Cost Structure Bench Marking Oracle Sap Final

© RAAD Research GmbH 2009 - Status: 01/28/2009 - Slide: 1

Cost Structure Benchmarking – Oracle vs. SAP Apps.

Cost Structure BenchmarkingOracle vs. SAP Applications



Introduction

Software Costs

Implementation Costs

Support, Maintenance, Operation

Conclusion

IT Budgets



Introduction

The comparison of costs and benefits constitutes a deciding factor for companies looking for an appropriate ERP supplier. For Companies, the economic and flexible use of software is particularly important in order to free funds for additional investments, not least in further IT products. Providing for this is also the explicit goal of most ERP suppliers, like Oracle and SAP, for instance.

Nevertheless, RAAD studies conducted in 2008 show that many SAP customers consider the costs for implementing, customising, and operating SAP software as very high. From this perspective, the objections against the planned increase of SAP’s maintenance fees is quite understandable. The general feeling that SAP products are too expensive to purchase and operate has also spread among the non-SAP customers of Germany’s small and medium-sized businesses. Here, the predominant opinion is, that SAP is too expensive and too complex. However, RAAD Studies show that SAP’s products and price models are largely unknown to the decision makers. These opinions are therefore based on preconceptions. To date, no comparable studies are available regarding Oracle customers in the German-speaking countries. But Oracle also had to suffer criticism concerning maintenance costs and customer support in the past. (http://www.computerwoche.de/heftarchiv/2006/47/1216914/)

Despite the criticism directed at both software suppliers, a structured analysis comparing cost types and cost influencing factors of Oracle and SAP systems in respect to acquisition, implementation, and operation is still missing with regard to German-speaking countries. The study at hand is meant as a first step in this direction. It is the first of its kind that was supported by both software suppliers.



Purpose of the StudyComparing Oracle vs. SAP, but also Oracle vs. Oracle and SAP vs. SAP

The primary purpose of the inquiry was to find out whether the expenses for Oracle and SAP systems differ significantly with regard to a number of easy to inquire cost types and cost influencing factors like licenses, maintenance fees, project duration, and employees required for operation and support. This study can also serve as a means for companies to compare their IT according to the results of aspects inquired among the same ERP user base. In case this deviates from the bulk of the answers, it can be useful for a company to analyse why and where it does not fare so well and where improvements can be realised.

Benchmarking can only start with this studyBenchmarking between companies – although successfully applied in practice – is still a hotly discussed issue in theory. It is not least the care exercised in selecting the appropriate companies that determines how good and convincing a benchmark really is. In order to derive recommendations for specific actions, a company should only compare itself with a small and narrowly defined subset of companies of similar size, industry, IT affinity, etc. However, as stated above, this is not the immediate objective of this study.

Who is more expensive: Oracle or SAP? Neither?To benchmark the IT costs in total seems inadvisable, as no single definition employed by each and every company exists for “IT Cost Total”. Which factors are regarded as part of the IT costs can differ considerably between companies, depending on the structure of the IT. Due to this consideration, next to ‘global’ criteria like the IT budget and the IT budget for a particular supplier, a number of cost influencing factors have been queried and compared. These allow conclusions with regard to the total expenses, even though, at the end of this study, no flat result can be presented which company is more expensive: Oracle or SAP.



Which Cost Types and Cost Influencing Factors Have Been Queried?

Cost Type

Hardware Costs End-user Costs

Software Costs Costs for System Failures

System/Network Management


Direct Costs Indirect Costs

Implementation Costs Additional Service Costs

When purchasing, implementing, and operating IT systems, the resulting costs can be assigned directly or indirectly to the investment. Direct hardware and system/network management costs shall be ignored for the purposes of this study, as shall the indirect costs resulting from end user training, misuse, etc. or from a necessary increase in service. While the neglected direct costs will accrue regardless of the ERP supplier employed, end user costs will probably correlate with the respective user-friendliness of the programs used. Further studies will have to take this into account.

The study at hand will therefore focus on the cost types and cost influencing factors for software costs, implementation costs, support and operating costs, and system failure costs.



Cost Type

Hardware Costs End-user Costs

Software Costs – Chapter 2License Expenses per CompanyNumber of Licenses per CompanyMaintenance Rates

Costs for System Failures – Chapter 4Number of System Failures

System/Network Management

Support, Maintenance, Operation – Chapter 4Number of IT EmployeesSoftware Supplier-Specific IT EmployeesNumber of IT Employees for operationNumber of Employees for Level 1 SupportNumber of Employees in the Application DevelopmentExternal Consulting Days for Application Development

Direct Costs Indirect Costs

Implementation Costs – Chapter 3Number of Major Release Changes per YearProject Duration in TotalProject-Related Internal/External Person DaysDuration of CustomizingCustomizing-Related Internal/External Person DaysMaximum, Minimum, Average Consulting RateNumber of Project-Related Test Days

Additional Service Costs

The list of cost influencing factors assigned to each cost type in the table is not comprehensive. Due to the time restraints of the interviews, not all cost influencing factors possible in theory could be addressed. Therefore, the query focused on factors deemed easy to answer. Directly asking for cost types was omitted, as the comparability could have been influenced negatively by different definitions. The queried cost influencing factors therefore had to be defined as broadly as possible.



