SAP
ERP is one of the top-selling ERP systems in the world. However, firms
must look at alternatives and substitutes, especially since ERP systems have
such a large price-tag, in purchasing, implementing, and maintaining the
system. The ERP selection
process includes defining clear goals, define requirements of what ERP needs to
do, and forcing vendors to demonstrate against the requirements, according to
Eric Kimberling of Panorama Consulting Solutions in his webinar “ERP Software Selection
Success: Ten Tips From the Pros at Panorama.” We look at
SAP’s two major competitors as well as a growing recent market entrant:
Oracle, Microsoft Dynamics, and Infor.
Oracle’s
ERP system holds the second largest market-share ranking only behind SAP’s ERP
product solutions. SAP’s ERP software integrates several business applications
and can unite and work with multiple databases, while Oracle created its own
ORDBMS (Object Relational Database Management System). SAP works in ABAP
(advanced Business Application Planning) language and Oracle’s database is
SQL-based. It is known that SAP is extremely hard at customizing which means
companies need to pay more for the additional needs, while, Oracle has created
a pluggable architecture which uses open industry standards and it can make it
quite easy for companies to integrate and customize, even a small company like
IVK can also deploy at an affordable price. In comparing costs, analysts reported that on average Oracle's total cost of
ownership (incl. consulting and resource costs) is 46% lower than SAP's, while
the software license costs are comparable. The findings of this report lets us
conclude that in context of prices Oracle has more chances to win over
potential customers because of its lower ownership cost, while SAP's consulting
costs are almost twice higher. (Centriqs, 2014) Managers cannot
forget that additional costs like yearly maintenance have been rising as the
market becomes less competitive due to rivals failing and acquisitions.
Oracle and SAP raised maintenance fees by as much as 20 percent.
(Gallaugher, 2014). An average of 51 man hour is required to deploy Oracle
software suites versus 93 for SAP which means Oracle's time-to-implement cycle
is almost twice shorter and choosing Oracle can be tangible benefits for
reducing the user’s time as well as money, according to Kimberling ("SAP vs. Oracle," 2014.) Like SAP ERP, Oracle’s risks include data risk, which for a firm like IVK
come in the form of brand credibility and compliance and it could result in
legal ramifications, loss of customer confidence and decreased inquiries by
potential customers.
Microsoft
Dynamics® ERP offers comparable software to SAP’s All-in-One solution
although the price is much more competitive than the similar best-in-class ERP
software options. Barton’s thought of restructuring the IT departments within
IVK, which would create synergies across line of business integration as well
as allow IVK to hire a Microsoft specialist to ensure they can take full
advantage of software standardization and best engage the correct outsourcing
partners. (Austin, 2009). Compared to SAP and Oracle, Dynamics has the
shortest implementation time at 12.5 months, but is average for over-run on
implementation at 4 months, but still significantly faster to implement.
Dynamics offers user-based pricing, and a cost-calculator similar to SAP.
Pricing is estimated as follows, for up-front costs, at $254,980. (Microsoft
Dynamics GP, SL, CRM & Intacct).
Packages & Modules
|
Factors
|
Price
|
Software Package based on read-only
users
|
150 read-only users & 25 full users
|
161,000
|
Software Packages based on full-users
|
||
Assisted Installation Implementation
|
Set rate, this amount can vary
depending on how IVK’s IT team wants to manage the partnership
|
33,000
|
Business Ready Advantage Plan
|
18% of software cost
|
28,980
|
Extended Pack for Reports
|
To ensure synthesis of data
|
10,000
|
Extended Human Resource & Payroll
|
For HCM integration
|
7,000
|
Additional Functionality Customization
Pack
|
Developing options for IVK’s
implementation team
|
6,000
|
Total
|
254,980
|
Costs highlighted above have been pulled from the following site: http://www.erpsoftwareblog.com/2012/11/microsoft-dynamics-gp-2013-functionality-starter-pack-extended-pack-more/
Dynamics’
interface operates like MS Office software, whose ubiquity makes it almost
certain that IVK already uses at least some of the applications (which would
minimize training and help transitions be more intuitive.) Its also
scalable and fully customizable, like SAP. Dynamics also offers
rapid implementation by “professionals who know accounting.” The risk of
Dynamics are also similar to SAP. There is more evidence of botched SAP
implementations on the web. Microsoft lists Known Risks and
Vulnerabilities (2014) lists precautions that firms must take, which
include setting policies, to minimize risks like off-site access, weak
passwords, securing servers so that configuration files cannot be altered, and
attack vulnerabilities.
