As more companies opt to outsource SAP deployments, they find themselves grappling with the age-old dilemma of...
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whether to put all of their eggs in one basket. Their predicament: Should they offload SAP hosting and SAP Basis support services to a single provider or seek out third-party companies that specialize in the individual disciplines.
Having one provider handle both functions can deliver efficiencies, both from the perspective of lowering costs and streamlining SAP operations. Additionally, contracting both types of services from one provider will give a company more leverage in terms of negotiating better rates, which will help optimize the overall cost of the SAP outsourcing arrangement, industry experts contend.
And handing one party responsibility for everything from SAP system uptime and performance to maintenance and SAP Basis support functions minimizes the work involved in managing the outsourcing relationship. A one-source provider is also bound to eliminate much of the finger pointing that goes on when problems ensue with an enterprise SAP rollout.
“With an all-in-one situation, you can get a better price point,” said Liz Herbert, principal analyst at Cambridge, Mass.-based Forrester Research Inc. “There are also advantages with knowledge transfer because you’re keeping all of the knowledge of your business within one critical partner.”
Yet, as with most major decisions, there is a flip side and plenty of benefits associated with the alternative approach. Contracting with different outsourcing providers for these separate functions widens access to a larger talent pool of SAP specialists, experts say, and keeps each entity focused on its core competencies. In addition, two companies vying for the same piece of business may result in both offering up more aggressive deals -- ultimately, a win for the manufacturer.
Taking a two-stage approach to outsourcing SAP
National Gypsum tackled the problem of SAP outsourcing in two stages. Initially, the building products manufacturer opted to outsource hosting functions to avoid having to invest in dedicated resources and talent to run SAP. Two years into that relationship and based on its success, the company is getting ready to outsource its SAP Basis support to the same provider, after eliminating its Basis support position as part of a companywide downsizing initiative. Having one company perform both functions seems like a natural evolution because there is overlap, according to Jack Rech, National Gypsum’s senior director of information systems.
“The provider now has complete control over the application -- if we tried to split that, we would always be trying to decide which company does what, and there might be some finger pointing,” Rech says. “Having one throat to choke simplifies that aspect.”
Companies maintaining some internal SAP talent may do better with cultivating separate outsourcing arrangements because there is someone on hand who can actively manage the relationships and ensure the best deal, according to Jon Reed, an independent SAP analyst and SAP mentor. Companies lacking internal SAP resources, like National Gypsum, would likely find a one-stop shop less of a management burden, he said.
In either case, Reed advises companies opting for outsourcing SAP functions to be sure they don’t abdicate all responsibility and knowledge of the system.
“When you turn all of that stuff over to someone else, you’re really divorcing yourself from the process of cultivating internal management skills,” Reed said. “There is something to be said for taking IT seriously as an area for competitive innovation.”