Comparability

Ensuring a comparability of costs and cost influencing factors as high as possible requires, thata) comparability is created by harmonizing the standards for costs and cost influencing factors. Thus,

the license expenses per user are a better yardstick than the expenses for the entire company.b) the respective cross-sections of Oracle and SAP customers are as similar as possible, with regard to

company size, line of business, corporate affiliation, number of users and functionalities used. The target group design took this into consideration, as clarified below.

The larger the cross-sections interviewed, the more reliable the results derived. Therefore, RAAD tried to query as many companies in Germany, Austria and Switzerland as possible during the timeframe running from October to December 2008. In total, 86 IT managers of Oracle-using enterprises and 127 IT managers of SAP-users participated in the study. The duration of the interviews averaged 7-10 minutes. Even though IT costs are often not only debated within the IT, but also within a company’s executive board - as shown in a RAAD study from the beginning of 2008 -, many companies did not wish to participate in the study, despite a statement of confidentiality from RAAD and the support of the software suppliers. This resulted in an interview response rate of ca. 8%, which is very low in comparison to other RAAD studies.



ResultsHow many employees does your company have?Both for Oracle and SAP customers, the number of employees of the legal entity was inquired.The adjoining graph shows that both samples are comparable with regard to the size of the companies. An applied statistical test detected no differences between both cross-sections regarding the number of employees.

13%9%

23%

14%17%

6%

17%

5%8%

27%

19%

14%11%

16%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

less than 100 100 - 199 200 - 499 500 - 999 1.000 - 1.9992.000 - 4.999 more than 5.000

Oracle

SAP

Source: RAAD

(DACH, Oct. - Dec. 2008, n1 = 69, n2 = 115)

Company employees

MedianOracle 500 - 999 SAP 500 - 999



ResultsHow many Oracle or SAP users does your company have?The number of ERP users should also be similar in both questioned groups. Therefore, the number of ERP users of the legal entity was inquired. Here as well, no statistical deviations between both groups could be ascertained.

53%

20%

15%

7%

0%3% 2%

33%

16%

33%

10%

2%6%

1%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

less than 100 100 - 199 200 - 499 500 - 999 1.000 - 1.9992.000 - 4.999 more than 5.000

Oracle

SAP

Source: RAAD

(DACH, Oct. - Dec. 2008, n1 = 60, n2 = 83)

ERP user of the legal person

MedianOracle < 100SAP 200 - 499



ResultsDoes your company belong to a corporation?Due to the prevalent sales policy strongly focussing on large corporations, at least in the past, most of the responding companies, whether Oracle or SAP customers, are part of a corporation.Here too, the two target groups do not differ from each other.

88%

13%

83%

17%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No

Oracle

SAP

Source: RAAD

(DACH, Oct. - Dec. 2008, n1 = 72, n2 = 121)

Group affiliation



ResultsIn which industry does your company operate?Regarding the distribution across industries, no statistical difference between Oracle and SAP customers could be established.

0%

6%

27%

8%

13%

10%

24%

9%

2%

1%

17%

33%

12%

10%

7%

11%

7%

2%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%

Mining

Construction

Manufacturing

Transport., Comm., Electric, Gas, And Sanitary

Wholesale Trade

Retail Trade

Finance, Insurance, And Real Estate

Services

Public Administration

SAP

Oracle

Source: RAAD

(DACH, Oct. - Dec. 2008, n1 = 86, n2 = 127)

Industry by SIC-Code



ResultsWhich software products from Oracle or SAP are licensed?The software functionalities used by individual companies should be as similar as possible to achieve a viable comparison between the cost structures of Oracle and SAP customers. To this end, the applications used in 7 different areas were queried: Finance (FI), Human Resources (HR), Customer Relationship Management (CRM), Supplier Relationship Management (SRM), Supply Chain Management (SCM), Production, und Applications Platform (Platform).The use of particular functionalities is in part clearly divergent when comparing Oracle with SAP customers. Regarding the use of FI, HR, CRM, SRM and SCM systems, significant differences can be ascertained at the alpha error level = 0,05. Nevertheless, due to the poor response rate, this divergence from the original model had to be accepted in order to generate at least enough interviews for a comparison.

87%

99%

48%

77%

74%

23%

32%

11%

35%

9%

38%

21%

25%

27%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Oracle FI (n = 69)

SAP FI (n = 124)

Oracle HR (n = 29)

SAP HR (n = 121)

Oracle CRM (n = 42)

SAP CRM (n = 111)

Oracle SRM (n = 22)

SAP SRM (n = 108)

Oracle SCM (n = 23)

SAP SCM (n = 108)

Oracle Production (n = 26)

SAP Production (n = 112)

Oracle Plattform (n = 20)

SAP Plattform (n = 105)

Source: RAAD

(DACH, Oct. - Dec. 2008, 19 < n < 123)

Software usage

Oracle

SAP



ResultsWhich software products from Oracle or SAP are licensed?The study does not aim to examine specific software packages, like comparing SAP ERP with Oracle Applications. The adjoining graph clearly shows this.The distribution of the SAP products in the queried group strongly correlates with the distribution in the overall market.

