What are the current trends in outsourcing?

While the SAP outsourcing arena is constantly evolving, three hot trends seem to be gaining a great deal of customer adoption and resonating within the marketplace:

• Customers shifting from traditional large SAP Services Integrators (SIs) toward nimble specialized SAP boutiques: Frustrated with the traditional chains associated with the inflexible institutional behemoths, customers are choosing to partner with more agile smaller SAP consultancies which provide more specialized services and customer-centric approaches. Large SIs continue to flourish, but this resourcing/partnering wave has shifted the outsourcing playing field.
• The proliferation and commoditization of SAP hosting providers: Perhaps one of outsourcing’s most widely known “secrets” – SAP hosting is a cost-effective and powerful solution for outsourcing an organization’s SAP NetWeaver infrastructure (and even potentially more). Until recently, this opportunity was only available for a subset of those “in the know.” Fortunately for customers, however, SAP hosting provider options have grown dramatically over the last several years providing excellent and cost-effective hosting alternatives servicing the entire market spectrum. In fact, with the rise of SAP within the small to midsize market, SAP hosting adoption has really taken off within this cost-conservative market segment.
• Nearshore and on-shore outsourcing coming front and center: Offsite SAP outsourcing has essentially been synonymous with off-shoring (e.g., Indian-based SAP delivery). Now focused on closer time zones with equivalent or higher levels of quality, both nearshore and on-shore SAP outsourcing offer customers closer geographic proximity along with a tighter cultural fit. Instead of working with SAP consultants halfway around the globe, customers are able to work with myriad SAP partners based across North America or South America. Customers have taken notice and this hot trend continues to pick up momentum.

What can companies gain from outsourcing beyond just saving money?

While cost is certainly an important component in an organization’s decision to leverage outsourcing, additional benefits most definitely exist beyond the pocketbook. Some of the many outsourcing benefits include:

• Access to otherwise inaccessible expertise – such as in-house SAP knowledge
• Flexibility and scalability – working with SAP outsourcing provides easy and contractual SAP ramp-up without the normal full time employment overhead
• Organizational empowerment – small to midsize organizations become empowered to tackle so much more than if they were left only to their own full-time equivalents (FTEs)
• Business excellence focus – companies can focus on what makes their business special. SAP is a tool, albeit a powerful one.
• Rapid SAP initiative deployment – working with an SAP outsourcing provider can enable an organization to more quickly implement an SAP initiative than left solely to their own peoplepower

Are there situations in which companies should decide against outsourcing and keep their processes in-house?

Without question. Some SAP skill sets are simply not well-suited for outsourcing. As stated previously, there are most definitely several situations, and perhaps more accurately, several key skill sets, that should ideally be resourced internally. From a best practice perspective, there are three general rules for organizations to follow:

• Generals lead, soldiers execute: Strategic SAP positions and responsibilities, including key leadership positions, should be handled by an organization’s full-time employees. Outsource the tactical. Driving SAP initiatives, whether from a project or program management position or technical architecture design, requires long-term vision and long-time commitment in which the responsibility lies squarely on the customer. Strong SAP outsourcing partners can mostly definitely have the client’s best interests in mind; however, no one has more of a vested interest in an organization’s success than the organization.
• The complex, business-critical, and rapidly changing: Mission-critical roles that drive or support an organization’s business processes such as key SAP functional roles, technical architects, or integration management are all best delivered via internal resources. While SAP outsourcing can most definitely provide valuable support within these areas, an organization must always remember what drives its business’s success: the business service they provide its customers. Key SAP support roles focused on business innovation, key functional business process support, and crucial SAP functional configuration design should be driven within an organization. If an organization does not possess these skill sets internally, at a minimum internal FTEs should be assigned to shadow, absorb, and transition.
• No fox watching the henhouse: Another best represented internal role should be the outsourcing partner oversight. If an organization leverages an SAP outsourcing partner heavily, such as an off-site/off-shore/nearshore/on-shore delivery center, it is imperative that a designated company FTE be assigned to ensure delivery. There are myriad accountability tools that can and should be used to ensure your outsourcing partner is meeting your agreed upon service levels, metrics, key performance indicators, and responsibilities. Failing to have this level of outsourcing oversight – even with the best partner with the best intentions – can prove to be at best confusing and at worst costly.

In chapter 3 you mention “the various flavors” of outsourcing. What is the most popular “flavor” and which do you think is the smartest route?

In typical consultant speak, there is no one answer. The “smartest route” depends completely on a laundry list of factors specific to not only the organization but also the specific SAP initiative being tackled. Even within the same exact company and business sub-function, the outsourcing approach could be completely different, let alone when you add in unique organizations, markets, industries, and organizational sizes.

However, all that being said, one of the most popular SAP outsourcing flavors that I am seeing within the marketplace is the “hybrid” approach. Due to many of the factors described above, SAP customers understand that the one-size-fits-all outsourcing model simply doesn’t work, at least in most cases. Therefore, companies installing SAP are choosing a blended outsourcing strategy based on cost by leveraging on-site resources for some skill sets and offsite resources for others. Typically, the more business process-focused skill sets and complex technical developments (e.g., interfaces) are designed onsite while the less complicated (ABAP custom reports and forms) and routine areas (SAP NetWeaver hosting and operations) are constructed remotely.

