Outsourcing has been considered a solution by companies to avoid the problems of implementation and many companies take everything from hardware, software and consultants from the vendors to take care of the new software but there are many disadvantages of outsourcing and one cannot ensure if it will not cause cost overrun or other related implementation problems.
A number of small and midsized organizations find outsourcing cheap and easy as compared to the traditional methods but there is equal number of problems associated to the provision.
Some of the common issues related to ERP outsourcing are
Buyer does not own anything: In case the client buys software on rent, the whole setup of ERP which includes the application and the database servers are established at another location which may not be located close to the buyer's place and the company may be taking the services on subscription basis which means the company does not own anything and when it stops paying the monthly bills. It may not get anything for the money previously spent but in case it is not outsourced. The client owns the software it buys and it can claim to get the upgraded versions whenever it needs.
Privacy of data: The database located with the vendor raises the issue of security and privacy of data especially when the business of the client disallows disclosing critical information. A number of companies feel the method such as taking applications on rent can be risky.
Cost: The cost although it appears to be less as compared to traditional methods but in the long run it may exceed expectations. The cost for leasing and offering services can be very high and will also increase with time.
The client requires proper testing of the solution before taking any decision related to it. It has been found in a survey that companies may get more and more less interested in getting the outsourced solution with time and the decision may change in one or two years of making the arrangements.
Quality: The solution may not be up to the mark because the service provider is sitting at another place and is not aware of the real business environment of the client. The solution may not offer the required methodologies, modifications; customization and it may not be helpful.
For outsourcing the client has to select the right vendor, analyze the number of services provided by the clients and ensure if it can provide the complex features required by the client or not. The agreements and managing decision are taken at later stages.
Expense on management and maintenance: Even after taking up an outsourced solution the company may have to spend resources in managing it at its place and it may have to hire employees to take care of the solution, hardware and related applications.
Many outsourcing companies face similar situations just like a company that goes through the in-house development or implementation process of ERP; therefore, the problem of software implementation cannot be completely omitted by outsourcing.