37% 65% 5%

53% 13% 17% 22% 13%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% 120%

SAP

Oracle

R/3 SAP ERPSAP Business Suite Oracle AppsPeoplesoft J.D. EdwardsSiebel Other Oracle softwareSource: RAAD

(DACH, Oct. - Dec. 2008, n1 = 86, n2 = 127)

Licensed Software Products



Conclusion

Oracle and SAP customers are comparable regarding the criteria company size, number of users, line of business, and corporate affiliation.

There is a significant difference between Oracle and SAP customers in the software functionalities used. In proportion, there are more SAP customers employing SAP’s Finance and Human Resources solutions than Oracle customers using the corresponding Oracle products. In contrast, Oracle customers more often cover their CRM, SRM and Production software needs from the Oracle portfolio, than SAP customers do with SAP software.



Introduction

Software Costs



Conclusion

IT Budgets



Software Costs – Chapter 2

According to TCO analysis, software costs often contribute less than 10% to the overall costs, depending on the type of software used. Software costs are composed of licenses and maintenance rates. The most important cost influencing factors are the number of purchased licenses, the license price, and the maintenance rates. During the query, it was often difficult for the contact persons in the companies to spontaneously recapitulate the various prices for user and engine licenses. Therefore, the overall license costs, i.e. the sum of user and engine license costs, were inquired.

With regard to maintenance costs, both the total amount of the maintenance costs and the maintenance rates were inquired. The cited results refer to the maintenance rates, due to their superior comparability.

Regarding Oracle customers, it was explicitly stated that the costs for Oracle database licenses should not be considered, but rather only the licenses for software of the product categories Oracle Applications, Peoplesoft, J. D. Edwards and Siebel. In addition, information regarding Agile and Hyperion was also included in the examination.

Software Costs – Chapter 2License Expenses per CompanyNumber of Licenses per CompanyMaintenance Rates



ResultsHow high is the overall license price, incl. Engines?The overall license price for Oracle customers does not differ significantly from the one for SAP customers.The overall license costs are not suitable for comparing Oracle with SAP, because Oracle and SAP customers differ with regard to user penetration.

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

4500000

Oracle SAP

Licences overall(DACH, Oct. - Dec. 2008, n1 = 29, n2 = 27)

Source: RAAD

See addendum to graph, Median, Quartiles and Test.

L. Quartile Median U. QuartileOracle 118,800 227,273 600,000SAP 167,316 460,000 744,793



ResultsHow many user licenses does the company have?Compared to Oracle customers, SAP customers have purchased significantly more software licenses. The number of purchased licenses for the SAP customers is about three times higher than for Oracle customers, when comparing the respective Median.

* significant difference between Oracle and SAP (α = 0,05)

0

1000

2000

3000

4000

5000

6000

7000

8000

Oracle SAP

Number of Licences per company(DACH, Oct. - Dec. 2008, n1 = 39, n2 = 110)

Source: RAAD

L. Quartile Median U. QuartileOracle 27.50 100.00 260.00SAP 120.00 290.00 700.00



ResultsHow high is the user penetration (ERP user per employee) in the company?Due to the higher number of licenses for SAP customers, the relation of SAP users to company employees is clearly higher than for Oracle customers.The higher user penetration is not due to the SAP Business Suite (at least 25% of the employees have to be licensed) showing up very often in the sample. SAP also has a higher user penetration in the case of R/3 and SAP ERP customers than comparable Oracle customers.

MedianOracle 16%*SAP 40%*

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Oracle SAP

ERP user per employee(DACH, Oct. - Dec. 2008, n1 = 54, n2 = 79)

Source: RAAD




ResultsHow high is the average license price per user?For a better comparability, the overall license expenses have to be brought in relation to the number of purchased licenses. This shows that the license expenses per user for Oracle and SAP are almost identical.Until now, the number of the responses available in both groups is too small for the evaluation to be able to ascertain a difference. In this position, the users within the company are asked to participate in additional inquiries in order to be able to uncover possible differences.

0

1000

2000

3000

4000

5000

6000

7000

8000

Oracle SAP

Licences per user(DACH, Oct. - Dec. 2008, n1 = 23, n2 = 27)

Source: RAAD

L. Quartile Median U. QuartileOracle 1,000 2,000 3,111SAP 1,311 2,136 2,828



ResultsHow high is the average license price per employee?Due to the insufficient number of responses, no difference can be ascertained between the user groups regarding the license expenses per employee.

