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software, and managing application upgrades with internal resources. In both cases, ERP
teams face the challenge of integrating external partners with their global IT and business
community.
Most IT outsourcing initially occurred in such back-office functions as technical
support, software development, and maintenance areas. This was mainly triggered, in the mid-
to late 1990s, by the Y2K (year 2000) software problems. The urgency in fixing these prob-
lems created a tremendous shortage for IT personnel and triggered an outsourcing boom in
which U.S. and European companies hired a large number of software programmers and
developers from all over the globe from such countries as India, Russia, and Ireland. The Y2K
problem gave a major boost for IT outsourcing because it provided tremendous cost savings
for these companies. This eventually progressed into other IT functions within the organiza-
tion, where management of many companies figured that outsourcing was both cost-effective
and provided tremendous flexibility. Many companies slowly started moving to front-office
functions (e.g., customer support and help desk, call center functions, customer relationship
management, and sales force automation). The front-office function generally includes IT
solutions and support that have direct interaction with the customer. This area can be risky
because many companies feel customers are too important to turn over to someone outside,
particularly if the outsourcing company is from a different country (offshore) with a different
cultural background. Therefore, it is very important for all parties to define their outsourcing
relationship similar to one shown in Figure 10-1.
Organizations planning on ERP software are probably too wrapped up in implementation to
worry about how they will maintain and update the system in the future. Most experts, however,
say that in order to maximize your benefits, the sooner you start thinking of this the better. The
benefits for ERP outsourcing depend on the organization. There are many other benefits beyond

Customer

Products/ Interactions/
Services Service Delivery

Company Outsourcer
Business Relationship
FIGURE 10-1 Outsourcing Relationship.

4 Howarth, F. (September 16, 2005). Software as a Service-Salesforce.com’s New Application Shop. Practice Leader.
Bloor Research, Publisher: IT Analysis Communications Ltd. www.it-director.com/services/content.php?cid=8075
(accessed June 2007).