School of Business and EconomicsIndiana University South Bend K507–Enterprise Resource Planning – 2008 Fall – ERP Project Comparative analysis of ERP vendors: SAP, Oracle, and Microsoft Koenraad Adams, Eric Piazzoni, and In-Saeng Suh [email protected], [email protected], [email protected] Abstract This is a study of the comparative analysis on the enterprise resources planning (ERP) vendors, SAP, Oracle, and Microsoft. We research on functionalities, cost, features, and target market for each vendor. Keywords: ERP, SAP, Oracle, Microsoft, SME 1 School of Business and Economics Indiana University South Bend 1. SAP expanded into a much broader set of applications for other functions in the enterprise: customer relationship management (CRM). From there. Oracle was founded in 1977 as Software Development Laboratories. Oracle. ERP packages are designed to be customizable to concrete needs of an organization and to its legacy systems. Due to already mentioned general ERP characteristics. 1972. this time to Oracle and in 1987 the company went public. product life-cycle management (PLM). The customization of ERP modules for a concrete user is performed with special tools and using specific or standard programming languages. SAP was founded on April 1. The software was never "officially" released though. and supplier relationship management (SRM). by five IBM employees. which SAP or SAP-trained SI consultants would then customize. SAP became known for high-quality. customization and implementation usually require specialized knowledge and significant resources. By bundling and integrating these applications. It developed its first product (financial accounting software) in close cooperation with its first customer. Oracle remains one of the leaders in the ERP industry. The company had changed its name by then to Relational Software Inc. supply chain management (SCM). and Microsoft. The leading global providers are SAP. comprehensive enterprise solutions. The first Oracle program was written in assembly language. Business grew and by 1982 they had changed their name again. Introduction ERP system is an integrated information system to support the business within different organizational parts of an enterprise. A few of the firsts Oracle brought us are: The first commercially-available SQL-based database (1979) 2 . The company grew initially around ERP and solidified its market leadership by being a pioneer in the move from mainframe to client-server computing with its R/3 ERP solution introduced in the 1990s. Version 2 which was released in 1979 was the first to be released. ran on PDP-11 and with 128k of memory. Today. the solutions are places in one of four quadrants: Leaders score higher on both criteria. Typically larger industry developed businesses with vision and potential for expansion 3 . customer relationship management (CRM). Using various qualifiers based on the rankings. While many will argue that Gartner‘s methods are too simplistic and don‘t give a truly accurate view of what the decision makers face. business intelligence. In 2007. Gartner released the quadrant on the left. collaborative workspace. human resource management. project management. it is still a good place to start when comparing products. Completeness of Vision and Ability to Execute. manufacturing. and configuration and development. the ability to execute and completeness of vision. Gartner ranks venders in two areas.School of Business and Economics Indiana University South Bend The first database to support symmetric multiprocessing (SMP) (1983) The first distributed database (1986) The first database product tested to comply with the ANSI SQL standard (1993) The first 64-bit database (1995) The first web database (1997) The first proprietary RDBMS to become available on Linux (1998) The first database to support XML (1999) Microsoft Dynamics AX is a line of business management solutions that provides financial management. The Information Technology views quadrants Gartner Consulting produces each year as a type of benchmark to see where each provider stacks up against their competition. supply chain management solutions. the presentation layer. SAP R/3 also offers a complete development environment where developers can either modify existing SAP code to modify existing functionality or develop their own functions. ABAP. and target market of the ERP vendors: SAP. 4 . utilizing a 3-tiered model. SAP R/3 is structured using its own proprietary language called ABAP (Advanced Business Application Programming). Oracle. Functionalities and Features 2. update. Typically larger. the application layer. With the introduction of ABAP Objects. Typically smaller companies that are unloading their planned potential Niche players score lower on both criteria: the ability to execute and completeness of vision. yet powerful programs. 