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SAP
Outsourcing
10 Things You Need
To Know
- What is Outsourcing/Hosting all about?
The rise of the internet has given new life to ASP’s
(Application Service Providers). It is now possible to outsource
your entire SAP system – hardware, software, implementation,
support and all the rest - and pay a fixed monthly fee for
access to it.
- Why might a company do it?
The primary reason we can think of is to enable companies to
focus on their core business … and not have to redirect
resources and energies on systems implementation and support. In
essence, companies who buy SAP (or any other true ERP) are
outsourcing their systems development effort. Many of these
companies utilize the services of consultants to implement their
systems – which is tantamount to outsourcing the systems
implementation. Many people – especially the ASP’s - believe
that Outsourcing/Hosting is the logical next step – where
companies outsource the infrastructure and running of their SAP
systems.
What – according to the ASP’s - is the value proposition?
Traditional SAP Implementations required large up-front
capital expense for things like the purchase of new hardware
platforms, design and building (or extension) of data centers,
recruiting of additional permanent and consulting resources with
the necessary skills, and the training of additional IT (and
other) resources. Furthermore permanent help-desks support
operators and system administrators were required.
With Outsourcing/Hosting for a flat monthly fee, you do not pay
an up-front fee, your costs are predictable, you do not have to
buy hardware and find a place to put it, and you do not have to
spend time and energy on recruiting/training people with the
right skills. Furthermore, the ASP value proposition states, you
are shielded from costs associated with changes in technology.
Guaranteed network uptime and disaster recovery services are
also provided.
What is SAP doing in this space?
SAP have( interestingly) lumped Hosting in with the three
other mySAP.com offerings (read this article if you don’t
know what they are). At this point SAP’s strategy is to offer
Hosting during systems design and build phases, and pass you to
your ASP partner at or just prior to go-live. Watch this space
for future developments.
Is Pandesic an ASP?
Not really. Pandesic (the 1997 joint venture between Intel and
SAP) is more like an end-to-end systems solution for an
e-business including web storefront, transaction processing,
BackOffice systems, hardware, security and ongoing support.
Apart from Pandesic - SAP’s joint venture with Intel - who
are some of the other SAP ASP’s?
We noticed the following at SAPPHIRE’99 - eOnline, HostLogic,
Qwest Cyber.Solutions, Systems America and Metamor Enterprise
Operations.
Who might have the most to benefit from Outsourcing/Hosting?
Most of the ASP’s are targeting small and medium size
businesses – which makes intuitive sense (to us anyway) as
they usually have to watch their cash flow more closely. This
solution isn’t only for small and medium sized businesses,
however; for example eOnline’s first two customers (announced
at SAPPHIRE’99) were a start-up of 20 people and a
multi-national with 17,000 employees.
What does it cost?
HostLogic – one of many ASP’s offering this service –
touted a flat monthly fee of $495 (US) per user at SAPPHIRE’99.
This price includes implementation, software, hardware,
networks, technical and business process support, internet
backbone and security. The price is based on a 36-month contract
with 200 users (or, as they call them, seats). NOTE: THIS IS NOT
INTENDED AS AN ENDORSEMENT OF HOSTLOGIC- MERELY AS AN EXAMPLE OF
ONE PRICING PLAN WE HAVE COME ACROSS.
Are ASP’s certified by SAP?
Yes. The only one (we saw) claiming to be certified at SAPPHIRE’99
was eOnline.
What are the potential pitfalls of pursuing this strategy?
Any outsourcing agreement requires close management to avoid it
spiraling into breakdown. The "flat" monthly fee might
turn out to be anything but "flat" when the inevitable
change requests start rolling in … so read the fine print.
Some IT departments may resist a perceived loss of control, and
of course you are dependent on the long term success of your ASP
partner. SAP Upgrades are a regular occurrence, so factor those
changes in as well.
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