Comparative Analysis of ERP Vendors

School of Business and Economics Indiana University South Bend

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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

mailto:[email protected]




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1. Introduction

ERP system is an integrated information system to support the business within different

organizational parts of an enterprise. The leading global providers are SAP, Oracle, and

Microsoft. ERP packages are designed to be customizable to concrete needs of an

organization and to its legacy systems. The customization of ERP modules for a concrete

user is performed with special tools and using specific or standard programming

languages. Due to already mentioned general ERP characteristics, customization and

implementation usually require specialized knowledge and significant resources.

SAP was founded on April 1, 1972, by five IBM employees. It developed its first product

(financial accounting software) in close cooperation with its first customer. 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. From there, SAP expanded into a much broader set of applications for other

functions in the enterprise: customer relationship management (CRM), supply chain

management (SCM), product life-cycle management (PLM), and supplier relationship

management (SRM). By bundling and integrating these applications, SAP became

known for high-quality, comprehensive enterprise solutions, which SAP or SAP-trained

SI consultants would then customize.

Oracle was founded in 1977 as Software Development Laboratories. The first Oracle

program was written in assembly language, ran on PDP-11 and with 128k of

memory. The software was never "officially" released though. Version 2 which was

released in 1979 was the first to be released. The company had changed its name by then

to Relational Software Inc. Business grew and by 1982 they had changed their name

again, this time to Oracle and in 1987 the company went public. Today, Oracle remains

one of the leaders in the ERP industry.

A few of the firsts Oracle brought us are:

The first commercially-available SQL-based database (1979)


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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, business intelligence, human resource management, project

management, customer relationship management (CRM), manufacturing, supply chain

management solutions, collaborative workspace, and configuration and development.

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. In 2007,

Gartner released the quadrant on

the left. 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, it is still a

good place to start when

comparing products. Gartner ranks venders in two areas, Completeness of Vision and

Ability to Execute. Using various qualifiers based on the rankings, the solutions are

places in one of four quadrants:

Leaders score higher on both criteria; the ability to execute and completeness of

vision. Typically larger industry developed businesses with vision and potential

for expansion


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Challengers score higher the ability to execute and lower on the completeness of

vision. Typically larger, settled businesses with minimal future plans for that

industry

Visionaries score lower on the ability to execute and higher on the completeness

of vision. Typically smaller companies that are unloading their planned potential

Niche players score lower on both criteria: the ability to execute and

completeness of vision. Typically market fledglings

In 2007, both Oracle and SAP were placed towards the bottom of the Challengers

Quadrant. This would indicate they have the ability to execute, though maybe not that

well as they are towards the bottom of the quadrant, and they don‘t seem to have a great

deal of vision. But is that all there is to look at?

In this study, we focus on functionalities and features, the total cost of ownership, and

target market of the ERP vendors: SAP, Oracle, and Microsoft Dynamics.

2. Functionalities and Features

2.1 SAP R/3

SAP R/3 is a client-server based application, utilizing a 3-tiered model, the presentation

layer, the application layer, and the database layer. SAP R/3 is structured using its own

proprietary language called ABAP (Advanced Business Application Programming).

ABAP, or ABAP/4 is a fourth generation language (4GL), geared towards the creation of

simple, yet powerful programs. 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, whether reports or complete transactional

systems within the SAP framework. ABAP's main interaction with the database system is

via Open SQL statements. These statements allow a developer to query, update, or delete

information from the database. Advanced topics include GUI development and advanced

integration with other systems. With the introduction of ABAP Objects, ABAP provides

the opportunity to develop applications with object-oriented programming. SAP ERP

redefines enterprise resource planning – delivering role-based access to crucial data,


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applications, and analytical tools. With SAP ERP, we can efficiently deal with business

challenges in the following areas:

End-user service delivery – Ensure that employees can readily access the critical

data, applications, 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, finances, and other key processes. SAP ERP offers

role-based access, self-services, and employee interaction center support through

SAP Manager Self-Service, SAP Employee Self-Service, Duet and employee

interaction center support. Plus, SAP Mobile Time and Travel enables employees

in the field to report time and expenses offline.

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. SAP ERP Financials automates

financial and management accounting and financial supply chain management.

The solution also provides rigorous support for corporate-governance mandates

such as Basel II and Sarbanes-Oxley.

SAP ERP Human Capital Management – Optimize the HR processes with a

complete, integrated, and global human capital management (HCM) solution.

