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Debating ERP and best-of-breed

An AMR Research report examines the reasons some large companies prefer SAP and other large vendors over best-of-breed providers, and vice versa.

No matter how much controversy or chaos surrounds the current enterprise resource planning (ERP) market, a key question persists for global clients: Is a single-vendor approach better than a best-of-breed strategy?

That depends on whom you ask, of course. A 2003 report published by Boston-based AMR Research Inc. examined the question, focusing specifically on European retailers. Several notable trends emerged from the report.

Control, not cost, was cited by many executives as the most important factor when deciding between one of the major ERP vendors and a best-of-breed player.

IT decision makers also reported that a best-of-breed approach allowed them the flexibility they wanted. However, total cost of ownership (TCO) was considered easier to predict with large vendors, such as SAP, than with smaller, specialty providers.

The current consolidation in the ERP market can be expected to stimulate growth among best-of-breed companies, which will position themselves as vendors that operate outside the fray and stay focused on customers. This is same tact SAP has taken, as Oracle continues to fight to take over PeopleSoft, which recently acquired J.D. Edwards & Co.

Indeed, SAP was the most popular choice among survey respondents who chose a single, large vendor over a niche vendor.

In a strange turnaround, SAP and other large vendors may be making life easier for smaller vendors these days. "Vendors have been forced by customers to open up their technology to allow easier integration," said Joshua Greenbaum, principal consultant of Daly City, Calif.-based Enterprise Applications Consulting. "They've really opened up Pandora's box by making integration that much easier; as a result, they've actually expanded the best-of-breed market."

Why they chose what they did

The report was authored by Nigel Montgomery, AMR director of European research, who recently moderated a panel of European retailers.

Companies discussing the issue included Coca-Cola HBC, a Greek bottling company that holds a franchise of the brand in 26 countries; the U.K.-based supermarket operator Tesco; French retailer Casino; U.S. retailer Wal-Mart; and Swiss retailer Coop.

Coca-Cola HBC has begun implementing a wall-to-wall SAP implementation. Wal-Mart and Tesco insisted that a thorough investigation into the large ERP vendors made clear that none of them could provide even 80% of the functionality they needed. Finally, the Casino company decided on a combination of the two.

Coca-Cola HBC executives emphasized the importance of scrutinizing consultants, and the company selected their SAP consultants from the six countries where the software implementation will take place

Montgomery said that survey respondents did not rate large ERP vendors as always having the latest technology, but buyers did like the broad coverage those large vendors can provide.

"There's a lot more coordination needed in the best-of-breed approach," Montgomery said. "Going forward, though, as XML and other standards reduce the hindrance of integration, the question will arise as to whether the best-of-breed approach becomes more effective than a single-vendor approach."


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To provide your feedback on this article, contact Robert Westervelt.

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