Enterprise Application Outsourcing

Definition of Enterprise Application Outsourcing

Enterprise Application Outsourcing refers to the practice of hiring an external company to manage, maintain, and update an organization’s software applications. This allows the organization to focus on its core business functions while entrusting its applications to a specialized service provider. The outsourcing often includes operations management, application hosting, system integration, and application modernization.


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Key Takeaways

  1. Enterprise Application Outsourcing helps businesses to streamline their processes, reduce costs, and improve operational efficiency by delegating their application management and development tasks to specialized outsourcing service providers.
  2. Some common enterprise applications that are outsourced include Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), Business Intelligence (BI), and Human Resources Management (HRM) systems, which can be customized to meet the company’s specific needs.
  3. When considering outsourcing enterprise applications, organizations must carefully evaluate potential service providers based on their expertise, track record, service quality, and security measures to ensure successful implementation and a positive return on investment.

Importance of Enterprise Application Outsourcing

Enterprise Application Outsourcing (EAO) is important as it helps businesses manage, maintain, and improve their critical enterprise software applications in an effective and cost-efficient manner.

By outsourcing these tasks to experienced third-party service providers, companies can focus on their core competencies and dedicate resources to their strategic objectives.

This enables organizations to achieve better performance, reduced operational risks, and rapid application development and deployment.

In addition, EAO contributes to greater scalability and flexibility, as companies can easily adapt to evolving market conditions and customer demands without making significant investments in training or technology infrastructure.

Overall, EAO plays a crucial role in improving business processes, enhancing operational efficiency, and supporting growth and innovation.


Enterprise Application Outsourcing is a strategic business approach employed by organizations to enhance their overall efficiency and focus on their core operations. The process involves entrusting the management, maintenance, and development of specific enterprise applications to a third-party service provider.

By leveraging the expertise, skills, and technologies of these service providers, organizations can optimize their operational processes, reduce expenses and risks, and drive innovation for business growth. Through this strategy, businesses aim to avail themselves of scalable services that can quickly adapt to the changing needs of their clients, competitive markets, and technological advancements.

The purpose of Enterprise Application Outsourcing is to enable organizations to capitalize on the knowledge and capabilities of external service providers, ensuring that their essential applications are consistently updated and improved to meet industry standards. These applications may include Customer Relationship Management (CRM) systems, Enterprise Resource Planning (ERP) solutions, and Supply Chain Management (SCM) tools, among others, which play a critical role in streamlining operations, enhancing customer experiences, and facilitating communication between departments.

With the agility and expertise brought forth by outsourcing partners, organizations can concentrate on their core business functions, capitalize on emerging opportunities, and gain a competitive advantage in their respective industries.

Examples of Enterprise Application Outsourcing

IBM and Procter & Gamble (P&G):In 2003, Procter & Gamble signed a ten-year, $4 billion deal with IBM for Enterprise Application Outsourcing (EAO). Under this agreement, IBM managed P&G’s enterprise applications, including supply chain management, customer relationship management, and other key functions. By outsourcing their IT infrastructure management, P&G aimed at reducing costs and allowing their internal IT team to focus on strategic initiatives. The partnership has since been renewed and expanded multiple times.

Xerox and HCL Technologies:In 2010, Xerox outsourced the operations and management of its enterprise applications to HCL Technologies, a leading global IT services company. The partnership aimed to transform and optimize Xerox’s critical enterprise applications such as Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM). The deal allowed Xerox to focus on its core business, while HCL provided the expertise needed to maximize the benefits of their technology investments and improve customer experiences.

The State of Georgia and IBM:In 2008, the state of Georgia signed a contract with IBM Global Services for Enterprise Application Outsourcing (EAO) and IT Infrastructure Transformation. Under this four-year, $873 million deal, IBM took over the operation and management of the state’s applications, including financial and procurement systems, human resources, and other core government services. This partnership enabled Georgia to modernize its IT systems, become more agile, and serve its constituents better.


Enterprise Application Outsourcing

What is Enterprise Application Outsourcing?

Enterprise Application Outsourcing is the process of delegating the management, maintenance, and support of an enterprise’s software applications to a third-party service provider. This can help companies reduce costs and focus on core business activities while ensuring the smooth operation of their software infrastructure.

What are the advantages of Enterprise Application Outsourcing?

Some advantages of Enterprise Application Outsourcing include cost savings, increased scalability, greater agility, access to specialized expertise, and streamlined management of software applications. Outsourcing can also free up internal IT resources for more strategic initiatives.

What types of services can be outsourced in Enterprise Application Outsourcing?

Services that can be outsourced in Enterprise Application Outsourcing include application development, application maintenance and support, software as a service (SaaS) management, infrastructure management, and application testing, among others.

How can organizations ensure data security when outsourcing enterprise applications?

Organizations can ensure data security by conducting thorough due diligence on the outsourcing provider, including evaluating their security policies, infrastructure, and expertise in handling sensitive data. In addition, organizations should establish clear data security agreements and maintain open lines of communication with the provider to ensure alignment on security best practices.

How do you choose the right Enterprise Application Outsourcing provider?

Choosing the right Enterprise Application Outsourcing provider involves evaluating factors such as their track record, expertise in your industry, knowledge of specific applications, data security capabilities, scalability, and cost. It is essential to engage in open and honest communication with potential providers to ensure your needs and expectations are met.


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Related Technology Terms

  • Managed Service Providers (MSPs)
  • Application Service Providers (ASPs)
  • Cloud-based Software as a Service (SaaS)
  • Business Process Outsourcing (BPO)
  • Service Level Agreements (SLAs)

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