Many companies and governmental organizations are choosing to outsource the administration of their Information Technology (IT) departments. As this practice increases in popularity, procurement of software and hardware often falls to the outsourcer, as well.  Procurement of hardware, software and maintenance by third party administrator, adds at least one additional layer to the IT administration onion.

Manufacturing Software

Purchasing a Manufacturing Software System as an outsourcer

When it comes to the ERP and/or manufacturing software system piece of a manufacturing company’s infrastructure procurement and purchasing personnel have to be completely head’s up to additional considerations in making these purchases. Some considerations:
1.    Software and hardware licensing provisions that prohibit the outsourcer from making such purchases on their client’s behalf.
2.    Outsourcers are sometimes required to “carry” their clients on their own system.
3.    The outsourcer must be a formally designated agent for the client in order to make such purchases and adjustments.
4.    Maintenance and security certificate administration can be tied to hardware ownership and original purchase.
5.    Legacy issues associated with previous outsourcer.

Software licensing issues are often affected by a number of factors. The five items listed above can affect the client and the outsourcer in the following ways.
1.    Some software and hardware providers do not allow for the third party procurement of their products on behalf of their client and can be negotiated out of a license or maintenance agreement, but not always.  The end result is that warranty and maintenance terms can be voided, on the manufacturing software system or other software package.

2.    Compliance issues can also arise out of creative licensing solutions.  On occasion, the outsourcer may offer to “carry” the client on it’s own licensing and maintenance agreements.  Buyers beware, few if any, software companies would find this acceptable.

3.    Some software and hardware maintenance providers require that the outsourcer become a formally designated agent for the client in order to purchase software and/or enter into maintenance or software agreements on a client’s behalf.  This often involves a formal process and paperwork without which licensing compliance is null and void.

4.    Maintenance and security certificates used on an Internet site may have originally been purchased directly by the client.  Administration of these contracts and certificates may be designated to a particular individual in the company and while certificates may be moved around between servers, doing so will be difficult if originally purchased by the client company and often results in having to re-purchase the certificates and re-write agreements.

5.    If an outsourcer has won a contract from another outsourcer additional monies (as high as 20%) should be put aside in the budget to deal with purchasing compliance holes. Watchdog groups find transition time to be a great opportunity for auditing an organization.  Non-transferable licenses will have to be re-bought and should be factored in. 

 Despite all the headaches associated with outsourcing for the provider and for the client, it has proven a viable and cost effective alternative to maintaining an internal IT department for some organizations and a moneymaking proposition for the providers worldwide.

Written by :

alr857