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Oracle SAP

Licenses per employee(DACH, Oct. - Dec. 2008, n1 = 26, n2 = 24)

Source: RAAD

L. Quartile Median U. QuartileOracle 66 388 641SAP 340 898 2001



ResultsHow high are your current maintenance costs for your ORACLE/SAP licenses per year?As expected, the maintenance rates do differ significantly from each other not only on paper, but also for the customers.Most of the customers pay the respective standard maintenance rates of 22% (Oracle) or 17% (SAP). Upward deviations can be explained by individual maintenance contracts (SAP MaxAttention) or by expiring standard maintenance contracts for old releases.Downward deviations can be explained by discounts for large software license sales.

0

5

10

15

20

25

30

35

Oracle SAP

Maintenance charge(DACH, Oct. - Dec. 2008, n1 = 24, n2 = 48)

Source: RAAD





ConclusionLicense expenses per company

No difference between Oracle and SAP customers could be determined regarding the license expenses per company.

This probably results from the small number of responses to this question, as SAP customers have definitely purchased more SAP licenses than Oracle customers have purchased Oracle licenses. This causes the user penetration for SAP customers to be almost three times higher (median comparison) than for Oracle customers.

License expenses per user, respectively employeeThe comparison of the standardised variables license expenses per user and license expenses per employee resulted in no difference between Oracle and SAP customers.

Maintenance ratesAs expected, the maintenance rates for Oracle customers are significantly higher than for SAP customers.

Future studiesThe sample available for this study was not large enough to determine a conclusive difference regarding the major comparison variables license expenses per user and, respectively, per employee. A comparison of the respective price lists shows differences, these however cannot be globally transferred to the customer situation, due to sometimes considerable discounts. Before possible detailed studies regarding this issue are conducted in future, larger samples should be gathered and evaluated, in order to determine whether there really are no significant differences.



Introduction

Software Costs



Conclusion

IT Budgets



Implementation Costs – Chapter 3Implementation costs can severalfold surpass the software purchase costs, depending on the project’s complexity. The comparison of project-related cost influencing variables for implementation costs in this study always refers to the latest larger Oracle or SAP project of the respective company. Possible project types were release changes, migrations or new implementations.

Implementation Costs – Chapter 3Number of Large Release Changes per YearOverall Project DurationProject-Related Internal/External Person DaysDuration of CustomisationsCustomising-Related Internal/External Person DaysMaximum, Minimum, Average Consulting RateNumber of Project-Related Test Days

The major influencing factors on implementation costs are the complexity and complicatedness of an implementation project, however, these variables and their respective influence are not directly measurable. They can be indirectly measured via cost influencing variables like project duration, internal and external person days spent , consultant rates and test days.

Due to release changes, implementations of a product are recurring events. Implementation costs therefore have to be summed up over the entire product lifecycle, so that the number of release changes can represent a major cost influencing variable for implementation costs.



ResultsWhen was the last time you performed a large modification to your system? The last large Oracle or SAP project was given to the IT Managers as reference for answering all the questions in this chapter. Possible project types were new implementations, migrations or release changes.In both groups, 50% of the customers have performed a large modification during the last two years. With regard to SAP customers, even 75% of the projects have been executed during the period 2006-2008. This also includes many SAP-ERP implementations, which have been noticed to increase on the market in the last two years.

1996

1998

2000

2002

2004

2006

2008

2010

Oracle SAP

Date of last major project(DACH, Oct. - Dec. 2008, n1 = 53, n2 = 121)

Source: RAAD




ResultsWhat type was the last major change to your system?In most cases, the last major system change was a release change.A new implementation was mentioned in only about one fifth of the cases. Migrations were stated only by one percent of the SAP customers. This value shows that the product migration from SAP R/3 to SAP ERP is mostly perceived as a release change by most of the SAP customers.

82%

18%

0%

79%

21%

1%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Release Change

New Implementation

Migration

Oracle

SAP

Source: RAAD

(DACH, Oct. - Dec. 2008, n1 = 86, n2 = 127)

Type of last major project



ResultsOn average, how many release changes has the company performed per year since the introduction of the system?No significant difference can be established between the Median values for both groups.For 50% of the SAP customers, an average of up to 0.19 major system changes takes place per year, which means approximately one every five years. For Oracle customers, the system changes take place once every seven years (0.14 times per year).It is notable that 25% of the Oracle customers have apparently not performed a release change so far. However, this also includes a number of new Oracle customers from the last two years.

0,00

0,20

0,40

0,60

0,80

1,00

1,20

Oracle SAP

Major release changes per year(DACH, Oct. - Dec. 2008, n1 = 47, n2 = 96)

Source: RAAD




ResultsHow many days did the last major project (release change / migration / new implementation) take in total? (including customising / configuration; in days from project start until the system went live)

The medians of the project durations for Oracle and SAP customers do not differ significantly from each other. However, the values tend to spread wider with regard to Oracle projects. For instance, here the upper quartile with 75% of the customers amounts to 191 days, while for SAP projects it only amounts to 90 days. Most of the data only refers to release changes. A differentiation by project type could not be performed due to the small number of answers.