2. settled businesses with minimal future plans for that industry Visionaries score lower on the ability to execute and higher on the completeness of vision. ABAP's main interaction with the database system is via Open SQL statements. though maybe not that well as they are towards the bottom of the quadrant. SAP ERP redefines enterprise resource planning – delivering role-based access to crucial data. the total cost of ownership. and the database layer. and Microsoft Dynamics. geared towards the creation of simple. whether reports or complete transactional systems within the SAP framework. But is that all there is to look at? In this study.School of Business and Economics Indiana University South Bend Challengers score higher the ability to execute and lower on the completeness of vision. or ABAP/4 is a fourth generation language (4GL). and they don‘t seem to have a great deal of vision. These statements allow a developer to query.1 SAP R/3 SAP R/3 is a client-server based application. we focus on functionalities and features. both Oracle and SAP were placed towards the bottom of the Challengers Quadrant. This would indicate they have the ability to execute. Typically market fledglings In 2007. ABAP provides the opportunity to develop applications with object-oriented programming. Advanced topics include GUI development and advanced integration with other systems. or delete information from the database. SAP ERP Financials – Ensure compliance and predictability of business performance – so the organization can gain a deeper financial insight across the enterprise and tighten control of finances. The SAP ERP HCM solution automates talent management. SAP ERP Operations also helps discrete and process manufacturers manage the entire life cycle of product development and manufacturing.School of Business and Economics Indiana University South Bend applications. SAP ERP Operations – Manage end-to-end procurement and logistics business processes for complete business cycles – from self-service requisitioning to flexible invoicing and payment – optimizing the flow of materials. SAP Employee Self-Service. and analytical tools. and workforce deployment – enabling increased efficiency and better compliance with changing global and local regulations. and employee interaction center support through SAP Manager Self-Service. SAP ERP Human Capital Management – Optimize the HR processes with a complete. Plus. applications. core HR processes. self-services. SAP ERP provides this HCM solution for organizations of all sizes and in all industries. SAP ERP offers role-based access. and flexibility. The solution automates the entire manufacturing process and reduces costs by controlling and adapting the 5 . You can maximize the potential of your workforce. With SAP ERP. while supporting innovation. SAP Mobile Time and Travel enables employees in the field to report time and expenses offline. SAP ERP Financials automates financial and management accounting and financial supply chain management. we can efficiently deal with business challenges in the following areas: End-user service delivery – Ensure that employees can readily access the critical data. integrated. growth. finances. Duet and employee interaction center support. and other key processes. and analytical tools they need to perform all their job functions efficiently and effectively while also supporting a shared-services organizational model for human resources. and global human capital management (HCM) solution. The solution also provides rigorous support for corporate-governance mandates such as Basel II and Sarbanes-Oxley. while reducing financial and environmental risks and enhancing safety of employees. usually on different servers. attach to a central storage array. planning. security and reliability stored on either a clustered or single server. project portfolios. strategy management and scorecards. and safety compliance. In addition. SAP ERP Corporate Services – Helps organizations manage their most costintensive corporate functions by supporting and streamlining administrative processes in the areas of real estate. and risk management.2 Oracle An Oracle database system is a platform with at least one application running on it to access and process the data. operations analytics. scalability and redundancy for the users. scalability. SAP ERP supports financial analytics. The recommended structure for an Oracle database is the institute RAC--Real Application Clusters. Runs on all standards and available with a large number of applications. enterprise assets. Oracle divides it‘s product into various editions to track marketing and sales. and forecasting. corporate travel. 6 . Sold through Oracles 400 Value Added Resellers. as well as consolidated financial and statutory reporting. and global trade services. SAP ERP Corporate Services is a complete and integrated solution that maximizes transparency and control. Data is stored logically in the form of table spaces and physically in the form of data files. Standard Edition – Provides Enterprise level functions for mid-sized organizations. There are various versions of the Oracle database management software. Standard Edition One – low end—minimum five users—entry level package. Enterprise Edition – The full suite of performance. quality. environment. budgeting. and workforce analytics. Performance management – Support the entire life cycle of performance management. delivering real-time. personalized measurements and metrics to improve business insight and decision making. health. 