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SAP snags big win over Oracle, thanks to Duet, TCO

SAP beat out Oracle to replace BNSF Railroad's legacy system, thanks to pricing, TCO issues and Duet.

When BNSF decided to replace its aging legacy systems, two software companies naturally came to mind. At the end...

of the decision process, only SAP remained.

Fort Worth, Texas-based Burlington Northern Santa Fe Railroad had already pushed its decades-old legacy systems to the limit, and with the railroad industry expecting rapid growth, the company decided it was time to upgrade, according to Jeff Campbell, BNSF's vice president of technology services and chief information officer.

The only question was: SAP or Oracle?

"Both have good products, and it was a very extensive search," Campbell said. "But for BNSF, there were some specific drivers for SAP."

The rail industry -- BNSF in particular -- is poised for strong growth in the next few years. Chinese manufacturing is creating demand for transportation of goods from West Coast ports to other areas of the U.S. At the same time, highway congestion, aging roads and high gas prices are in many cases making rail a more attractive option than trucking, according to Campbell.

"External studies have said that transportation volumes will grow 67% over the next 20 years," he said. "We want to be well positioned to handle that kind of growth. Now was the time to invest to position these [back-end] systems for the future."

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BNSF's financial and HR systems were mainframe-based and more than 15 years old. Employee self-service expense reporting, online invoicing, forecasting and other applications from niche vendors had been "bolted on" over the years.

"This created a massive spaghetti ball, integrating all the bolt-on applications with the core financials," Campbell explained. "The idea was to rid ourselves of the mainframe environment, tear out all the niche applications, get rid of all the integration points and go with one single, integrated suite of products."

BNSF chose SAP over Oracle for reasons ranging from total cost of ownership (TCO) and systems compatibility to less measurable factors.

With more than $15 billion in revenue and about 45,000 employees, BNSF is the second-largest railroad company in the U.S. It operates in 28 states and two Canadian provinces, Campbell said, and transports enough coal every year to power one in 10 U.S. homes.

BNSF viewed SAP as the ERP vendor best-positioned to serve the railroad industry. According to Rod Strata, transportation and logistics industry principal for SAP, five of the seven Class 1 railroads in the U.S. are SAP customers. When there are so few companies in an industry, having most of them can make a difference, according to BNSF.

"When we looked at the long-range roadmap for future functionality and the ability to levy demands on SAP for functionality we wanted," Campbell explained, "we felt like being with SAP would align us with the majority of the industry and therefore we'd be in better stead."

BNSF also felt that SAP would operate better with its existing technology products, especially IBM. Campbell also cited SAP's ability to work easily with many databases and development languages.

"SAP will play with anybody," Campbell said.

This led to some real TCO advantages for SAP in BNSF's eyes. For example, BNSF uses DB2 and SQL databases, and choosing Oracle would have required the company to add a "significant number" of database administrators (DBAs) to the payroll. With SAP, that number would be one or two.

SAP was also very competitive on the pricing front. Campbell actually expected Oracle to have more aggressive up-front pricing, but that was not the case.

"In terms of aggressiveness [on pricing], I was really surprised," he said. "From a single price point perspective, while SAP didn't give away their product, they were certainly very competitive."

Bill McDermott, CEO of SAP Americas, and Henning Kagermann, SAP's CEO, both visited BNSF personally, which was indicative of SAP's commitment through the decision-making process, Campbell said.

"We saw a real commitment from SAP," he said. "Every time we had an executive check point meeting, the executives at SAP seemed much more in tune with the status and what the issues were. We didn't feel that sort of knowledge on the Oracle side."

The final nail in Oracle's coffin may well have been Duet. While SAP and Oracle both had advantages in other areas, BNSF felt Oracle couldn't match Duet's functionality.

"Our casual users are very good at, and very familiar with, the Office environment," Campbell said. "To be able to utilize that platform -- as time goes on and more functionality is available in Duet -- makes it much easier for the end-user experience."

For example, when booking a vacation through Duet, BNSF employees would use Outlook, a product they are familiar with and use for other tasks, rather than going online and reporting vacation with a transaction-based system, Campbell said.

With Duet, employees send an email requesting vacation to their manager, who then sends an approval email back. That time is then entered automatically in their Outlook calendars and the necessary back-end SAP systems.

The project, which will replace all BNSF's core financials, HR and payroll processes, is currently in the blueprint phase and is scheduled to go live on January 1, 2009. After that, the company may look toward its aging asset management systems, including supply chain management (SCM), materials management and railroad-specific systems such as engineering and transportation organization.

"In terms of where the journey goes, who knows?" Campbell said.

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