0

50

100

150

200

250

300

350

400

450

500

Oracle SAP

Project duration(DACH, Oct. - Dec. 2008, n1 = 48, n2 = 91)

Source: RAAD




ResultsHow high were the overall internal expenses of the last project in terms of person days?No significant difference can be ascertained between the median of the two group. Only about 25 companies in each group were able to provide data.50% of the Oracle customers specified having spent up to 20 person days, the remaining 25% needed up to 191 days.The first 50% of the SAP customers specified that they needed up to 80 days, while an additional 25% needed up to 90 days.The overall spread is distinctly higher with regard to Oracle customers.

0

200

400

600

800

1000

1200

1400

1600

1800

2000

Oracle SAP

Project related internal person-days (DACH, Oct. - Dec. 2008, n1 = 25, n2 = 27)

Source: RAAD




ResultsHow high were the overall external expenses of the last project in terms of person days?The medians of the two groups do not differ significantly from each other.On the whole, the number of externally purchased consultant days is very low. In most cases, release changes are evaluated here. These in general seem to generate only a small need for external consulting.

0

500

1000

1500

2000

2500

Oracle SAP

Project related external person-days (DACH, Oct. - Dec. 2008, n1 = 24, n2 = 40)

Source: RAAD




ResultsHow many days did the adjustment (customisation / configuration) of the software to the company’s needs take with regard to the last major project?The adjustments accompanying projects took longer for Oracle customers than for SAP customers.The difference of the medians is significant. Up to 50% of the Oracle customers need up to 22.5 for the adjustment. For SAP customers, this value amounts to 10 days. Why the customisation took longer for the Oracle customers could not be clarified within the scope of this study. Here, additional studies are necessary.

0

100

200

300

400

500

600

700

800

Oracle SAP

Customizing duration(DACH, Oct. - Dec. 2008, n1 = 32, n2 = 41)

Source: RAAD





ResultsWhat percentage of the adjustment effort went into additional programming?Customisation is generally composed of two aspects: programming and configuration. This type of adjustment is generally tied to extensive programming activities. During configuration, the parameters specified by the software are set up.The medians for the amount of additional programming for Oracle and SAP customers do not differ significantly from each other.The data tends to spread a bit more for Oracle customers, 50% of their values being between 23% and 72.5%. For SAP, the median 50% are located between 34% and 50%.

0

20

40

60

80

100

120

Oracle SAP

Programming part of implementation project(DACH, Oct. - Dec. 2008, n1 = 31, n2 = 54)

Source: RAAD




ResultsWhat percentage of the adjustment effort went into the system configuration?Customisation is generally composed of two aspects: programming and configuration. This type of adjustment is generally tied to extensive programming activities. During configuration, the parameters specified by the software are set up.The picture for the configuration also does not display any significant differences for the medians of the two groups. This picture constitutes the counterpart to the previous one. Together, they respectively show the distribution of the two values programming and configuration.

0

20

40

60

80

100

120

Oracle SAP

Configuration part of implementation project(DACH, Oct. - Dec. 2008, n1 = 31, n2 = 54)

Source: RAAD




ResultsHow large was the internal customisation workload of the last project in overall person days?In both cases, the number of answers is very small. In many cases, the respondents were unable to give an answer to this question, because the project occurred too long ago, or because such values did not exist.The differences between both medians are not significant.A convincing piece of information cannot be obtained due to the small number of answers, the representation has been included only for the sake of completeness.

0

50

100

150

200

250

Oracle SAP

Customizing related internal person-days (DACH, Oct. - Dec. 2008, n1 = 13, n2 = 13)

Source: RAAD




ResultsHow high was the externally purchased customisation workload of the last project in overall person days? In both cases, the number of answers is very small. In many cases, the respondents were unable to give an answer to this question, because the project occurred too long ago, or because such values did not exist. In some cases, a fixed price was agreed upon, so that the data could not be broken down into person days.The differences between both medians are not significant here either.A convincing piece of information cannot be obtained due to the small number of answers, the representation has been included only for the sake of completeness.

0

50

100

150

200

250

300

Oracle SAP

Customizing related external person-days (DACH, Oct. - Dec. 2008, n1 = 7, n2 = 21)

Source: RAAD




ResultsHow high was the average daily rate for a consultant?The average daily rate for consultants for Oracle customers amounts to up to 1,100 Euros in 50% of the cases. For SAP customers, it amounts to almost exactly the same, with 1,163 Euros. However, the difference of these medians is not significant.

0

500

1000

1500

2000

2500

Oracle SAP

Average daily rate for consultants(DACH, Oct. - Dec. 2008, n1 = 24, n2 = 39)

Source: RAAD




ResultsHow high was the maximum daily rate for a consultant?The medians for the maximum daily rate for a consultant are only a little higher than the average daily rates for consultants.There is no significant difference between the two customer groups.