2. This offers better performance.School of Business and Economics Indiana University South Bend manufacturing process in real time – and increases customer satisfaction by delivering higher-quality products. Multiple instances. Oracle Personal Edition – ―High end‖ functionality but sold to single-use developers. Oracle Database Lite – designed to run on mobile devises. Business Process Outsourcing – an application which seems to work as an extranet and allows organizations track the non-core business processes which have been outsourced. financial and operational management processes. Of the other three. These include: Enterprise Performance Management – A tool which aides in the executive decision making process by supporting a broad range of strategic. Though this looks like a large number of options. JD Edwards etc.) Oracle Business Suites alone have over 140 different applications which can be installed on their platform. PeopleSoft Enterprise Siebel JD Edwards Hyperion Agile AutoVue Fusion Not counting the other products (PeopleSoft. Oracle has grown dramatically mostly through acquisitions. offer some other ―flavors‖ to offer as well. Customer Relationship Management—tracks what is going on in the sales department. It will also allow the marketing groups know how effective campaigns have been. 7 . Oracle does. It is small. Allows other departments (finance. there are really only three true choices and they are based on the size (number of seats) of the organization. production) know what they can expect.School of Business and Economics Indiana University South Bend Express Edition – primarily intended for students to learn how to code applications for Oracle. 2 are for developers and the other just provides access to database information from a mobile devise. however. free and his limited capacity. Their product lines include. Financial Management Solutions—provides and tracks data for finance operations.html>.oracle. sales process. from core human resource (HR) transactional functionality through service automation and delivery to complete enterprise talent management solutions. cash flow. analytical accounting. risk. The World's Largest Enterprise Software Company. 19 Nov.com/applications/scm/transportation-management/index. This reduces the risk of order entry errors.‖1 It provides the needed resources and has proven to reduce the costs. Procurement – Insures that the supply chain stays on top of productions needs and maintains the most cost effective method of doing so. You can easily manage your general ledger. inventory. receivables. Essentially. bank reconciliations. Oracle has a way to meet it. Human Capital Management – ―tracks all aspects of the Human Capital needs. ―lowers transportation costs. and provides flexible. and performance management. 2008 <http://www. global fulfillment options. 2 "Transportation Management. Production or warehouse groups receive the order right away and can act on it much quicker so turn around takes less time. 1 "Human Capital Management Solutions.com/applications/human-capital-management.html>. and collections. The World's Largest Enterprise Software Company. 8 . compliance.School of Business and Economics Indiana University South Bend Customer Self-Service Solutions—allow customer place orders themselves without the supplier having to have someone enter the order. 2008 <http://www. 19 Nov. improves customer service and asset utilization. whatever the need. payables." Oracle." Oracle. purchasing.‖2 These are just a handful of the applications available. Project Management—maintains record of current projects statuses and communicates with those needing the information in order to insure projects are proceeding as they should. fixed assets. Transportation Suite—insures shipments reach their destination as well as. 2. governance.oracle.3 Microsoft Dynamics Financial Management Microsoft Dynamics AX accounting and finance solutions help you track and analyze business information. accountants and executives to improve their project profitability and adapt to changing conditions. In addition manage resources. and skills development. call center. Collaborative Workspace This extends the reach of business applications. demand planning. In addition the system helps you ensure your organization is meeting government reporting requirements accurately and on time. Supply Chain Management This improves inventory management. and supply and capacity requirements planning. Configuration and Development 9 . create and launch marketing campaigns. manage. management of single or multi-site warehouses. track customer activity. order processing. and online collaboration with suppliers. and marketing professionals. field service. It also enables automation of many day to day tasks for sales.School of Business