disclosing their secrets to a third party whether or not he is connected with the company. Since there are no other options other than revealing the company has to go ahead and take a chance. This is one of erp outsourcing disadvantage.

Leads to practical difficulties for the vendor in coping up with the organization
The vendor is given a hard task of working for and in an organization to which he is not acclimatized to. The vendor not only faces hiccups but also some uncertainties regarding the organizations function. First is the fact that the vendor is not comfortable in working in the atmosphere and secondly he cannot solve them even after clarity as the in-house personnel would do in spite of the difficulties. This is another erp outsourcing advantage.

Causes troubles after restructuring
The vendor might carry on the restructuring process on his own perceptions and conveniences. This can turn out to be a potential trouble if not found early. Even though the company needs to heed to the words of the vendor it has to see to that he does not intrude his idealism because ultimately the employees of the company will also be working on the ERP systems. This rule applies not only for restructuring but anything done after that.

Conclusion

ERP outsourcing has equal advantages and disadvantages as the two sides of the coin. It can nevertheless be advocated in the larger interests of the company. The organization should exercise necessary care in choosing erp outsourcing company.

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