SAP costs more and takes longer to implement than Oracle, Microsoft and Tier 2 ERP software vendors, but its customers are the most satisfied, and their businesses see the most improvement, according to a new Panorama Consulting report.
An average of 72.2% of SAP customers indicated that their businesses benefited from an
That said, Tier 2 software and Microsoft are offering benefits comparable to Oracle's and SAP's at millions lower in implementation costs. While executives and employees using SAP are the most satisfied (73%), an average of 70% of those with Tier 2 software and 69% with Microsoft are happy with their choices. That's compared with 62% for Oracle.
"Tier 2 vendors have clearly stepped up their strategies to compete with the 'big boys' of Tier 1," said Eric Kimberling, president of the Denver-based ERP consulting group. "But now that the field has more qualified players, the burden is on the buyer. Savvy companies must take the time to analyze, plan and evaluate all of their software options before signing with any vendor – no matter how impressive their pitch."
Implementations of Tier 2 ERP software cost $3.46 million on average, against $16.8 million for SAP, $12.6 million for Oracle and $2.6 million for Microsoft.
But cost shouldn't be the only factor in selecting ERP software, Kimberling said.
"It all starts with clearly defining what you need in a system and picking the right system," he said. "For projects that fail or have low satisfaction levels, the first domino to fall is choosing the wrong software."
For instance, SAP ERP software poses the lowest risk of disruption to a business during an ERP implementation -- meaning customers saw no operational stoppages or significant negative impacts on their business, Kimberling said.
And while employee satisfaction levels are lower with Oracle, he said, executives tend to be more satisfied with it because of its strong reporting and analytical capabilities.
One reason Oracle E-Business Suite may rank lower in employee satisfaction is that the vendor has taken more of a best-of-breed approach, so there is some inconsistency in the look and feel of the software across modules, Kimberling said.
Also, the economy is forcing the Tier 1s to flaunt agressive software discounts, particularly in competitive deals. SAP recently began negotiations with a discount of 64% off its list price for one client that Kimberling is working with.
"Know it's a buyer's market right now," he said. "With the economy the way it is, a midmarket company is going to have a lot of negotiating leverage. We're finding a lot of companies are looking at Tier 1s because they're being so aggressive in their pricing right now."
When choosing ERP software, a company should expect a vendor to demonstrate its software in the context of the company's specific business processes and requirements, Kimberling said. Don't call it a demo, he said, call it a day in the life.
In general, he said, software licenses should make up no more than 25% of the ERP implementation budget.
Another key to ERP success is getting a real return on investment (ROI) and actually recouping money spent to implement the software, Kimberling said. Make sure it's accomplishing specific business goals, such as reducing inventory or labor costs. Too many companies make the mistake of not monitoring the system for KPIs after go-live, he said. This can be accomplished by developing thorough business processes and workflow prior to implementation.
"I think that's where a lot of companies fall short," he said. "Their finish line is the go-live, and there's very little that gets done after the fact."