Sidebar: ERP Outsourcing: How to Go About It

Computerworld - The only way to judge whether it's a good idea to outsource any of a company's ERP workload is to closely examine current in-house ERP capabilities to see if they're really critical to the way the organization conducts business. It's also a good idea to consider the following when evaluating the outsourcing option:

Figure out your business objectives first, "before outsourcing vendors are invited for briefings. Don't make vendor selection or negotiation your first step," warns Dean Davison, an analyst at Meta Group Inc. "Most importantly, expectations need to be realistic and set ahead of time. Incorrect expectations are the primary reason why outsourcing arrangements are perceived as failures."

Don't expect immediate cost savings. "The myth that outsourcing is far less expensive than managing ERP applications in-house is simply untrue," says Gartner analyst Robert Anderson. Outsourcing may be more expensive, but it provides easier and more predictable budgeting.

Make sure the vendor is strong in all of the geographical areas of your deployment, including multisite and international operations, Anderson says.

Work with a single point of contact at the outsourcing vendor -- and make sure that person is responsible for the success of ERP operations. Plus, the contract should provide a clear escalation path to resolve problems, says Anderson.

Be sure to manage the outsourcing relationship, and don't become overly dependent on the outsourcer. Outsourcing still requires in-house personnel who understand the applications and business processes involved, Anderson warns.

Document software revisions and system changes -- and keep the documentation in your possession. "This information is vital if you must switch outsourcing vendors or bring operations back in-house," he notes.

Treat the contractor's on-site staff like employees. That means requiring them to attend staff meetings and adhere to company schedules.