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294 Chapter 10 • Global, Ethics, and Security Management

IMPLICATIONS FOR MANAGEMENT

Outsourcing
Outsourcing is certainly not a new idea; however, the face of facility service outsourcing is
changing. You now have a wide range of companies with very assorted business models. There
are companies that self-perform services, who subcontract services, and who contract manage
services. Your next avenue of support lies somewhere in the middle of the crowd of service
companies. When companies outsource, it raises ethical questions, especially in this post-Enron era.
Casseres 36 said, “My favorite post-Enron cartoon, by Dan Wasserman, has two captains of
industry discussing what to do about the fallout from corporate scandals. ‘We are seen as ethical
disasters,’ says one of them. ‘How are we going to rebuild public trust?’ In a flash of brilliance,
the other answers: ‘We could outsource it!’ ” He further continues his article saying that when
companies begin to outsource, you can’t help but ask if they are shedding ethical responsibility
for their company. The key to realizing the benefits of outsourcing or offshoring ERP implemen-
tation activities is to know when to use these services properly.
The first consideration is to determine the amount that companies should rely on outsourc-
ing and the extent to which they do. 37 Even though IT budgets have been flat through much of
this decade, government regulations (e.g., SOX) have required companies to innovate to remain
competitive. Offshoring and outsourcing services include data center operations, help desk and
application maintenance, and specialized project work (e.g., global ERP implementations). IT
and business management need to determine where offshoring fits with their business goals and
how much makes sense for the organization, both fiscally and culturally.
The second consideration is to reevaluate the level of support required for the ERP imple-
mentation. Companies need to decide if and when to replace traditional business and implementa-
tion services with comparable services from one of the major Indian offshore services providers
mentioned earlier. ERP projects are one of the largest budget items of most IT organizations,
enforcing the need for more affordable services in this area. ERP support is quickly becoming a
buyer’s market, and savvy IT organizations are exploiting this fact to their advantage, proving to
be a more cost-effective option and improving the company’s bottom line.
The third consideration is to evaluate business process outsourcing (BPO) and hosted
applications for key business processes. BPO is the contracting of a specific business task
(e.g., payroll) to a third-party service provider. Software as a Service (SaaS) is renting externally
hosted enterprise applications on a fixed monthly, per seat cost from application service
providers like Salesforce.com or NetSuite. The BPO and SaaS providers have matured to the
point that they warrant consideration for key ERP-related business functions. IT and business
leaders can be assured quality solutions through BPO providers or subscription-based hosted
providers, and they can be cost-effective alternatives to traditional software purchase and instal-
lation. In fact, according to Dana Stiffler, a research director for AMR Research, “BPO can offer
operational savings of up to 50 percent over purchased applications.” 38
Last, when considering outsourcing solutions (whether they be offshore development or
SaaS providers), ERP management teams need to look beyond cost. Given the emotional

36 Gomes-Casseres, B. (October 1, 2005). Outsource, Don’t Abdicate. CIO Magazine. www.cio.com/archive/
100105/keynote.html?page=1 (accessed January 15, 2007).
37 www.amrresearch.com/Content/View.asp?pmillid=17890 (accessed February 2001).
38 Ibid.