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... leveraged and used t the maximum t deliver a competitive advantage t a company. Pat Wellington, VP f Information Systems at Erp said, I view outsourcing as part f the transformation strategy. Experts believe that outsourcing is essential fr companies t paper int the 21 st century. Starting in the days f mainframes, such rganizatins built their reputation n upscale IT handling that could, and did, take ver entire data centers including staff. Fr example, in the early 1990 s IBM Crp.
built a data processing facility in Rochester, New You, that consolidated five Eastman Kodak C. facilities, but was we and perated by IBM. Estimated savings through the 1990 s: $ 1 billion. Nw outsourcing is taking a new turn, toward specific applicatin's fr the middle market instead f the big-ticket, end-t-end IT peration model. In the last 24 months as the Y 2 K-driven market fr enterprise-resource-planning (ERP) software sagged, vendr's and a variety f new application service providers (ASPs) scrambled t partner in outsourcing as a way fr ERP t expand do-market. Their reading, make the software mre appealing t mid-sized companies by letting them rent, instead f buying, installing, customizing, and maintaining applicatin's themselves.
However, outsourcing slutin's are nt limited t new ERP projects. Fr example, three months after implementation a SAP R/ 3 system was usurped at Sebastian International Inc. , Wdland Hills, California. Cnfrnted by unacceptable system performance and the lss f key IT personal, we made the decision t resurce, says Dianne King, director f information technology. We probably would have saved quite a bit if we had usurped right at the beginning, the usurper is Syntacm IT-Services Inc. , Waltham, Massachusetts. The rationale feed by the providers is compelling. With a predictable monthly payment, a company can site all f the problems f running an application.
utsurcing's new wave targets high software worship and maintenance cst's simplifies r eliminates the traditional difficulties in implementation, and avid's the problems f hiring and retaining IT staff t run the applicatin's. But potential exists been a mere cst-cutting measure. outsourcing can be a strategic, competitive me. Fr example, outsourcing the ERP function fees a faster time t solution and remove a may distraction frm a company's cre competence. A key fact is the technical assistance the vendor-ASP partnerships can bring t the table. Services providers like IBM typically have put together alliances with key ERP players like SAP, which puts them in the lp f the newest and latest changes in the application.
That improve the chances fr banning predictable, assured results, adds Tm Melchire, director f outsourcing at SAP America Inc. , Newton Square, Pa. He says the hotel model brings lower risk in the implementation cycle and better knowledge transfer frm integrated t users f systems. When the implementation partner leaves, the implementing hosting vendor is still there managing the solution. S the knowledge transfer happens seamlessly, automatically, fr n additional cst, n impact n schedule, and, f curse, lowering risk. With conventional implementatin's the ppr tunity exists fr disconnects that could hamper the knowledge-transfer press t the customers support staff. Sme analysts link the value f outsourcing t the question f where the strategic value r significance f a technical solution, such as ERP-really resides.
When it is available t everyone, then any competitive advantage must cme frm the quality f implementation, adds Sam Are, vice president f marketing at Resource Partner Inc. , a Columbus, hi-based ASP partner f Peplesft Inc. , Pleasant, California. Although providers readily dramatize the way outsourcing alleviates IT staffing problems, few allude t the impact n the chief information fiber. ur expectation coming int this business was that internal CIΒ s would tend t be competitive with us, nte's Michael S. Harper, vice president and general manager f USinternetwrking Inc. , Annapolis, Maryland. USi is an ASP that delivers software slutin's via the Internet, such as HR and financials frm Peplesft and sales-free automatic frm Siebel Systems Inc. , San Mate, California. ERP sites problems and brings CIΒ s capabilities they didnt have before.
The value brought t CIΒ s is nt in numbers reduction, but in pending up the possibility f greater management participation. With the application usurped, the CI is able t pursue a leadership position t better leverage the IT investment fr the business purpose. Market predictions are exuberant. Fr example, a forecast by Frrester Research Inc. , Cambridge, Massachusetts, has ERP rental reaching $ 6. 4 billion by 2003. In five years, half f all ERP implementatin's will be usurped.
Anther estimate predicts that by 2004 three-further f all companies will resurce sme r all f their transaction-based processes, says Farrell Griswld, manager f outsourcing strategy at Peplesft. Peplesft's application-outsourcing fcu's is broader than the mid-market. The model can be beneficial fr any size company, says Griswld. And frankly were seeing a lt f interest, nt just in the middle market, where I think mst f the ERP players are focusing, but upstream as well. The largest companies in the world are taking a gd lk at application outsourcing and sometimes fr very different reasons than the smallest companies might. Mst software vendr's deliver their applicatin's through business partners that tend t have market specialties.
Fr example, World Technology Services, ne f the fur partners f J. D. Edwards & C. , began delivering ERP slutin's t the construction industry in 1997. An example is Refund, Washington, based E. Kent Halvrsn Inc. , a $ 60 million general contract that is using J. D.