0

500

1000

1500

2000

2500

Oracle SAP

Maximum daily rate for consultants(DACH, Oct. - Dec. 2008, n1 = 10, n2 = 19)

Source: RAAD




ResultsHow high was the lowest daily rate for a consultant? Equivalently, the median for the minimum daily rate for consultants is not far below the average. However, the values tend to spread more for Oracle. On the whole, no significant difference is notable here either.

0

200

400

600

800

1000

1200

1400

1600

Oracle SAP

Minimum daily rate for consultants(DACH, Oct. - Dec. 2008, n1 = 6, n2 = 12)

Source: RAAD




ResultsHow many days have been needed for testing during the last major project?Test days describe the period for tests conducted for the final approval before the system goes live.For testing during the last major project, 50% of the Oracle customers needed up to 14 days, 50% of the SAP customers needed up to 10 days. These values do not differ significantly.With regard to Oracle, however, there are considerable upward deviances.

0

100

200

300

400

500

600

Oracle SAP

Project related test days(DACH, Oct. - Dec. 2008, n1 = 41, n2 = 54)

Source: RAAD




ConclusionReference projects

The answers of the IT managers referred to the last major project of the company: New implementation, migration or release change.In about 80 percent of the responses, the last project performed was a release change, regardless of the supplier.Most projects were performed within the last two years.

Number of release changesCost advantages arising from a lower average number of release changes are provided by neither supplier. The number of release changes performed per year since the introduction of the respective systems does not differ significantly for Oracle or SAP customers.

Project duration and effortAccording to the existing data, both the project duration and workload (internal/external person days) do not differ regarding Oracle or SAP customers. The workload in internal person days is distinctly higher for SAP customers. However, the number of responses detailing internal and external person days is too small for statistically sound statements. For that, additional data definitely has to be gathered.



ConclusionCustomisation duration and workload

Customizing takes significantly longer for Oracle customers than for SAP customers. Due to the lack of data regarding internal and external person days expended for customisation, it could not be clarified whether the workload as well is greater for Oracle than for SAP customisations. The reason why Oracle customisation projects take longer could also not be determined. Additional inquiries are necessary here.

Configuration and Programming both have a major influence on Customizing duration and workload. In this respect, no difference between Oracle and SAP customers can be determined, which implies that the overall customisation effort could be similar in both cases. However, this assumption has to be verified by further examination.

Daily rates for external consultantsThe daily rates for Oracle and SAP consultants are similar.

Number of test daysAlmost the same number of test days is employed in both groups.

Future studiesIt is noticeable in this chapter, that the Oracle distributions in general show a higher spread. This could imply that SAP release changes take place in a more standardized manner when compared to Oracle release changes (Most of the responses referred to release changes). This issue might be traced back to Oracle’s wider product portfolio due to acquired software providers. This hypothesis, however, has to be confirmed by additional studies.



Introduction

Software Costs



Conclusion

IT Budgets



Support, Maintenance, Operation – Chapter 4

Introduction

The largest percentage of the total costs for ERP systems, estimated at 60%, is taken up by support, maintenance and operation of the software.

A fundamental and easily inquired cost influencing factor is the number of employees respectively responsible for operation, support and additional application development (adjusting the system after it has entered productive operation).

In order not to neglect general structural differences between Oracle and SAP users, the total number of IT employees was also inquired.

Support, Maintenance, Operation – Chapter 4Number of IT EmployeesSoftware Vendor-Specific IT EmployeesNumber of IT Employees for OperationNumber of Employees for Level 1 SupportNumber of Employees in Application DevelopmentExternal Consultant Days for Application Development



ResultsHow many full time employees (FTEs) does the IT of your company have?A total of 50% of the questioned Oracle customers stated having up to 20 full time positions in the IT. The average in this group even is much greater, however this is primarily caused by a number of extreme deviances (companies with strong IT affinity, like, for instance, IT service providers). The values for SAP customers are slightly lower (median at 11 FTE).However, no significant difference can be ascertained between the two groups.

0

500

1000

1500

2000

2500

Oracle SAP

IT staff overall(DACH, Oct. - Dec. 2008, n1 = 76, n2 = 115)

Source: RAAD




ResultsHow many full time employees (FTEs) does the IT of your company have per employee?The number of FTEs in the IT in proportion to the whole staff of a company amounts to 2.1% for 50% of the Oracle customers and to 1.3% for SAP customers. The number of IT employees in proportion to the whole staff is significantly higher for Oracle customers than for SAP customers. This difference is so far not substantiated by the use of Oracle or SAP. It remains to be established whether the companies have different IT strategies (homogenous vs. best of breed?) that justify the difference.The deviances in the case of Oracle customers result from the participation of large IT providers.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Oracle SAP

IT staff per employee(DACH, Oct. - Dec. 2008, n1 = 69, n2 = 115)

Source: RAAD


L. Quartile Median U. QuartileOracle 0.7% 2.1% 6.7%SAP 0.5% 1.3% 2.8%



ResultsHow many FTEs in your company are responsible for Oracle or SAP?Oracle- and SAP customers employ approximately the same number of employees responsible for Oracle or SAP topics in their IT department. The groups do not differ significantly. 50% of the Oracle customers occupy up to three employees with the Oracle system, for SAP customers this number amounts to up to 4 employees.There are some considerable deviances in both groups.

