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Making a business case for outsourcing an SAP application

How do you make the business case for outsourcing an SAP application?

Interest in outsourcing is inevitably higher during bad economic periods, as companies look to implement cost-savings and risk-reduction measures through services. Outsourcing large, enterprise-wide applications can be particularly attractive, especially as CFOs look to approve only projects that will deliver returns in a shorter window.

Historically the question has been whether to 'build or buy.' Today, it's more likely to be a calculation driven by whether resources can be used more effectively elsewhere. This makes outsourcing a strategic question, more than just a tactical next-step exercise.

To determine the ROI of outsourcing an SAP project, assess how it will affect three key must-haves:

-Availability. Unplanned downtime will be eliminated, planned downtime will be reduced and if an issue occurs, the provider will assume responsibility; the service level guarantees deliver millions of dollars in availability improvements.

-Security. The service provider will assure that corporate assets are secure from internal and external threats.

-Accountability. Outsourcing passes along all risk to the service provider: interoperability, scalability and financial return problems.

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.

In the long run, these properly deployed outsourced resources make it easier for companies to scale more effectively, set and predict costs and allow the corporation to focus on its core business.


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