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SAP ERP HCM wins out over PeopleSoft thanks to ROI

One of Canada's largest cities, a longtime PeopleSoft customer, recently opted to implement SAP ERP for human capital management.

The city of Mississauga didn't drop PeopleSoft in favor of SAP ERP human capital management (HCM) because it was looking for more functionality.

The sixth largest Canadian city, located in Ontario, wanted a better return on its ERP investments. The city is spending $2.9 million Canadian (about $2.87 million U.S.) on a full-scale implementation of SAP ERP HCM.

"We now know SAP and PeopleSoft can do all the functions we need," said Rekha Jethva, the city's manager of planning and integration in IT. Rather, Mississauga wanted to consolidate its systems onto one platform.

The city will save on maintenance, IT administration time, interface costs and consulting support for upgrades, she said. They go live with SAP ERP HCM on January 1, 2009.

Mississauga, population 700,000, has been a PeopleSoft customer since 1996, using the software to manage its 7,500 city employees. It also uses SAP ERP Financials, SAP BI (Business Intelligence) and Business Objects for reporting and testing web intelligence. SAP acquired Business Objects in October of last year, after Mississauga had signed on with the BI company.

Mississauga's human resources software certainly needed more functionality, Jethva said. It needed better workflow; employee self-service, which allows employees to access and update their personal records and payroll; and environmental health and safety, she said.

But trying to integrate to a single, ERP system was the bigger goal.

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Four years ago, Jethva and her IT department began examining their applications environment, hoping to simplify it and ultimately reduce budgets and the costs of running their applications. They hired a consulting firm in 2006 to figure out whether to integrate around an Oracle ERP backbone or an SAP one. In the past year, they've put their plan into action.

"It has been a very big year," Jethva said.

When the study started, Mississauga wasn't certain when Oracle's new middleware, Fusion, would be available, she said -- or how to prepare for it or how it would perform.

Because they were on PeopleSoft 8.3 SP1, which is two versions behind the newest PeopleSoft release (PeopleSoft Enterprise HCM 9.0), they would have had to do two more upgrades before doing the major conversion to Fusion.

It was a wash in terms of paying to move onto SAP or doing the PeopleSoft upgrades, Jethva said. But they never received a clear date on when they would have to do the major move to Fusion.

"[Oracle's] direction was not clear as to what they were going to do," she said. "We knew they were talking about Fusion, but they didn't have enough in place."

SAP's middleware, NetWeaver, was therefore a big reason for deciding to implement ERP HCM.

"In the city, 90% of our applications are packaged, and a lot of our vendors are rewriting for service-oriented architecture [SOA]," Jethva said. "NetWeaver was a definite plus for us. SAP is solid. We knew SAP. Why not just move our system to SAP?"

Being a Business Objects customer gave them another incentive to move to an ERP platform from which they could leverage the data in their HCM applications for BI.

"We can leverage the BI in the SAP platform," she said. "As our city matures, we want to have BI to drive our costs."

Cost was also a consideration.

She couldn't put a number on how much she predicts the system will save the city in the long run, but she said that, in the short term, SAP will wind up being 45% less per CPU than Oracle. And from a day-to-day point of view, managing one system should save between 65% and 70% of IT administrators' time.

SAP also honored its previous maintenance rates with Mississauga, even though it announced in February that it had ended its lower-cost maintenance options. Instead of paying the 22% of licensing fees that new customers are supposed to pay, the city will pay the lower-cost support option that SAP has since eliminated: 17% of net licensing fees. Mississauga started negotiating its contract in January of 2007.

"We do know our maintenance is going to be a lot less [than PeopleSoft]" Jethva said. Oracle's maintenance rates are 22% of a customer's net licensing fees.

Another factor, she said, was that historically Mississauga pays less in consulting costs for its SAP upgrades in ERP Financials applications than for PeopleSoft upgrades.

In terms of adding more vertical functionality, the city has added third-party software from Baltimore-based RWD for document management, but there are no plans to add other tools anytime soon, Jethva said.

SAP currently has 12,000 customers using its ERP HCM applications, according to David Ludlow, vice president of Suite Solution Management. SAP made a major investment in its Safe Passage program to lure away customers in the wake of Oracle's acquisitions of Siebel, J.D. Edwards and PeopleSoft, but Ludlow wouldn't say how many of those 12,000 were former PeopleSoft customers or how many full-scale HCM implementations there have been in the last year.

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