SAP ERP provides this HCM solution for organizations of all sizes and in all

industries. You can maximize the potential of your workforce, while supporting

innovation, growth, and flexibility. The SAP ERP HCM solution automates talent

management, core HR processes, and workforce deployment – enabling increased

efficiency and better compliance with changing global and local regulations.

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 ERP

Operations also helps discrete and process manufacturers manage the entire life

cycle of product development and manufacturing. The solution automates the

entire manufacturing process and reduces costs by controlling and adapting the


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manufacturing process in real time – and increases customer satisfaction by

delivering higher-quality products.

SAP ERP Corporate Services – Helps organizations manage their most cost-

intensive corporate functions by supporting and streamlining administrative

processes in the areas of real estate; enterprise assets; project portfolios; corporate

travel; environment, health, and safety compliance; quality; and global trade

services. SAP ERP Corporate Services is a complete and integrated solution that

maximizes transparency and control, while reducing financial and environmental

risks and enhancing safety of employees.

Performance management – Support the entire life cycle of performance

management, delivering real-time, personalized measurements and metrics to

improve business insight and decision making. SAP ERP supports financial

analytics, operations analytics, and workforce analytics, as well as consolidated

financial and statutory reporting; planning, budgeting, and forecasting, strategy

management and scorecards, and risk management.

2.2 Oracle

An Oracle database system is a platform with at least one application running on it to

access and process the data. Data is stored logically in the form of table spaces and

physically in the form of data files. The recommended structure for an Oracle database

is the institute RAC--Real Application Clusters. Multiple instances, usually on different

servers, attach to a central storage array. This offers better performance, scalability and

redundancy for the users.

There are various versions of the Oracle database management software. In addition,

Oracle divides it‘s product into various editions to track marketing and sales.

Enterprise Edition – The full suite of performance, scalability, security and

reliability stored on either a clustered or single server. Runs on all standards and

available with a large number of applications.

Standard Edition – Provides Enterprise level functions for mid-sized

organizations. Sold through Oracles 400 Value Added Resellers.

Standard Edition One – low end—minimum five users—entry level package.


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Express Edition – primarily intended for students to learn how to code

applications for Oracle. It is small, free and his limited capacity.

Oracle Personal Edition – ―High end‖ functionality but sold to single-use

developers.

Oracle Database Lite – designed to run on mobile devises.

Though this looks like a large number of options, there are really only three true choices

and they are based on the size (number of seats) of the organization. Of the other three, 2

are for developers and the other just provides access to database information from a

mobile devise. Oracle does, however, offer some other ―flavors‖ to offer as well.

Oracle has grown dramatically mostly through acquisitions. Their product lines include.

PeopleSoft Enterprise

Siebel

JD Edwards

Hyperion

Agile

AutoVue

Fusion

Not counting the other products (PeopleSoft, JD Edwards etc.) Oracle Business Suites

alone have over 140 different applications which can be installed on their platform.

These include:

Enterprise Performance Management – A tool which aides in the executive

decision making process by supporting a broad range of strategic, financial and

operational management processes.

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.

Customer Relationship Management—tracks what is going on in the sales

department. Allows other departments (finance, production) know what they can

expect. It will also allow the marketing groups know how effective campaigns

have been.


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Customer Self-Service Solutions—allow customer place orders themselves

without the supplier having to have someone enter the order. This reduces the

risk of order entry errors. Production or warehouse groups receive the order right

away and can act on it much quicker so turn around takes less time.

Financial Management Solutions—provides and tracks data for finance

operations, governance, risk, compliance, and performance management.

Human Capital Management – ―tracks all aspects of the Human Capital needs,

from core human resource (HR) transactional functionality through service

automation and delivery to complete enterprise talent management solutions.‖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.

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.

Transportation Suite—insures shipments reach their destination as well as,

―lowers transportation costs, improves customer service and asset utilization, and

provides flexible, global fulfillment options.‖2

These are just a handful of the applications available. Essentially, whatever the need,

Oracle has a way to meet it.

2.3 Microsoft Dynamics

Financial Management

Microsoft Dynamics AX accounting and finance solutions help you track and analyze

business information. You can easily manage your general ledger, payables, receivables,

inventory, sales process, purchasing, analytical accounting, cash flow, bank

reconciliations, fixed assets, and collections.

1 "Human Capital Management Solutions." Oracle, The World's Largest Enterprise Software Company. 19

Nov. 2008 <http://www.oracle.com/applications/human-capital-management.html>. 2 "Transportation Management." Oracle, The World's Largest Enterprise Software Company. 19 Nov. 2008

<http://www.oracle.com/applications/scm/transportation-management/index.html>.