Infor
ERP joins SAP, Oracle, and Sage to hold approximately 50% of the market share
(Columbus, 2013) at 6%, serving 70,000 user
organizations. Infor was originally the software design of Baan
corporation, a Dutch company, eventually bought by Infor, but the SAP All-in-One comparable is an Infor acquisition solution called Lawson, which is most
likely what IVK would consider. Infor Lawson can be used with startups,
small, medium, and large businesses and is scalable as an organization grows.
It integrates well with Microsoft Office applications because its built
on Microsoft Sharepoint. Infor’s latest competitive efforts have been 1)
to move to the Cloud (Infor bets big on Amazon) to
deliver “. . . the first full suite of business applications purpose-built by
industry running in a public cloud through Amazon Web Services" and
2) to create an interface with the end-user in mind. Infor places a big
emphasis on R&D as a business model, and its ERP solutions experience is in
Manufacturing, Distribution, Service, Retail.
SAP offers more in its package (like a Customer Support app in its CRM
modules) and payroll and security features than Infor. (Top 5
Client/Server Applications, nd). Infor is more moderately priced
than SAP, at about a quarter of the cost of SAP, starting at $237,170, but
prefers subscription models, usually per user. (Aberdeen
The Total Cost of ERP Ownership, 2006.) IVK’s staff will like that the interface
is very user friendly and consistent, and runs as a “dashboard” and offers
real-time data. Infor also supports multiple platforms and server OS,
making integration and implementation potentially less risky. However,
Infor’s bet on cloud integration is risky, and some firms like IVK might not be
ready to trust the cloud. It also is not available for mobile platforms,
which IVK staff will not like. Although the cost and user interface would
be beneficial for IVK’s bottom line, the cloud-based server would not be
acceptable for the storing customer’s financial data.
Summary Data
| ||||
Vendor
|
SAP
|
Oracle
|
Microsoft Dynamics
|
Infor
|
Market Share
|
26%
|
17%
|
11%
|
6%*
|
Short-list Rates
|
51%
|
43%
|
32%
|
5%**
|
Selection Rates After Short-listing
|
21%
|
18%
|
14%
|
20%**
|
Implementation Duration (months)
|
18.5
|
22.5
|
12.5
|
17.8***
|
Project Cost
|
$2.55 million
|
$2.25 million
|
$1.8 million
|
$.3 million
|
Payback Period (months)
|
23
|
16
|
24
|
NA
|
Success Rate
|
62%
|
71%
|
67%
|
NA
|
Failure Rate
|
38%
|
29%
|
33%
|
NA
|
% Realizing 50% or More Benefits
|
31%
|
17%
|
0%
|
NA
|
Disruption at Go-live
|
69%
|
50%
|
67%
|
NA
|
Data from Clash of the Titans 2014. Additional data for Infor derived from additional sources:
*Columbus, L, “ERP Market Share,” 2013
** Panorama Consulting Solutions. 2014 ERP report.
*** Bjorlin, C. “In ERP software comparison,” 2009
While
each of these systems are functionally ERP systems, there are advantages and
disadvantages to each, as well as big cost and functionality differences (see chart above).
One trend in ERP that we haven’t considered, which is becoming clear -
that users and customers will demand mobile in the near future. According
to the OpenMarket report (2014), businesses must meet their customers where
they are - on the mobile channel. Given this, IVK and Barton need to consider
their market, their staff and users, cost, and fit. Kenney’s 2013 analysis
suggests that cloud hosting is cheapest, but has long-term subscription fees.
From our analysis, we recommend that Microsoft Dynamics is likely the
best alternative to SAP’s ERP because of its simple integration, low cost, and
services focus. We would not recommend Infor because of its emphasis on cloud
storage, and would hesitate with Oracle because of the massive hidden costs and
its strong similarities to SAP. Kimberling also recommends choosing the
right partner in the process of selecting an ERP system.
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