and Economics Business Intelligence and Reporting Indiana University South Bend Microsoft Dynamics allows you to manage budgets. information and process to employees. forecast costs and budgets. manage sales and after sales. Customer Relationship Management Customer relationship management solutions enable management of customer groups. Project Management Project management and accounting applications allow project managers. track time. Human Resource Management Microsoft Dynamics allows the management of applicant and employee information: payroll and benefits. Manufacturing It provides an integrated suite of manufacturing applications that give you the tools to plan. and expenses. The manufacturing process consists of product configuration. recruitment and employee registration. create and consolidate reports and look for trends and relationships in any part of the business. customer service. scheduling and shop floor. manage contracts and billing. Lastly. skills mapping. and partners with role based delivery through a single web-based portal. customers. and execute a top of the line manufacturing operation. 066 $346. Three different elements of total cost associated with ERP implementations are actually important: Amount spent on software Amount spent of external services Internal costs Since as the company grows.500 Average Service $126.$500M $500M . along with the total cost of software and services.000 $2.920.785 $5. Table 2: Software and Service Costs by Vendor 10 .021 $5.597 $482. as the number of users goes up. SAP and Oracle.778 Average 3 years Maintenance $81.479.092.941 $695.735 $1.022 $351.163.090 $655. Table 1: Average Software and Services Costs by Company Size Company Size Under $50M $50M .554 $443.551 $1.263 $1. 3.714 $1.360.$1B $1B .081.531 Average total cost $384.869 $1.809 Source: Aberdeen Group.987. The total cost of ERP ownership Total cost of ownership (TCO) is a significant factor in ERP strategies and decisions.364.208 $1.102.School of Business and Economics Indiana University South Bend Customization capabilities enable programmers and system administrators to add new functionality and modify existing functionality quickly and with limited coding. Infor.$250M $250M .081. the total cost of software and services also rises. We just adopted a few major vendors.918. Yet while both end-users and ERP vendors tend to talk about lower TCO and many vendors claim it as a point of differentiation.$100M $100M .652.110.395 $985.374 $581.676 $247. July 2007 Table 2 displays software and service costs by vendor.639 $617. the number of users goes up.295 $1. Lawson. QAD. As shown in Table 1. since the ratio of services to software costs is indicative of both ease of use and ease of implementation. one can naturally expect a correlation between size of the ERP deployment and costs.616 $3.719.000 $2.286 $2.$5B Over $5B Average # of Users 38 92 195 344 475 2187 3365 Average Software $176.577 $2. 983 Source: Aberdeen Group.3 10.169.444 $455.750 (Nucleus Research.500 $633.745 with a low of $50. Table 3: ERP Usage and Costs per User per Percentage of Functionality Used ERP Vendor SAP Oracle Microsoft Dynamics Average # of Modules Used 12.4% 73. $702 $513 $607 Source: Aberdeen Group.773 $11.0 10.231 Indiana University South Bend Average # of ERP modules 11.000 and a high of $2. According to Nucleus Research.000. The consulting average expenditure for Microsoft Dynamics AX deployment was $1. Inc the average initial license price for a Microsoft Dynamics AX customer was $571.871 $1.8million.161 $15. and Microsoft Dynamics. Table 3 shows the ERP usage and total cost per user per percentage Point of functionality used by three vendors.School of Business and Economics ERP vendor Infor Lawson QAD SAP Oracle Average Software $703. along with the cost of software. Those companies that invested in the internal personnel for deployment and 11 . July 2007 Cost Areas of Microsoft Dynamics AX The initial average license price per user for Microsoft Dynamics AX is $3.000. Pertaining to those customers that made hardware investment. services.115. and on-going maintenance combine to provide a price performance of ERP.167 Average Service $494.5 Average Software + Service per user $9. July 2007 Functionality and TCO remain significant factors on ERP strategies and decisions. 7).1% 72.521 $9.276.234 with a low of $50.323 $1.381 $16.826 $12.9 11. the average hardware costs were $180.55 million.4 11.667 $1.188 while the median cost was $84. The depth and breadth of functionality deployed.741 $11. Oracle.8 10.158 $1.882 Average total costs per user $12.843 $10. The median expenditure for consulting was $600.929. SAP.000 and a high of $6.6 Average % of Functionality Used 69.694.2% Average # of Users 834 1365 116 Software + Service + 3 Yrs Maint.2 11.067 $20.556 $463.261 $482. 