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The Impact of ERP and BI Outsourcing - Real numbers

by Dr. Berg

September 13, 2011

In the SAP community there is a significant volume of ‘chatter’ about lost IT jobs, ERP and BI outsourcing, Software-as-a-Service and cloud computing. In this blog, we will look at some real numbers and see how facts may provide a clearer picture on how our field is changing. By Dr. Berg

Some Background

Over the last decade there has been a substantial amount of outsourcing of ERP and BI in organizations. For instance, the London School of Economics estimate that 58% of all application development and 52% of infrastructure is either already outsourced or planned to be outsourced in 2011. There are however many models for how this is done.

Software as s Service (SaaS)

First we had the offshore model where the system support was moved to India or typically another Asian country. Now we see a growth in Software-as-a-Service (SaaS). For example, in October 2010, InformationWeek surveyed 275 professionals and found that at least 60% of companies already use this method to outsource functions such as email, storage, backup etc., a increase from 47% in 2009.

SAP has also a SaaS offering called “Business ByDesign”. In February, 2011 SAP released this in its 2.6 version with a published base price of only $149 per month per user (this price varies based on volume discounts and the functionality included).  This is a significant step towards allowing companies to “drink milk – without having to buy a cow”…

Cloud Computing

Others have started to use cloud computing. The defin ition of this overlaps somewhat with SaaS, but it also entails using storage and applications that companies actually own, on rented networks, hardware with ‘virtualized’ scalability. According to a report from IDC, IT cloud spending will expand from $21.5 billion in 2010 to $72.9 billion by 2015 and one of every $7 spent on packaged software, service and storage offerings in 2015 will be related to the public cloud model.

Since the worldwide IT spending is increasing by 5.7% since 2010, this means that IT cloud services is growing at more than four times the rate of other IT spending..

The Impact of Outsourcing on IT workers has been Minimal.

The US Department of Labor found that in 2010, the number of IT workers employed in the US remained steady at 3,175,520 (in 2009 the number was 3,196,930).

When we factor out programmers (who declined by 9.31% to 333,620), the number of IT workers actually grew by 10,850. So, bad news for ABAP programmers, but a great development for ERP and BI application developers.

Also, the average salaries actually increased by $1,026 from $79,443 to $80,469. Since the national average salary is only $44,410, it is hard to argue that the recession and outsourcing has hurt the overall compensation of the IT workforce either.

Summary

Our field of IT development is morphing from programming to application configuration. How we do ERP and BI will change dramatically over the next 3-5 years.

We will shed magnetic disks. We will go to in-memory computing, SaaS will become the norm, and hardware will be in-the-cloud. But like always, this is a great time to be part of the change and learn new skills. The demand for overall ERP and BI workers will not decline, but the jobs will simply become more specialized…

To hear more on this topic, and perhaps share a glass of wine, meet me at the SA P Outsourcing Conference in Las Vegas in November 2-4...

Dr. Berg

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