When selecting midmarket ERP software for his company, it was tempting for Joerns Healthcare CIO Partha Biswas...
to go with Oracle. It was, after all, sort of free.
His company had spun off from its parent company, Sunrise Medical, in January of 2007. The technology unit spun off at the end of 2007 and needed to select a new ERP system. But it still had Oracle licenses from Sunrise, a longtime Oracle customer. Joerns' ERP search started with Oracle, along with Microsoft and Infor. SAP wasn't on the list.
"I had a strong belief that SAP is a very complex product; it's too expensive to implement and takes too long to realize business value," said Biswas, whose Wisconsin-based company makes high-end beds, medical products and furnishings for long-term care facilities.
Around the same time, Saladino's, a wholesale foodservice distributor based in Fresno, Calif., was shopping for its own ERP system. The company needed to replace its legacy system, which ran on AS 400, and it wanted to automate warehouse management, which is now completely manual, according to CIO Craig Urrizola.
Both Joerns Healthcare and Saladino's wound up choosing SAP Business All-in-One, swayed by the product's level of integration and functionality, SAP's vision and investment in research and design, and the lower total cost of ownership (TCO) of the product compared with competitors, the CIOs said.
"SAP's TCO was the lowest," Biswas said of his decision to go with SAP. "And SAP's vision for research and design -- they spend more than $1 billion on research and design -- was aligned with what we were trying to do. We felt SAP supported our vision very well."
SAP had, approximately, a more than 15% TCO advantage over other software they were considering, Biswas said. The resource requirements to support the SAP environment were lower than what they would have needed to support the Oracle environment, he said, and they didn't need to purchase third-party software.
One of SAP's major growth strategies is to win more small and medium-sized businesses (SMBs). It's a market where SAP has a leg-up on Oracle -- according to a recent Forrester Research study . SAP currently sells two products geared to this segment -- SAP Business All-in-One, designed for midmarket customers, and SAP Business One, designed for smaller companies.
CIOs' midmarket ERP selection process
Joerns Healthcare's CEO, CFO and the project team participated in the selection process, as did the ERP implementation team, which Biswas selected before the project began. This allowed him to pick the best people, he said, not just the available people.
Five questions guided the team's software selection process: Will the product meet our requirements today and our anticipated needs? What kind of resources will we need to enhance and maintain the product? What is the total cost of ownership? What is the vendor's strategic direction and investment in research and design? What is the availability of consultants?
To this day, Biswas doesn't really know how SAP found him, because he never sought the vendor out. After SAP called, he let them participate in the selection process. SAP spent three days demo-ing the All-in-One product, and Joerns Healthcare spent one day "playing" with the product.
"We asked the entire team, 'Do we want to settle for something that is free?' " Biswas said, referring to the Oracle licenses. " 'Does it support our long-term vision? Does it support how we would like to operate as a company?' "
SAP's level of integration also impressed Biswas. He wanted his 10-member IT team -- composed of five business analysts, four people who supported the network infrastructure and himself -- to be able to focus on enhancing the system, not maintaining it.
"I have come from [an environment with many applications], and I had to live through the nightmare of integration," he said. "My whole premise was: I do not want my team members waking up in the morning and thinking, 'Is the integration working?' I want them to focus on business processes, not worry about day-to-day issues."
Saladino's started its midmarket ERP search two years ago, according to Urrizola. The company also looked at the Oracle suite but became frustrated with the vendor simply because they couldn't get in touch with the right person, he said.
One of the biggest challenges for Saladino's during the midmarket ERP selection process was trying to understand the SAP package -- what was included in the price of licenses and what wasn't. For instance, they wanted a tool that they thought was included in the SAP for Wholesale Distribution package, which turned out to be part of the SAP for Retail package. Both are preconfigured SAP products built on the NetWeaver platform.
"It's really hard when you don't come from an SAP background," Urrizola said. "Those are the types of things we were most frustrated with."
Advice, challenges on SAP Business All-in-One implementation
Joerns Healthcare, which has about 700 employees, bought about 300 licenses. The SAP Business All-in-One purchase included modules for manufacturing, distribution, quality, product lifecycle management and change control, as well as CRM and Business Objects. The company plans to buy 100 more licenses when its Business Objects implementation, under way now, is complete.
One challenge for Joerns was deciding what to use out-of-the-box and what to configure. It relied on consultants to help make those decisions, Biswas said. The company also met with the senior leadership every week, and senior management dictated all the terms of the project.
The midmarket ERP implementation began in December 2007, and Joerns Healthcare went live in May 2008. The project was on time and under budget, Biswas said, and the company exceeded its sales revenue targets for the first month.
Saladino's, which has 475 employees, including a seven-member IT department, bought 110 licenses.
It signed on with SAP in May 2007 and went live with financials in March 2008. The company plans to go live with the rest of the project in March 2009, which is longer than originally planned because of the decision to add CRM.
Saladino's also grudgingly invested in new hardware, urged along by SAP and HP. This decision, which included the purchase of HP blades, helped make the CRM project much smoother, Urrizola said. The cost to implement CRM was minimal, he said, because the infrastructure was already there.
"The ability to integrate those as tightly as we have, it's seamless," he said. "It's real time, it's not a batched interface. We're really excited about it."
Priorities for 2009
User acceptance at Joerns Healthcare is very high, Biswas said.
"It was very satisfying to see CFOs and VPs getting information directly from SAP, who never used the legacy system in the past," he said.
In fact, even with a limited budget in 2009 , training and education is one of the areas they'll continue to invest in.
"There's so much in SAP, training and education is something we're continually investing in," Biswas said.
To meet its long-term goals, which include online ordering for its customers, Joerns may have to develop or implement more modules, like warehouse management.
Saladino's plans to implement a warehouse management system in the coming year. It also wants to hire some new people with SAP Basis skills for the project.
Budgets this year will also present their own challenges. Both CIOs said their budgets are likely to remain about the same as in 2008. But they're confident that with some creativity, they'll be able to deliver their planned projects.
"Creativity and innovation are very important," Biswas said. "Find a better way and find a cheaper way. At the end of this economic downturn, we emerge as a winner."