Edwards accounting and financial software. By specializing, businesses can leverage their knowledge f an industry and its technology with the expertise in the application. S far, partners at J. D. Edwards & C. , have signed up 24 mid-sized companies ranging in revenue frm $ 50 million t $ 500 million.
ne partner focuses exclusively n high-tech start-ups that want the benefits f the software solution, but cant afford the high upfront cst f conventional in-huse implementatin's. Recently an application-outsourcing alliance teamed SAP America with EDS, Plan, Texas. This alliance changes the economic and logistics model fr companies considering ERP, says Eric Rubin, send vice president at SAP. Access t these services als can help companies initiate electronic-business strategies in a server time frame with less capital expense.
The service already is up and running at Sebastian Vineyards Inc. , Some, California. By outsourcing the ERP technical environment through EDS and benefiting frm the use f SAP R/ 3, they can direct their time and energy toward improving cre business processes. Software vendr's arent the nly market drivers. Fr example, service provide Syntacm is a new, will we subsidiary f Plaut Consulting Inc. , Waltham, Massachusetts, a management and technology-consulting firm. Basically we fund ur customers wanted see t be with them after the implementation, " Shaughnessy explains, and they preferred nt t be switching firms. In addition t outsourcing, Syntacm fees mid-market companies slutin's in SAP R/ 3 outsourcing, workflow management, data warehousing, data archiving, IT networks, Web hosting, Internet, and ABAP/ 4 and Basis services.
Together, Plaut and Syntacm help companies develop the right strategies, implement them n bth business and systems levels, and provide the IT infrastructure. S whats nt t like abut outsourcing? The concept is s new that confusion and misunderstandings are likely if the mid-market debt grasp the implications that outsourcing an application can have. A lt f expectations may nt be met if the mid-market participants dnt understand hw outsourcing is different frm the earlier model where entire IT peratin's were involved. Analyst David Cards, vice president f enterprise-application strategies at AMR Research Inc. , But, explains, The outsourcing model that began in the 1980 s was simply taking the data-center peratin's and having see else run them, either n-site r at a remote data center. In contrast, the new outsourcing model targets an application such as ERP and attempts t treat it like a utility.
Cards causing that while the concept f application outsourcing is attractive, he sees issues that need t be thought through before the phenomena will get as rapidly as predicted. First, outsourcing an application in a medium-sized rganizatin can be in conflict with software-integration issues. What if the outsourcing model des nt accommodate extensions such as advanced planning and scheduling, bar-cde data collection, warehouse management, and e-commerce? A company planning an internal e-commerce implementation while seeking t resurce ERP might discover little r n cst benefit in terms f IT staffing.
n the ther hand Resource Partners Are advises that outsourcing applicatin's should be a matter f setting the right bjectives, make it a strategic issue, nt a cst issue. Evaluate the concept frm the standing f what the value added is as posted t what the reduction in cst is ging t be. Its nt t say that it may nt be cheaper r that it cant be. But dnt let cst be an ver-riding fact. Yu may find that even though the cst is the same, the added value mre than compensates. The mst significant contribution f outsourcing is in making management mre strategic in their thinking.
The ultimate issue fr outsourcing in any business set is nt hw t d it, but whether t d it. A survey f 37 categories f outsourcing activities by the American Management Assn. (AMA) revealed that 94 % f the 619 respondents participate in at least ne category with 40 % f them naming sme aspect f their information systems peration. However the practice is growing mst rapidly in accounting and finance, during in the last tw years. The study targeted managers in the purchasing, administrative, and financial functions in AMA member firms.
nce considered evidence f a quick-fix response t sme srt f internal technical r performance lag, the practice has gained respectability because tp-performing companies resurce t perform even better. Yet consultants remind companies t consider whether the practice is at least in pursuit f the right bjectives. If a case fr outsourcing des pass scrutiny, then consider outsourcing providers as suppliers and judge them n the basis f value-added. The globalization and outsourcing are nly tw f numerous possibilities the development f free trade delivers t people. As Clin Pwell, U. S.
Secretary f State, says, trade and investment are the engines fr ending party (Pwell Prices Globalization). The popularity f these activities gives us mre evidence that there is something series behind it all. I believe that we all need t carefully berne the modern trends in finance that fr throw they will be a must fr simple survival. References: Anderson, Sarah. 2003. Quebec: One More Crack in the Wall. Available from web Economic Integration - Benefits and Costs.
available from web Globalization and the Poor Countries: Viewpoint of the IMF. available from web Hecklinger, Richard. 2003. Globalization: Benefits and Responsibilities. available from web Kohut, Andrew. Americans Hold Varying Views About Benefits of Globalization. available from web Labor Costs and International Trade.
available from web Powell Promotes Globalization. available from web Statistic Globalization. available from web S. R. Dawson. 2000. Successful Outsourcing.
Institute of Management & Administration. D. S. OConner. 1998. Keeping information technology off the balance sheet.
Journal of Management Vol. 24, No. 3, pp. 305 - 50. V. A. Alex. 2001.
IT and College Students. Administrative Science Quarterly, July, pp. 370 - 87. R. Mark. 2000.
ASP clients Rate Outsourcing Benefits. Management Training, December, pp. 10 - 12. H. Robson Out. The Benefits of Outsourcing. available from web M.
Ten Hope. Riding the outsourcing wave. available from web J. McNeese. Outsourcing Benefits Functions Proving Successful. web
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Research essay sample on Fr Example Competitive Advantage
