Meta Group Inc. analyst Michael Doane sees far reaching implications for the global sourcing approach. He says implementing large-scale enterprise applications, such as ERP and CRM, can be done to great advantage using a combination of onshore and offshore resources. As an example, he says the global energy company British Petroleum PLC (BP) reduced the cost of a corporate-wide SAP AG implementation by 30 per cent using this strategy.

Software implementations such as ERP are carried out in five phases, Doane says. The first phase, strategy and planning, and the second phase, blue printing and design, require lots of revisions and require a lot of interaction with end users. This means they are best carried out by an internal team or consultants working locally. During the third phase, software configuration, significant savings can be achieved by sending most of the work offshore, although any redesign work would continue to be performed onshore as the configuration work progresses.

The fourth phase is data migration, which involves populating the new ERP master file with data from legacy systems. Doane describes this as “real drudge work that’s well suited to less-expensive offshore labor.” Likewise system testing, the fifth and final phase, and any application customization, also can be done just as effectively and far more economically offshore.

“This model will catch on over the next 12 to 18 months, and will make enterprise applications like ERP much more affordable for the mid-market, which has always resisted them” because of the high costs of implementation, Doane says. Selectively using offshore resources to reduce those costs “will open up a huge new market and create opportunities for much greater business efficiencies.”