The Outsourcing Continuum, Part V: Application Outsourcing - Page 2

May 28, 2009

Mike Scheuerman

The costs for email services have a fairly wide range, but on average you should be able to get basic email service for around $10 per user per month. There are lots of options available to customize the service to your needs. It’s a bit like a Chinese menu and each item adds a little more the total bill.

App Outsourcing in General

Today there a number of companies offering software subscriptions. Everything from CRM to ERP systems can be obtained from an outsourcing service provider. These subscription based services are sold under various labels (SaaS, software as a service, Cloud computing, etc).

In a software subscription environment the focus of your company stays on the core business and not on the technology that enables the business. When you have someone else worrying about the nuances of accounts receivable processing you can devote more resources to generating the business that creates the accounts receivable. Many companies already do this when they outsource their payroll processing. They don’t worry about whether the tax tables are up-to-date; they just worry about whether their employees are productive.

The time and effort involved in maintaining and updating generic business applications software goes away. Someone who is far more knowledgeable about the subtleties of a particular business application will update the software without your in-house staff doing all the research to determine whether this is a good update or not. You don’t have to worry about whether you need to spend money on a new server because the old one ran out of gas―the software subscription vendor takes care of that as a part of the subscription.

You also don’t have to worry about running the backup every day, because your provider will do that for you. From a business continuity perspective you’re in much better shape since you can run the subscription business process from just about any computer. So, if a disaster strikes, your normal business processes can be up and running again as fast as you can run down to the local Best Buy and get a new machine and get online.

You can count on what it will cost to run that part of your business. You know exactly how much it costs you to run your general ledger or accounts payable or CRM. Under a licensed model, there are a lot of hidden costs that you don’t know about or track so you don’t really know other than the cost of the software, what it costs you to run those systems.

The downside is these offerings are still in their infancy so they may not be as flexible as they will be in the future. They aren’t fully business hardened yet so there are going to be problems that crop up that you don’t see in a licensed software package. The upside is that the provider’s business is dependent on a stable service offering and they will throw every resource they have at resolving the problem quickly.

It will take a lot more due diligence to determine what vendor can provide you with the stable, secure, reliable business process functions. You won’t be able to walk into the local software store and pick up a software package and walk out. Of course, when you do that today you have to go back to your office and figure out how to install it and get trained on how to use it.

The range of outsourcing options is growing daily so you’ll want to keep your eyes open for opportunities within your company to consider outsourcing not only your infrastructure but also the basic business applications that are essential to business operation but are not critical to your business strategy.

In the next article, we’ll take a look at how to integrate outsourcing into your Business and IT strategy.

Mike Scheuerman is an independent consultant with more than 26 years experience in strategic business planning and implementation. His experience from the computer room to the boardroom provides a broad spectrum view of how technology can be integrated with and contributes significantly to business strategy. Mike can be reached at

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