Can consolidation create sustainable long-term value, or will it prove seductive but, ultimately, disappointing to shareholders, employees, customers, and management alike?
IT Security: Who's Investing In What?
one out of four implementations fail, regardless of scale of project, so it reduces risk to outsource.
But can't companies choose to just hang on another year, and hope that the economic climate improves?
Kim says that some will be able to, but "some of the systems are so old-there's just not a lot of Cobol programmers anymore. Unless they want to freeze any kind of capabilities that they've got, they've got to do some maintenance on these systems." Even from a maintenance standpoint, he says, maintenance costs, along with some customization or enhancing costs-necessary if companies want to tackle even small projects-all get expensive. "Sometimes you have to spend a little money in order to save money down the road, and I think that's what their challenge is," Kim says.
David Decker, vice president, sales and marketing at Colchester, Vt.-based Systems & Software, a provider of software systems, isn't so sure outsourcing makes sense. He says outsourcing is a model that everyone thought was a great model, but that has been "an enormous failure."
Decker says that in the case of those who outsourced customer functions, "most utilities realized that only they can care for their customers the way they need to be cared for-you can't give that to somebody else and have it done better." Cost also was a factor, he says. The cost of somebody else managing data centers, some of the services provided by customer service departments, and all of the infrastructure, turns out to be more expensive for companies than doing it themselves, according to Decker.
But with tight budgets, would it make more sense for companies to go to an outsourcing model if they have an old legacy system and they need some new functionality, without much cash?
Decker doesn't buy that argument. "My feeling is if you outsource it, you're going to spend more money doing it. . . .
[Something] we hear every single time we do an implementation is people saying, 'We're very willing to change the way we do business, and conform to a packaged solution.'" That lasts about two or three months into the implementation, he says, and then he hears, "You know, we can't change the way we're doing this, that, and the other thing." Yet, companies offering an ASP solution have to keep their package the way it was originally proposed, because an ASP company cannot run 20 different versions of their software for 20 different customers, according to Decker. "So there's a real sacrifice that takes place there from the utility side, or complexity that certainly gets added to the ASP side, which usually gets passed back to the utility as an increased cost." -J.A.
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