Thu, Feb 26, 2009 15:42 EST

Want to Save $10 Million or More on ERP? Don't Buy Oracle or SAP

Topic: Applications

Current Rating: Comments: 12

You want to play with the ERP big boys (SAP and Oracle), instead of the so-called Tier II ERP providers (Epicor, Infor, Lawson)? Then you better be prepared to pay a lot more ($9 million to $13 million) and plan for a longer implementation (two to three months longer).

And guess what: At the end of, say, your Oracle ERP implementation, your executive team is actually going to be less satisfied with the software's results than it would have been from a Tier II ERP provider.

That's according to new survey results from ERP consultancy Panorama Consulting Group. The data, gathered from December 2005 to November 2008, is culled from 670 participants who have implemented ERP during the last three years. In the study, Tier I providers are SAP, Oracle and Microsoft; Tier II include Epicor, Exact, IFS, Infor, Lawson, NetSuite, and Sage. (To read about NetSuite's 10-year journey to profitability, see "NetSuite's SaaS ERP Story: After 10 Years, an Upstart Finally Turns a Profit.")

Here are some survey highlights (or low lights, depending on which ERP provider you select):

The majority of respondents (77 percent) had chosen a Tier I provider (SAP 35 percent; Oracle 28 percent; and Microsoft: 14 percent). The rest (23 percent) went with the Tier II.

So, what was the total cost of the average EPR implementation? SAP $16.8 million; Oracle $12.6 million; and Microsoft $2.6 million. Tier II average: $3.5 million. (Microsoft's figure is pretty impressive.)

And how long did it take respondents to fully implement the ERP solution? SAP 20 months; Oracle 18.6 months; and Microsoft 18 months. Tier II: 17.8 months.

Now, the multimillion-dollar question: How satisfied are the executive team and users with the ERP solution? SAP 73 percent (Panorama's "satisfaction rating"); Oracle 62 percent; and Microsoft 69 percent. Tier II: 70 percent.

"Tier II vendors have clearly stepped up their strategies to compete with the 'big boys' of Tier I," noted Eric Kimberling, president of Panorama Consulting Group, in announcing the survey results. "But now that the field has more qualified players, the burden is on the buyer."

These survey results are the second part of Panorama's in-depth ERP study. In the first piece, Panorama's data showed that today's ERP rollout has only a 7 percent chance of coming in on time, will probably cost more than what companies estimated, and will likely deliver very unsatisfying results. Which can lead to outright nightmare ERP scenarios or even shareholder angst leading to halted ERP implementations.

All that led me to prognosticate that even with the high importance companies place on their ERP systems today, an ERP backlash is imminent at companies of all shapes and sizes. I think I now need to modify that statement to: "an ERP backlash is imminent at companies using Tier I ERP providers."

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All Comments Comments

Mon, Mar 2, 2009 10:31 EST

You get what you pay for

Posted by: Anonymous
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Decisions to play with the BIG BOYS is made on functionality and features. For example, SAP offers an entire add on suite for BI / dashboarding and MDM. Many years ago we went with software that had limited EDI functionality, which we did not need at the time. After getting a few large accounts that started requiring "specialized" EDI we found ourselves needing to swap ERP vendors to keep the accounts. Also, the larger ERP systems often have access to a large consulting base that may not be available on the Tier II "niche" market accounts.

If the functionality/ features are not needed then yes, go with a simpler system and save yourself the money ... but keep in mind that is why you are saving time and money.

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Mon, Mar 2, 2009 14:32 EST

Per user? Per module? Absolute numbers don't tell anything!

Posted by: Anonymous
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What I don't see in this article is the comparison of those who played with the big boys. Where they big themselves? And how about the "tier 2" clients?

What functionality has been implemented?

Simple ratio would tell more than the bold multi-million figures - that of course are much more attractive to pull in readers...

Sorry - but CIO becomes more and more rainbow-press - or BB advertising...

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Tue, Mar 3, 2009 10:10 EST

Unclear Conclusions

Posted by: Anonymous
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The article does not draw any correlations concerning the size of the implementation to the cost. I tried to access the whitepaper, but this press release just seems to be marketing/business development fluff. A Fortune 100 company would probably not use Microsoft or Lawson for its deployment, so the complexity and size of the engagements for mid-tier vendors are likely to be lower as a result. Oracle and SAP are certainly not always the best answer, but the way this survey frames the matter is quite misleading. A cost per end user would be a better indicator.

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Tue, Mar 3, 2009 21:03 EST

Big Boys in ERP

Posted by: John L
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You talk about the "BIG BOYS" in ERP.. specifically Oracle, but Oracle actually has 3 ERP's that I am aware of..
Oracle
Peoplesoft
JD Edwards
Are the Oracle stats inclusive of all 3 combined?

Also, other than the initial price, I find little difference in the implementation timelines and satisfaction rates. As another blogger mentioned, price could be a function of size.. licenses for larger companies going with tier 1 software, functionality, etc. Do you have the cost/user for example to set an even playing field?

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Wed, Mar 4, 2009 10:45 EST

CIO worthy information?

Posted by: Brent-BA
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As an IT Business Analyst/Achitect for a large organization (53k employees), with implimentations of PeopleSoft (Oracle) and SAP - I was tempted to share some of this information with my CIO, but did not because it is more of a 'teaser' than information to be used for decision making or of value to a CIO. For example: The general statistics of average ERP implimentation costs... ERP is like autism - you know one case, you can only say you know ONE case right?! In otherwords, is the average ERP implimentation a single module install of CRM? or a big bang adoption of multiple FSCM+ modules? Even then, I can only make sense of these figures and make meaningful risk assessments if I know - of these ERP initiatives, what percentage took on business process redesign efforts vs. mass customizations to accomodate their so called "special" ways for conducting business?

Some good teasers here regarding Teir II players - give it time - they become too profitable and MS, SAP or Oracle will buy them up and these adopters will be converting again (and again) in time ;)

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