When Jeffrey Osman at the York Water Company decided to migrate off the company's 30-year-old legacy systems, SAP
and Oracle were battling it out for his firm's business.
Osman, who serves as president of the York, Penn.-based municipal water distributor, worked with a consultant to evaluate, buy and implement the software.
"It all came down to pricing," Osman said. "SAP's price was much higher than Oracle's. We just weren't able to advance the company to any extent using our current systems, so we decided to dump it and go with Oracle."
As Oracle and SAP wage a market share battle, analysts said customers like York Water are in a good position to upgrade and replace outdated systems. The bargaining power is in the hands of customers, as they negotiate licensing fees and implementation costs.
Working with a third-party consultancy, York Water had its implementation fees included, in addition to its licensing costs, Osman said. SAP couldn't compete with that price.
PeopleSoft Inc. was also being evaluated at the time and was an attractive option, Osman said. When Oracle was finally cleared to acquire the company in January, the decision for York Water became clear.
"We chose the entire E-Business Suite," he said. "Our third party seems very committed, and we're committed to it and that's half the battle."
The first modules of the suite will go into full production Oct. 1 with other modules to follow over the next several months. The company is taking a piecemeal approach by first implementing the least extensive modules, Osman said.
Like York, other firms are using their bargaining power to get good deals from SAP and Oracle. Logistics management firm New Age Electronics Inc., wireless vendor USA Technologies, and soup and condiment maker Baxters Food Group recently signed deals with Oracle, while luggage maker Samsonite, pharmaceutical giant Amgen and chemical distributor Altana Chemie AG signed with SAP.
Even current SAP and Oracle customers have more bargaining power. SAP and Oracle each launched incentive programs to lure companies to migrate off their perspective software.
SAP is trying to sway PeopleSoft and J.D. Edwards customers with its Safe Passage program, a mixture of license credits and software services to make the switch more attractive. Oracle is also offering similar incentives to SAP customers through its Oracle Fusion for SAP or "OFF SAP" program.
So far both companies are claiming success though their incentive programs. SAP has highlighted several customers making the switch, and Oracle said it has more than 1,000 SAP R/3 customers registered to learn more about its incentive program.
"Were not going to see any real movement through these programs," said Phil Fersht, an industry expert who serves as research director at outsourcing advisory firm EquaTerra Inc. "They serve as a reminder of how volatile the ERP [enterprise resource planning] market is and the nature of how software and services are delivered is changing."