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November 8, 2005 5:19 pm

Shock news: all ERP vendors are the same

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SAP, Oracle, PeopleSoft – which enterprise resource planning system is the best? Answer: they’re basically all the same, according to The Hackett Group.

Research among large corporations by the business process advisory company suggests the battle to sell ERP, the massive computer projects that handle everything from accounts to manufacturing and customer relations, is largely irrelevant.

When it comes to financials, the core of an ERP system, any of the leading vendors’ software will do more or less the same job.

The group’s research methodology identifies “world class” companies as those among the top 25 per cent of performers, both in terms of the efficiency and the effectiveness of their back-end processes, namely IT, human resources, procurement and finance.

For the finance function, the big vendors dominate the “world class” group as 96 per cent use software from SAP, Oracle, and PeopleSoft (itself owned by Oracle and including JD Edwards software) as their primary ERP system, compared to 80 per cent of their peer group of non-“world class” companies.

A third of “world class” companies use each of Oracle and PeopleSoft (considered separately, because the acquisition of PeopleSoft is so recent), while 30 per cent use SAP, although the average size of SAP installations tends to be larger, making the number of users approximately equal.

The proportion of companies with each of the three vendors is the same in the peer group as the “world class” group – suggesting that their impact on efficiency and effectiveness is the same.

“Every way you look at it, it doesn’t make a difference,” says Philip Carnelley, senior research advisor at Hackett. “There are aspects that are quite different in terms of the architectural side but in terms of features and functions they are all very comparable products. They can all handle VAT and company tax rates and the euro and all of that good stuff. The things that make the difference are the processes in the organisation.”

Of course, using a big vendor does not guarantee world class performance because 96 per cent of their customers fail to reach that standard.

Hackett’s research does not cover every area where ERP systems have an impact. “We look at the ways in which people use technology to automate processes,” says Michael Campbell, vice president. “We don’t look at the technology itself, and we don’t look at market performance.”

Among the criteria used to define efficiency are the overall IT cost per end user, technology as a cost of overall revenue, and the number of hardware and software suppliers.

Criteria for effectiveness are the degree of infrastructure standardisation, help desk call volume, and the percentage of the technology which actually gets used.

Hackett takes this data from its clients, an impressive roster of global corporations, including 77 of the Fortune 100. It publishes median average findings for a number of different metrics, to allow companies to benchmark themselves against global best practices.

The majority of Hackett’s customers are large companies, few of which will be selecting an ERP system for the first time. But many will still find themselves choosing between vendors.

Many corporations have different ERP systems installed in different parts of the group, as a result of divisional managers making separate choices, or following takeovers of other companies,and they may be looking to consolidate on to a single system.

“It doesn’t matter which way they simplify, but simplifying is a good thing. The ‘world class’ organisations tend to only have one ERP package,” says Mr Carnelley.

The leading ERP vendors reject the notion that all systems are equal. Peter Kirschbauer, general manager at SAP, says: “If all ERP vendors were equal, how can it be that over the last three years that SAP has almost doubled its market share in its largest competitor’s home market?”

Juan Rada, senior vice president at Oracle, said: “I disagree fundamentally with this interpretation. Of course it matters which vendor you choose. It matters in terms of total cost of ownership and return on investment, and Oracle leads SAP in both these areas in independent studies by Meta Group and Nucleus Research.”

In such a hotly contested market, there is never likely to be agreement over which ERP system is better, but many watchers may agree with Hackett’s conclusion – that other business areas are now more important than which system to implement.

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