In chapter 8 you talk about different outsourcing models available. Can you describe the “Three Wise Monkeys” model?

This commonly used engagement method leverages a completely offsite SAP delivery mechanism with no outsourcing partner onsite presence. Taking its name from the proverbial Japanese maxim of the “see no evil, speak no evil, hear no evil” monkeys, the offsite partner and end-client interaction is kept to a minimum. All interaction and engagement is typically performed via ticket tracking systems and performance accountability tools to ensure acceptable delivery.

Of course, the “Three Wise Monkeys” name is an over-exaggeration; however, the intent behind the title is actually not that far off. This model is specifically designed to keep the offsite presence remote and the interaction limited.

The organizations that benefit the most from this SAP outsourcing construct tend to be those that leverage the “Three Wise Monkey” outsourcing model mostly for technical operational routine activities such as SAP Hosting, SAP NetWeaver production support, simply Level 1 delivery such as SAP password reset, and ABAP development break/fix.

What are the three most important criteria when selecting an outsourcing provider?

While there are countless critical factors involved in choosing the proper outsourcing provider, the following three criteria are without question the most important and prove to be key indicators of outsourcing success:

• Trust: Without a sense of real trust in your outsourcing partner, all other factors are meaningless. Working with an SAP outsourcing provider, as any business relationship, is similar to marriage. If an organization questions what the outsourcing provider is saying or performing, the lack of confidence can cause significant relationship decay ultimately leading to divorce. This is obviously not to say that trust should be blindly given. Trust in one’s SAP outsourcing provider must be earned and continually maintained. And in fact , it is imperative that prior to engaging formally with a given SAP outsourcing provider, a foundation of trust must exist.
• Proven experience and talent: Continuing with the theme of trust, trust can be earned by knowing that your SAP outsourcing provider has a proven track record of consistently delivering high quality SAP services. Checking references, holding thorough SAP technical interviews, watching vendor presentations and demos, and other methods to ensure your outsourcer are who they say they are must be performed to mitigate risk. Past successful performance is a strong indicator of future successful performance. Therefore, partnering with an SAP outsourcing provider with proven experiences and consulting talent specific to your SAP initiative’s needs is paramount.
• Partnership approach: While the other important criteria are based on how your organization perceives your SAP outsourcing provider, this factor is based on how your SAP outsourcing provider perceives the spirit of the relationship. Driven completely by the customer and propagated throughout the organization, a true partnership – “we all sink or we all swim” approach – is really fundamental to successful SAP initiative delivery when leveraging an outsourcing provider. Cultivating anything else such as an adversarial relationship can prove to be harmful.

How does the size of an enterprise affect the decision to choose outsourcing?

While enterprise size might not necessarily affect/impact whether an organization chooses to leverage SAP outsourcing (all size organizations can benefit, albeit differently, from the opportunity to outsource SAP delivery), the size of an organization can most definitely impact how you leverage outsourcing. Thus – size does matter.

Specifically small to midsize enterprises (SMEs) are gaining a great deal from the wall-to-wall SAP outsourcing delivery and post-production support options. With the explosion of SAP “All-in-One” product options coupled with rapid deployment, the SME segment has embraced SAP outsourcing beginning with its implementation and then continuing into full SAP production support.

Large SAP customers have always leveraged SAP outsourcing based on their deep pockets and constantly evolving SAP initiatives. However, in many large enterprise organizations, SAP outsourcing typically ended shortly after go-live. These larger organizations had the luxury of building robust internal SAP support mechanisms and chose to do so. While this is changing within the marketplace, large enterprises continue to have more options and exercise them.

What is the biggest mistake you see companies make when outsourcing SAP operations?

As with any complicated situation, successful execution is an art, not a science. While many fundamental factors exist, one critical criterion impacts success and causes more issues than others: establishing clear and mutually agreed upon delivery metrics. It is imperative that you set up clear expectations of roles and responsibilities coupled with effective delivery metric reporting when working with SAP outsourcers, independent of location (onsite/offsite), number of resources (single resource to entire project team), and skill sets (SAP Hosting, SAP business process). This is the only way to mitigate risk and set yourself up with the highest probability for success.

In too many SAP outsourcing customer/vendor arrangements, clients assume that certain SAP delivery responsibilities are included within an outsourcer’s agreement. To ensure successful delivery, they must define clearly written and well-documented roles and responsibilities. After both parties agree to that which is expected of each of them, constant delivery oversight to enforce accountability must be maintained. Companies should use the existing comprehensive suite of both SAP and non-SAP reporting mechanisms.

Laura Casasanto

Laura Casasanto is a technical editor who served as the managing editor of SCM Expert and Project Expert.

You may contact the author at lauracasasanto@gmail.com.

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