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Business Intelligence and Reporting

Microsoft Dynamics allows you to manage budgets, create and consolidate reports and

look for trends and relationships in any part of the business.

Human Resource Management

Microsoft Dynamics allows the management of applicant and employee information:

payroll and benefits, skills mapping, recruitment and employee registration, and skills

development. In addition the system helps you ensure your organization is meeting

government reporting requirements accurately and on time.

Project Management

Project management and accounting applications allow project managers, accountants

and executives to improve their project profitability and adapt to changing conditions. In

addition manage resources, forecast costs and budgets, track time, and expenses. Lastly,

manage contracts and billing.

Customer Relationship Management

Customer relationship management solutions enable management of customer groups,

create and launch marketing campaigns, track customer activity, manage sales and after

sales. It also enables automation of many day to day tasks for sales, customer service,

field service, call center, and marketing professionals.

Manufacturing

It provides an integrated suite of manufacturing applications that give you the tools to

plan, manage, and execute a top of the line manufacturing operation. The manufacturing

process consists of product configuration, scheduling and shop floor, and supply and

capacity requirements planning.

Supply Chain Management

This improves inventory management, management of single or multi-site warehouses,

demand planning, order processing, and online collaboration with suppliers.

Collaborative Workspace

This extends the reach of business applications, information and process to employees,

customers, and partners with role based delivery through a single web-based portal.

Configuration and Development


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Customization capabilities enable programmers and system administrators to add new

functionality and modify existing functionality quickly and with limited coding.

3. The total cost of ERP ownership

Total cost of ownership (TCO) is a significant factor in ERP strategies and decisions. Yet

while both end-users and ERP vendors tend to talk about lower TCO and many vendors

claim it as a point of differentiation. 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, the number of users goes up, along with the total cost of

software and services, one can naturally expect a correlation between size of the ERP

deployment and costs. As shown in Table 1, as the number of users goes up, the total cost

of software and services also rises.

Table 1: Average Software and Services Costs by Company Size

Company

Size

Average # of

Users

Average

Software

Average

Service

Average 3

years

Maintenance

Average

total cost

Under $50M 38 $176,597 $126,022 $81,676 $384,295

$50M - $100M 92 $482,941 $351,374 $247,554 $1,081,869

$100M - $250M 195 $695,395 $581,090 $443,066 $1,719,551

$250M - $500M 344 $985,714 $655,263 $346,639 $1,987,616

$500M - $1B 475 $1,364,286 $1,110,000 $617,735 $3,092,021

$1B - $5B 2187 $2,360,577 $2,081,000 $1,479,208 $5,920,785

Over $5B 3365 $2,652,500 $2,102,778 $1,163,531 $5,918,809

Source: Aberdeen Group, July 2007

Table 2 displays software and service costs by vendor, since the ratio of services to

software costs is indicative of both ease of use and ease of implementation. We just

adopted a few major vendors, Infor, Lawson, QAD, SAP and Oracle.

Table 2: Software and Service Costs by Vendor


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ERP

vendor

Average

Software

Average

Service

Average # of

ERP modules

Average

Software +

Service per user

Average

total costs

per user

Infor $703,261 $494,444 11.0 $9,843 $12,773

Lawson $482,500 $455,556 10.8 $10,521 $11,826

QAD $633,871 $463,158 10.2 $9,741 $12,161

SAP $1,276,667 $1,115,323 11.9 $11,381 $15,067

Oracle $1,929,167 $1,694,231 11.5 $16,882 $20,983


Functionality and TCO remain significant factors on ERP strategies and decisions. The

depth and breadth of functionality deployed, along with the cost of software, services,

and on-going maintenance combine to provide a price performance of ERP. Table 3

shows the ERP usage and total cost per user per percentage Point of functionality used by

three vendors, SAP, Oracle, and Microsoft Dynamics.

Table 3: ERP Usage and Costs per User per Percentage of Functionality Used

ERP

Vendor

Average # of

Modules

Used

Average % of

Functionality

Used

Average #

of Users

Software +

Service + 3

Yrs Maint.

SAP 12.4 69.1% 834 $702

Oracle 11.3 72.4% 1365 $513

Microsoft Dynamics 10.6 73.2% 116 $607


Cost Areas of Microsoft Dynamics AX

The initial average license price per user for Microsoft Dynamics AX is $3,000.

According to Nucleus Research, Inc the average initial license price for a Microsoft

Dynamics AX customer was $571,234 with a low of $50,000 and a high of $2.55 million.

