Strategic benefits of choosing multi-sourcing ERP solutions
ERP solutions enable companies to use a system of integrated applications to manage the business and automate several back office functions
Change is inevitable. Traditional ways of companies sourcing Enterprise Resource Planning (ERP) are undergoing a change. Companies used to outsource complete IT department or ERP solutions to a supplier or used to run it in-house. Companies are increasingly moving from outsourcing to a single ERP provider; to multi-sourcing with different ERP providers; a shift that is turning out to be a strategic advantage for organizations. Multi-sourcing not only reduces the dependency on a single supplier it also creates flexibility for the organization, while widening the options to source services from ‘best-of-breed’ suppliers, creating a competitive edge for the business while being cost-effective.
In the current world of IT strategy, companies have a menu of competitive offerings to choose from. They have a range of On-Premise and Cloud ERP solutions to evaluate, based on business needs. They are also looking at ways to keep all multi-sourced solutions under one umbrella, with an effective framework around it, which encompasses IT Service Level and financial management. In fact, analysts are also encouraging companies to consider the advantages of multi-sourcing models.
In parallel, it is equally important for this change in approach, to tie-in with business needs and evolving business process changes. For instance, the IT strategies within an organization also need to evolve to support business transformation initiatives through multi-sourcing. A clear assessment of business priorities and overhead should drive technology needs and future IT architecture.
Increased ERP choices drive a multi-sourced approach
It is also noteworthy to mention that the advent of software as a service (SaaS) has also increased ERP choices. Large enterprise software companies offer Cloud solutions and services as part of their go to market strategy. Market reports have forecasted that the SaaS market is expected to attain a market size of $186 Billion by 2024, with a growth of 20% year-on-year.
While traditional ERP offerings tend to run large chunks of a company’s business processes, there are usually gaps and missing functionalities that are often fulfilled by customization. Such customizations usually result in tedious version and release upgrades, which IT is more often than not challenged to manage, and often unable to adapt to the business process changes especially in the midst of business transformation programs in an effective and synchronized manner
To overcome this, ERP software providers offer “holistic solutions” to companies by offering SaaS solutions as “add-ons”, which potentially address all the requirements a customer needs and expects from enterprise software.
How to make multi-sourced ERP successful
In a nutshell, integration with reduced customization is a key requirement. While running IT programs for business, it is imperative that the impact on the legacy system landscape is taken into account. The new, go-forward system with multi-sourced solutions should work seamlessly with legacy systems to a point where these systems are rationalized as part of standardization initiatives for companies. While sourcing enterprise software, companies need to put integration with open APIs as a key priority. When open APIs are made available, SaaS solutions can create pre-packaged solutions and seamlessly integrate with main ERP systems. This will fill in the gaps in functionality from traditional ERP providers without major customization efforts. Companies can also expect more support for integration with 3rd party cloud offerings.
Another focus area is the trend of exploring new technology trends for digital transformation such as Artificial Intelligence (AI), Machine Learning (ML), Blockchain, Robotic Process Automation (RPA) and Augmented Reality (AR) and the impact it has on traditional ERP systems and multi-sourcing. Businesses are witnessing more benefits with the level of automation to their business processes like Order to Cash, Revenue Recognition, quicker month end close and financial consolidation. Blockchain is being considered to improve traceability in ERP systems, while Cloud ERP providers are catering to the automation needs of companies with traditional ERP systems.
Companies also need to consider compliance as a critical factor while choosing multi-sourcing model. While Sarbanes-Oxley requirements have been more of a standard compliance requirement, more recent regulations like General Data Protection Regulation (GDPR) need to be considered. Companies may need to consider compliance related add-ons which tie in with the main ERP system and SaaS ERP systems.
In summary, companies are strategically moving towards multi-sourcing IT/ ERP services from multiple software providers, and have a range of Cloud ERP offerings to choose from. Less customization to their main ERP systems is one of the key objectives. Companies are reducing complexity and Total Cost of Ownership by choosing “point SaaS solutions” as add-ons to the IT architecture to meet their business needs quickly and efficiently.
Authored by Arun Kumar VC, Vice President, Enterprise Solutions, HTC Global Services