Several years before I joined Yuma County, Ariz., the IT department contracted with an external agency to implement and host a countywide enterprise resource planning (ERP) system. This decision made perfect sense, from both an operational and financial standpoint.
I’m a big fan of outsourced applications. My background includes helping launch a business process outsourcing (BPO) operation that hosted multiple ERP projects for organizations that did not have the desire or the resources to run complex systems in-house.
Why then, you may ask, did we bring Yuma County’s hosted ERP software back in-house? There is no single answer to that question. Many factors influenced our decision to in-source our ERP, including:
- Continuing operational problems with the host provider. Our service provider did not follow the manufacturer’s recommended operational procedures. This resulted in upgrades that worked flawlessly in tests but failed miserably in production. It was often difficult to get the provider to implement requested changes to the environment, which resulted in days or even weeks of delay in virtually every major ERP-related project.
- Yuma’s physical location. While the reliability of Internet service to Yuma County has greatly improved, there have been several times in the past few years when the main Internet connection leading into the region failed, resulting in no Internet connectivity in the region, regardless of carrier.
- Price increases. Once our ERP was up and running, we faced significant unplanned price hikes from the host organization. The final increase resulted in well over $100,000 in nonbudgeted costs, plus $200,000 in billing errors that we were informed we had no choice but to pay. What had originally been a very cost- effective solution quickly became a financial burden that our county could not bear.
- Vendor arrogance. When we attempted to resolve problems with the host provider, it informed us that if we didn’t like the arrangements, we were free to reimplement our entire ERP environment in the next 60 to 90 days. The company knew that it would be extremely difficult if not impossible for us to re-create our entire ERP infrastructure in the given timeframe.
We realized that we were essentially being held hostage by our service provider, so we decided to take actions to shift the balance of power back to Yuma County. We successfully replicated our ERP infrastructure, reimplemented our ERP and migrated all data, user accounts and privileges in just over 60 days. This was accomplished by a team of five people with only minimal ERP experience and a single remote database administrator who never physically visited our location.
The system has been running successfully for the past several months. We have drastically reduced response time, as well as the time required to complete any ERP-related projects. Our hard-dollar savings over the next five years will exceed $1 million. Soft-dollar savings might possibly exceed that amount.
In-sourcing is not right for every software application or every organization, but when properly matched to the specific situation, it can be an amazing tool for any IT department.
Neal Puff is CIO of Yuma County, Ariz. He holds PMP, CPM and CISSP certifications.
Know your …
- Needs: The decision to outsource or in-source should be based on the specific needs of the organization.
- Environment: Understand your infrastructure and what impact bringing an application in-house will have.
- People: If your staff is not up to the task of implementing and managing a new application, it’s probably best to leave things as they are.
- Weak spots: If you have a good team with a few gaps in skills, spending money on an outside service will pay off in the end.
- Ability to rapidly deploy: During an in-sourcing project, it is not uncommon for new developments to require rapid redeployment of servers or services. Virtualization was key in our agility.