0

20

40

60

80

100

120

140

Oracle SAP

IT staff associated to software vendor(DACH, Oct. - Dec. 2008, n1 = 66, n2 = 118)

Source: RAAD




ResultsHow many FTEs (including external consultants) are involved in the daily operation of the system (basic operation, maintenance, support) in your company?For operating their respective system, Oracle and SAP customers have set aside the same number of employees. The values for both groups do not differ significantly.For Oracle, 50% of the customers have up to three employees, for SAP, this is up to two employees.

0

10

20

30

40

50

60

70

Oracle SAP

Application staff for daily operational, maintenance and support(DACH, Oct. - Dec. 2008, n1 = 61, n2 = 106)

Source: RAAD




ResultsHow many FTEs (incl. external consultants) are involved in the Level 1 Support?Oracle and SAP customers have a very similar number of employees in the Level 1 Support.For 50% of the Oracle customers, up to two employees are responsible for Level 1 Support, while 2.25 are responsible for SAP customers. In both groups, 75% of the companies have up to 5 employees available for the IT Support for their SAP or Oracle installation.

0

5

10

15

20

25

30

Oracle SAP

Staff for 1. level support(DACH, Oct. - Dec. 2008, n1 = 54, n2 = 106)

Source: RAAD




ResultsHow many end users are allowed to directly contact the Support of the software vendor?SAP in particular encourages the creation of Competence Centres in the company and requires these to conduct the first contact with the end user. This is obvious in the small number of end users allowed to directly contact the support of the software vendor. Regarding SAP customers, in half of the companies, no end user is allowed to directly contact support; In the case of Oracle customers, up to two end users are allowed.

0

50

100

150

200

250

300

350

400

450

500

Oracle SAP

No. of end user contacting software vendor support(DACH, Oct. - Dec. 2008, n1 = 65, n2 = 112)

Source: RAAD





ResultsOn average, how many days a year in sum does your system go down (incl. regular maintenance and failure cases)? System failure is an important criterion regarding the indirect costs. High downtimes rapidly sum up to a long work stoppages and can therefore become expensive. The amount of downtime costs however depends on the industry in question. Both groups show identical downtimes. The median amounted to half a day per year for SAP, and one day per year for Oracle customers. This value also marks the limit of the upper quartile, so, for 75% of the Oracle customers, the system stands still for up to one day per year. Deviances go up to 20 days. For SAP, the upper quartile amounts to 2 days.

0

5

10

15

20

25

Oracle SAP

System failure(DACH, Oct. - Dec. 2008, n1 = 66, n2 = 124)

Source: RAAD




ResultsDoes your company have its own Oracle or SAP application development?In both groups, 40% and more have an existing and continuous application development for their respective system, only 2% in each group implement this only in association with a project.A large majority in both customer groups, however, does not have its own application development and has to obtain these services externally.

40%

2%

58%

42%

2%

57%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%

Internal application development

Project associated application development

No internal application development

SAP

Oracle

Source: RAAD

(DACH, Oct. - Dec. 2008, n1 = 81, n2 = 122)

Internal application development department



ResultsHow many FTEs are employed in application development?The number of FTEs in application development does not differ between both user groups.If the respective application development is operated internally, Oracle customers, in 50% of the cases, employ up to 3 full time employees; For SAP customers, this value amounts to 4.5 FTE.The values do not significantly differ from each other, but they clearly spread within their groups. Again, this reflects the IT affinity of the companies in question. Thus, 5 percent employ more than 37 FTEs (Oracle) or even more than 43 FTEs (SAP).

0

5

10

15

20

25

30

35

40

45

Oracle SAP

Staff for application development(DACH, Oct. - Dec. 2008, n1 = 25, n2 = 47)

Source: RAAD




ResultsOn average, how many external consultant days do you purchase for application development (customisation / configuration)? Overall, only few Oracle users were able to even offer an answer to this question, so no statistical difference could be ascertained here.50% of the Oracle customers purchasing external application services utilize up to 0.19 person years or 45.6 days. The remaining companies purchase more days.In case of SAP customers, this value is a bit higher, with 0.315 person years or 75.6 person days. In this group, however, distinctly higher deviant values were given (up to 33 person years).

0,00

5,00

10,00

15,00

20,00

25,00

30,00

Oracle SAP

External consulting for vendor specific application development

(DACH, Oct. - Dec. 2008, n1 = 14, n2 = 32)

Source: RAAD




ConclusionVendor-independent number of employees in the IT department

Per company, Oracle and SAP customers employ a similar number of employees in their IT departments. Regarding the relation to the total number of a company’s employees, Oracle customers have considerably more IT employees than SAP customers. It remains to be ascertained whether Oracle customers follow a different IT strategy than SAP customers explaining this difference.

