Why OUTSOURCING is IN

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Author: TIM KEARNEY
Date: Jan. 2000
From: Strategic Finance(Vol. 81, Issue 7)
Publisher: Institute of Management Accountants
Document Type: Article
Length: 2,010 words

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APPLICATI0N SERVICE PROVIDERS (ASP) ARE MAKING IT EASIER FOR COMPANIES TO USE OUTSIDE SERVICES AGAIN.

WHEN OWENS CORNING LOOKED TO AUTOMATE its paper-based expense reporting process, we decided that our shared services center had enough responsibilities running core financial applications in-house. Integrating and running a licensed in-house expense management system with all the expense and time burdens it would heap on our staff didn't appeal to us. And creating and running our own automated system made about as much sense as it did for us to build a well behind corporate headquarters to supply our own water when it's readily available from a utility company.

So we turned to a new breed of computing service provider--an Application Service Provider (ASP)--to outsource our expense reporting system. Although we're using a slight variation of the model, typically this type of ASP hosts the software on its computer network, and employees dial up through the Internet to submit expenses and get expenses reimbursed within two days. In the ASP model, you generally don't own the software. Essentially, you rent it or pay per transaction, much like the service bureau model. Since the travel and expense software application resides on the service provider's servers, the ASP runs and maintains it so we can focus on what we do best--manufacture building products. It's like we have a virtual IT staff running our automated expense reporting system.

So how does an ASP operate? A recent article in Internet World, "The Rise of the ASP," says it best, explaining that the ASP will "load your data and business logic onto a packaged application, customize it, and operate it for you at a remote data center and spare you, the customer, the burden of buying, installing, and configuring the hardware and software." Another crucial point from this article states that "the buying decision can be presented internally as contracting with a service rather than meddling with IT infrastructure." This can speed the purchasing process dramatically and give users the applications they want and need now.

To help you decide if the ASP model is right for you, let's look at why the model is on the rise, concerns in selecting an ASP vendor, and the reasons we at Owens Corning chose the ASP model.

THE DRIVERS

Two keys that are driving the interest in ASPs include the Internet and the push away from ERPs. Before the Internet, if you chose to outsource, you usually needed expensive highcapacity communication gear to pipe the data back and forth. This often meant you leased expensive T-1 lines from a telephone company, but, today, a combination of Internet and Web-enabled applications eliminates the need for such an investment.

For most of the decade, large ERP companies have dominated the information technology arena, providing a wide range of applications--finance, accounting, human resources, and a host of others. A typical ERP relationship involves considerable assessment of need, software licenses, and extensive, expensive, and complex implementation usually accompanied by an army of on-site consultants and...

Source Citation

Source Citation
KEARNEY, TIM. "Why OUTSOURCING is IN." Strategic Finance, vol. 81, no. 7, 2000, p. 34. Accessed 10 Apr. 2021.
  

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