409.000 Average 3-year costs of software.000 Average number of users: 195 Average training time: 29 hours Assumed fully loaded hourly cost of an end user: $25 Average initial cost of deployment Average maintenance rate: 16% Average initial license price. Lastly.169.188 Data Components Average initial license price Average standalone consulting expenditure of customers interviewed Average hardware expenditure of customers interviewed Average number of personnel needed to deploy:4 Average time of deployment:13 months Assumed fully loaded cost of an employee:$80. training costs on average were $141. hardware.4 Assumed fully loaded cost of a support FTE:$80. The Average 3-Year Cost of an Microsoft Dynamics AX Deployment Average $571.750 customers interviewed Median number of personnel needed Personnel $220.000 expenditure of customers interviewed Median hardware expenditure of Hardware $84. Software Consulting Hardware Personnel $346. consulting.000 to deploy:3 Average time of deployment:11 12 .234 $1. twenty-nine hours of training time at a cost of $25 per hour. training and maintenance.School of Business and Economics Indiana University South Bend ongoing support for the ERP solution the average personnel costs were $346.667 Training Total Ongoing Costs Software maintenance Personnel $141.667 and the average annual ongoing cost was $192.000 Total 3-Year Cost $3.375 with one hundred and ninety-five users. Table 1. The Median 3-Year Cost of an Microsoft Dynamics AX Deployment Initial Costs Average Data Components Software $168.000.000 Median initial license price Median standalone consulting Consulting $600.207 $274.192 $576.745 $180.375 $2. Average number of FTEs required to support Microsoft Dynamics AX: 2.399 Table 2. personnel.259. 600 Personnel $300. SAP led the midmarket segment. The 13 .000 Median 3-year costs of software. The small and medium enterprise (SME) market is a huge opportunity.School of Business and Economics Indiana University South Bend months Assumed fully loaded cost of an employee:$80.750 $75. but to reach its goal of having 45% .25 Assumed fully loaded cost of a support FTE:$80. Enterprise solutions will probably remain a staple target for them.50% of order entry from SME customers by 2010. consulting.144. That wouldn‘t be entirely accurate. As of summer 2006.000 Median number of FTEs required to support Microsoft Dynamics AX: 1. hardware. SAP views SMEs as its main potential source of growth. SAP‘s offering has higher up-front outlays but lower maintenance rates. SAP aggressively expands SME market via the SAP NetWeaver platform strategy toward the goal of doubling SAP‘s market cap by 2010.269. SAP has to address the two most important elements of an SME solution: Total Cost of Ownership (TCO) and ease-of-use.000 $1. Target market SAP serves 75% of the Fortune Global 1000. It would probably be safe to say Oracle targets anyone interested in purchasing an ERP solution. but less than 1% of Fortune Global million.000 Median number of users: 120 Median training time: 24 hours Assumed fully loaded hourly cost of an end user: $25 Median initial cost of deployment Median annual cost of license: 15% Median initial license price: $168.950 3. it‘s an obvious sign they are seeking more small to medium businesses in their portfolio. training and maintenance. personnel.000 Total 3-Year Cost $1. It‘s obvious that Oracle has achieved it‘s success by building for the large Enterprise organizations but they‘ve also been successful due to their focus on their platform. Training Total Ongoing Costs Software maintenance $72. if you look at the products they are now producing making it easier for smaller organizations to get introduced to their product. However. html> 14 .techtarget. it will have to come down to what solution works best for the business making the choice.School of Business and Economics Indiana University South Bend Standard Edition One with a price of $180 per user is a sign of that.com. each solution has strengths and weaknesses. 2008 <http://searchmanufacturingerp. Smaller companies who may be able to provide a different type of service than what the biggest players offer. Obviously. They also have a suite of ‗out of the box‘ applications ready to bolt on once the server is in place.com/news/article/0.sid193_gci1329175. 9 Sep. 23 Nov.SearchManufacturingERP. At the end of the day. But how do you select a solution when one provider is strong in one area you need while another is strong in another? Additionally. 2008. selecting the best solution comes down to preference. especially with the current economic situation. I can‘t say that‘s a bad one. 3 Maxcer.3 SAP has already got a jump on the market with their ByDesign solution. "Is SaaS ERP a viable model for manufacturing?" Manufacturing ERP software and management . Chris.00.289142. Another solution many will consider in the future. At the end of the day. then sell more licenses as your software helps them grow seems to be their motto. Get the business used to the Oracle environment when they are small at a competitive price. there are more solutions coming on the scene. is the growing Software as a Service trend. zdnet.htm?feed=pt_sap>." Builder AU . "Magic Quadrant for ERP Service Providers. 2008 <http://www.com." 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