Thoughts on Offshoring ERP/non-ERP Packages
On these lines, I came across this interesting paper by Paul Reynolds that looks at “The Impact of Offshore Resources in ERP Projects” [Tipoff: offshoreindianews]. The report claims that performance data on the leading India-based systems integrators was also captured, adding "The India-based ERP systems integrators studied are Cognizant, Infosys, Satyam, Tata Consulting Services (TCS), and Wipro." The paper also explains how “The fact of the matter is that off-shoring components of ERP systems integration projects is on the rise, and this trend is not likely to change as long as it allows systems integrators to remain competitive in the marketplace. The real question, however, is what type of impact these offshore resources have the quality of delivery, and, ultimately, client goal attainment.”
While offshoring of ERP projects continues to rise, sourcing of application development involving non-ERP packages get bundled with regular sourcing programs. Besides the offshoring issues we have been looking at in the past, there are a few unique challenges when it comes to outsourcing, and offshoring of (ERP/Non-ERP) packages. For such packages, the knowledge and expertise of technical Subject Matter Experts (SMEs) is a key element to capture. Expertise gained by years on the job is certainly a valuable asset for an organization but good management practice also dictates the need to ensure updated system documentation about the current state
Here is my two cents: Most IT shops have system-experts, a.k.a ‘go to’ guys/ladies who have most of the system knowledge and understanding acquired from the years they have been on the job. Capturing and documenting such tacit, undocumented knowledge from SMEs is a key challenge while sourcing packages. This also involves getting a buy-in from SME to share their knowledge and understanding of configuration, tweaks and maintenance processes of systems.
I will continue to add to this list, and of course your comments and experiences welcome
Comments
ERP software’s are quite different, here are some reasons
• Complex technical and functional architecture, multiple systems, instances etc
• Number of business processes supported by an ERP software are large , complex and extremely integrated across multiple business units
• Large and distributed user base across geographies (some times in lakhs)
• Requires a sound understanding of clients business, processes and close communication with business
• Implementation spans multiple geographies; hence country specific requirements need to be known
• Systems are extremely prone to changes in business; hence they require a well managed support center of expertise
Predominantly ERP implementations have far greater challenges for off shoring than post go-live scenario
At a high level an ERP lifecycle consists of the following two phases
ERP Implementation (in bracket figures show how much work can be done onshore / Offshore )
• Blue print and Design ( 80 /20)
• Development ( 60/40)
• Testing ( 50 / 50 )
Post Go-live
• Application support & enhancements ( 20/80)
• Technical Upgrade ( 50/50 )
• Rollouts ( 50/50 )
Some of the off shoring challenges include
• Accurate and timely communication of Project scope creep (managing scope creep is very important in ERP implementation)
• Poor internal processes , methodologies and lack of a center of expertise for ERP software’s at the client location
• Process knowledge, business and domain skills specific to the industry vertical
• Business dynamics ( usually large ERP implementations span 12 to 18 months , during this span companies business and focus could change , mergers happen , plants close down ….understanding the impact of business dynamic on the project is a challenge from offshore )
• Access to business resources across time and geographies (challenge from offshore)
• ERP projects involve lot of integration across business process ( for e.g when a sales order is created your pricing , production scheduling , operations planning , manufacturing , stock availability and credit management are impacted ) …hence close co-ordination across business tracks is required ( another challenge from offshore ) so working with different teams across multiple business processes (including offshore ) could be a challenge
• Dependencies on other people /onsite deliverables
• Change management
As earlier said, ERP support can be very well managed from offshore, however implementations provide a lot of challenges and opportunities
Posted by: Chetan Bhor | December 10, 2007 05:05 AM
Chetan,
Very interesting points. I will build on this thread further
Posted by: Mohan | December 21, 2007 10:02 PM