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Hannah Smalltree, Editorial Director
your advice, my question is this:We are in the SMB space and are looking at options to offer clients outsourcing of their SAP technical environment on a 24x7 scenario to us as an American SAP remote operations company. We typically ask firms if they are cutting their staff to allow us to hire them, my question to you is, is this wrong? Should we not ask to hire their staff, should we just let firms outsource to India instead? It seems lately we are getting flack for basing our outsourcing with American workers here in the USA rather than in India, where yet we provide better service and support at the same price. Any thoughts?
The moral issues of outsourcing (to American or overseas companies) are hotly contested and are a major cornerstone of the recent political debates, and the answers differ for each company and its set of circumstances.
Companies are responsible for determining the ROI of outsourcing an SAP project, based on how it will affect three key must-haves:
- Accountability: How much risk will the service provider assume for interoperability, scalability and financial return problems?
- Security: How secure are corporate assets from internal and external threats?
- Availability: How much unplanned downtime will be eliminated? How much panned downtime will be reduced? And if an issue occurs, will the provider assume responsibility?
The business case for outsourcing should focus on how a service provider's highly trained resources, coupled with best practices, proper tools and back-office support, can outperform a team of full-time staff members.
The greatest cost of any IT investment is not the hardware, software or service contracts, but the staff expenses for resources needed to develop applications, manage and support these assets. In fact, more than 70 percent of total IT spending is spent on internal labor.
For outsourced services, the savings aren't always what they're chalked up to be. Managing an offshore contract, for example, increases the cost by six to ten percent, according to industry figures. Other extras include productivity lags, ramp up expenses, and "dead" money towards those laid off at home. Due to the piled up costs, many companies are bringing their operations back in house, to regain control of data and lower costs.
The bottom line: in the long run, properly deployed outsourced resources can make it easier for some companies to scale more effectively, set and predict costs, and allow the corporation to focus on its core business. But each organization must evaluate the costs and benefits of keeping services in-house, outsourced domestically, or outsourced offshore, to determine what gives the organization maximum value.
This was first published in August 2004