The consulting average expenditure for Microsoft Dynamics AX deployment was

$1,169,745 with a low of $50,000 and a high of $6.8million. The median expenditure for

consulting was $600,000. Pertaining to those customers that made hardware investment,

the average hardware costs were $180,188 while the median cost was $84,750 (Nucleus

Research, 7). Those companies that invested in the internal personnel for deployment and


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ongoing support for the ERP solution the average personnel costs were $346,667 and the

average annual ongoing cost was $192,000. Lastly, training costs on average were

$141,375 with one hundred and ninety-five users, twenty-nine hours of training time at a

cost of $25 per hour.

Table 1. The Average 3-Year Cost of an Microsoft Dynamics AX Deployment

Average Data Components

Software $571,234 Average initial license price

Consulting $1,169,745 Average standalone consulting expenditure of

customers interviewed

Hardware $180,188 Average hardware expenditure of customers

interviewed

Personnel $346,667

Average number of personnel needed to

deploy:4

Average time of deployment:13 months

Assumed fully loaded cost of an

employee:$80,000

Training $141,375

Average number of users: 195 Average

training time: 29 hours Assumed fully loaded

hourly cost of an end user: $25

Total $2,409,207 Average initial cost of deployment

Ongoing Costs

Software maintenance $274,192 Average maintenance rate: 16%

Average initial license price.

Personnel $576,000

Average number of FTEs required to support

Microsoft Dynamics AX: 2.4 Assumed fully

loaded cost of a support FTE:$80,000

Total 3-Year Cost $3,259,399

Average 3-year costs of software, consulting,

hardware, personnel, training and

maintenance.

Table 2. The Median 3-Year Cost of an Microsoft Dynamics AX Deployment

Initial Costs

Average Data Components

Software $168,000 Median initial license price

Consulting $600,000 Median standalone consulting

expenditure of customers interviewed

Hardware $84,750 Median hardware expenditure of

customers interviewed

Personnel $220,000

Median number of personnel needed

to deploy:3

Average time of deployment:11


13

months

Assumed fully loaded cost of an

employee:$80,000

Training $72,000

Median number of users: 120 Median

training time: 24 hours Assumed fully

loaded hourly cost of an end user:

$25

Total $1,144,750 Median initial cost of deployment

Ongoing Costs

Software maintenance $75,600 Median annual cost of license: 15%

Median initial license price: $168,000

Personnel $300,000

Median number of FTEs required to

support Microsoft Dynamics AX:

1.25

Assumed fully loaded cost of a

support FTE:$80,000

Total 3-Year Cost $1,269,950

Median 3-year costs of software,

consulting, hardware, personnel,

training and maintenance.

3. Target market

SAP serves 75% of the Fortune Global 1000, but less than 1% of Fortune Global million.

The small and medium enterprise (SME) market is a huge opportunity. SAP views SMEs

as its main potential source of growth. As of summer 2006, SAP led the midmarket

segment, but to reach its goal of having 45% - 50% of order entry from SME customers

by 2010, SAP has to address the two most important elements of an SME solution: Total

Cost of Ownership (TCO) and ease-of-use. 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.

It would probably be safe to say Oracle targets anyone interested in purchasing an ERP

solution. That wouldn‘t be entirely accurate. 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. Enterprise solutions will probably remain

a staple target for them. However, if you look at the products they are now producing

making it easier for smaller organizations to get introduced to their product, it‘s an

obvious sign they are seeking more small to medium businesses in their portfolio. The


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Standard Edition One with a price of $180 per user is a sign of that. They also have a

suite of ‗out of the box‘ applications ready to bolt on once the server is in place. Get the

business used to the Oracle environment when they are small at a competitive price, then

sell more licenses as your software helps them grow seems to be their motto. I can‘t say

that‘s a bad one.

At the end of the day, selecting the best solution comes down to preference. Obviously,

each solution has strengths and weaknesses. But how do you select a solution when one

provider is strong in one area you need while another is strong in another? Additionally,

there are more solutions coming on the scene. Smaller companies who may be able to

provide a different type of service than what the biggest players offer. Another solution

many will consider in the future, especially with the current economic situation, is the

growing Software as a Service trend.3 SAP has already got a jump on the market with

their ByDesign solution. At the end of the day, it will have to come down to what

solution works best for the business making the choice.

3 Maxcer, Chris. "Is SaaS ERP a viable model for manufacturing?" Manufacturing ERP software and

management - SearchManufacturingERP.com. 9 Sep. 2008. 23 Nov. 2008

<http://searchmanufacturingerp.techtarget.com/news/article/0,289142,sid193_gci1329175,00.html>


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Comparative Analysis of ERP Vendors

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