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ERP Guide : The sourcing basis: turn-key or do-it-yourself

Tutorial by:      Date: 2016-05-05 05:05:01

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The second principle on which a decision has to be taken before the ex ante evaluation of an ERP system starts is the sourcing basis, the division of tasks between the organization and the implementation partner. Most organizations that intend to implement ERP seek the support of an implementation partner. The costs of the implementation partner constitute a large proportion of the total costs of the ERP implementation, and the quality of the implementation partner to a large extent determines the success of the implementation. Clear agreement on the tasks and responsibilities of the implementation partner is therefore of the utmost importance for the ERP implementation project.

The sourcing basis can have two extreme shapes: the turn-key approach and the do-it-yourself approach.

With a turn-key approach, the implementation partner carries out all tasks it can reasonably do during the implementation. The full configuration is done by external consultants, the interfaces between the ERP system and other applications are built by them, they convert the data into the ERP system and they train the users. The employees of the organization are only involved when this is unavoidable, for example when specialist organization-specific knowledge is required.

The turn-key approach has advantages and disadvantages. An important advantage is the availability of resources: implementation consultants do not have operational tasks in the organization and can therefore concentrate fully on the implementation project; this enables quick progress. Another advantage is the fact that the configuration of the business logic is executed by experts who know the ins and outs of the ERP system and will make optimal use of its functionality. An advantage that is not politically correct but still valid is the scapegoat role an implementation partner can take: when the implementation does not work out as planned it is less painless to replace the consultant than to replace an employee.

Disadvantages of the turn-key approach are the extra time required by the end of the implementation for knowledge transfer from the consultants to the own employees, the risk that organization-specific requirements are not fully configured, and a strong dependence on external consultants.

With a do-it-yourself approach the employees of the organization carry out all implementation activities that they can reasonably be asked to do. They configure the business logic, design and develop the required interfaces with other applications and the data conversion programs, and train the users. The implementation consultant only supplies the expert knowledge of the ERP system.

This approach also has advantages and disadvantages. An important plus is commitment: employees that configure the ERP system build their own future working environment. Another advantage is the fact that the configuration is based on optimal knowledge of the own business processes. A last advantage is a potentially cheaper implementation: implementation partners have high rates. Potential downsides of the do-it-yourself approach are a longer implementation time span, because internal staff cannot always be fully relieved from their operational duties, and company myopia which may limit the creative use of options for process improvement offered by the ERP system. A disadvantage that should not be ignored is the risk that employees that are trained to become ERP experts are popular on the labour market and may be recruited by other organizations.

An example of a consciously mixed sourcing basis is presented in Figure 5.3. The company Recticel, supplier in the automotive industry, opted for an implementation team with both external implementation consultants and internal employees.

Sourcing basis at Recticel. Source: De Tijd [2002]

The division of tasks and responsibilities between the consultants of the implementation partner and the employees of the organization that intends to implement ERP is to a large extent determined by the choice for turn-key or do-it-yourself. Before a good ex ante evaluation can be started, it is therefore important to decide which of the two sourcing basis approaches is the principle direction for the implementation.

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