Outsourcing ERP: Challenges and Solutions

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Outsourcing ERP Challenges and Solutions

• Teja Phanidhar Kunju

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Enterprise Resource Planning(ERP)

• Enterprise resource planning is defined as a set
  of applications that automate finance and human
  resource departments and help manufacturers
  handle jobs.
• Enterprise Resource Planning (ERP) systems are
  capable of integrating the data and processes of
  an organization into a unified system.
• The word "Enterprise" in ERP means that whatever
  happens in one area has a ripple effect in other
  areas.

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Enterprise Resource Planning(ERP)

• Enterprise resource planning has been growing at
  a fast pace over the last few years and is
  expected to grow similarly in the long term.
• With evolving technology everyday, numerous
  business processes with the global enterprise
  should be integrated throughout the entire
  business and with ERP systems.
• The ERP technology boom in the 90s gave
  organizations a means to start obtaining much
  needed operational visibility.

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Outsourcing ERP

• Outsourcing the entire ERP functionality provides
  a solution in a faster means and overhauls major
  hurdles and allows more attention to company's
  core competence.
• Several factors are contributing to the interest
  in ERP outsourcing.
• ERP systems mostly find its existence in larger
  corporations thereby hardly providing any kind of
  competitive edge in the business arena.

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Outsourcing ERP

• ERP systems require setting up of new server
  system and purchasing new software pertaining to
  that ERP system .
• Outsourcing the software ownership and other
  maintenance costs pertaining to ERP simplifies
  the traditional difficulties in implementation.
• It helped in avoiding problems arising out of
  hiring and retaining IT staff.

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Positives in ERP Outsourcing

• Outsourcing ERP helps a company to concentrate on
  its core mission.
• Companies that outsource ERP have a more
  simplistic operational part and also manage the
  budget at a decent level.
• Managing day to day operations and long training
  periods will remain with the vendor to whom the
  implementation is outsourced.

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Positives in ERP Outsourcing

• Moreover the vendors have the option of pricing
  their services on a monthly basis thereby
  allowing the customers to manage the cash flows
  in a better way and preventing the large
  expenditures that are usually associated with up
  gradation and rollouts in ERP.

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ERP Outsourcing Challenges

• The main challenge for ERP implementation is the
  preparedness of the organization for a new system
  of functioning.
• Selecting ERP service provider. Analyzing the
  capabilities of ERP service provider and making
  sure the provider has the required expertise.
• Optimum utilization of ERP software solution can
  bring dramatic changes to the business
  performance.

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ERP Outsourcing Drawbacks

• The cost of outsourcing ERP related to the
  leasing and offering other services can increase
  with time.
• ERP Outsourcers may not offer complete support to
  modifications and that might not be helpful when
  the modifications are actually required.
• Proper planning and more caution are needed when
  it is being initially accepted.

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Conclusion

• State examples where different scenarios arising
  out of ERP outsourcing are explained with the
  companys example.
• Different aspects of outsourcing ERP.
• Suggest some possible solutions to some of the
  challenges in outsourcing ERP.