Vendor-specific number of employees in the IT departmentFor the number of vendor-specific employees in the respective IT department, neither an absolute, nor a relative difference can be ascertained between Oracle and SAP customers.

Number of employees for System operation and Level 1 SupportThe number of employees for system operation and Level 1 Support does not differ between Oracle and SAP customers.

Number of vendor-specific system failuresThe number of vendor-specific system failures does not differ between Oracle and SAP customers.

Number of employees for vendor-specific application developmentThe number of employees for vendor-specific application development does not differ between Oracle and SAP customers. The relative proportion of companies with their own application development is almost identical in both compared groups.



ConclusionNumber of externally purchased consultant years for application development

The number of externally purchased consultant years for application development does not differ significantly between Oracle and SAP customers. However, the number of responses from Oracle customers is too low for a solid conclusion. Additional inquiries will are needed to clarify this.

Future studiesDue to the fact that no significant differences could be ascertained regarding the cost influencing values queried, future studies will have to take into account the number and scale of, for instance, application development projects. This would produce relations possibly able to ascertain whether IT departments which are presently classified as having the same size work with different efficiency.



Introduction

Software Costs



Conclusion

IT Budgets



IT-Budgets – Chapter 5The IT budget is a factor strongly influenced by the decision for a particular ERP system, but also setting the frame for this decision. The absolute size of the IT budget is only of limited significance on its own, at least when comparing companies of different size. Accordingly, the weight the IT carries within its particular company more obviously manifests in the percentage of the company’s total revenues assigned to the IT budget. Both values therefore were collected and compared here.

In general, we we presume that the IT budget constitutes a percentage of ca. 3-5% of the revenues. This value fluctuates highly between industries, depending on the industry’s affinity for IT utilization (e.g.: Banking = high IT usage, construction companies = lower IT usage).

With the optimisation of the IT environment, more leeway for additional innovation can be created in the budget. In this respect, an optimised ERP environment does not have to reflect solely in the size of the IT budget. This is the reason, why the query also included the percentage of the budget assigned to the respective SAP or Oracle system, and the absolute size of this budget.

Basing on these values, an overall view of the position and cost value the IT has within the company can be obtained, and which position the respective SAP or Oracle system occupies in this structure.

The budget is always a very sensitive piece of information, which is generally only reluctantly given to outsiders. Accordingly, the number of responses here decrease significantly.



ResultsHow high in total is your IT budget per year?No significant difference can be ascertained between Oracle and SAP customers regarding the absolute size of the companies’ IT budget. Accordingly, the companies in both groups provide their IT departments with similar funds, which can be allocated by the persons responsible for the IT department. However, due to the sensitivity of the data, the number of responses is very low, limiting their significance.50% of the answers for Oracle amounted between 1.2 and 30 Mil. Euros and for SAP between 1.7 and 16 Mil. Euros. An outlier provides for the high upper whisker for Oracle.

0

100000000

200000000

300000000

400000000

500000000

600000000

700000000

800000000

900000000

1000000000

Oracle SAP

IT budget (DACH, Oct. - Dec. 2008, n1 = 19, n2 = 30)

Source: RAAD

L. Quartile Median U. QuartileOracle 1,200,000 4,800,000 30,000,000SAP 1,766,336 6,075,000 15,675,000



ResultsHow high is your IT budget in percent of the revenue of your company?A comparison variable which is mostly independent from the size of the company is the proportion of the IT budget in relation to the revenue. However, even after normalizing the IT budget by revenue, no differences can be ascertained between both groups. The fluctuations within the groups could be mainly caused by industry affiliation. For 50% of the Oracle customers, the values lie between 1% and 4% of the revenue (outlier at 11%). For SAP customers they lie between 1% and 2%.

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2

4

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8

10

12

Oracle SAP

IT budget as percent of revenues(DACH, Oct. - Dec. 2008, n1 = 20, n2 = 29)

Source: RAAD




ResultsHow high is the Oracle, respectively SAP budget? The proportion of the IT budget which can be assigned to Oracle or SAP respectively is represented here in absolute values. Here too, the low number of responses point out that this information is only reluctantly provided to outsiders due to its sensitive nature.Due to the extremely low response rate, no significant difference between the two groups can be ascertained. Whether Oracle or SAP customers provide more funds as budget for their respective vendor therefore cannot be answered.

0

10000000

20000000

30000000

40000000

50000000

60000000

Oracle SAP

IT budget associated to ERP vendor(DACH, Oct. - Dec. 2008, n1 = 11, n2 = 15)

Source: RAAD

L. Quartile Median U. QuartileOracle 210,000 1,000,000 2,704,500SAP 278,012 800,000 2,434,455



ResultsHow high is the respective Oracle or SAP percentage in your IT budget? Regarding the proportion of the SAP or Oracle budget, there were also not nearly enough companies responding for statistically sound conclusions. On the whole, no significant difference can be determined between the two groups.The budget proportion will presumably be higher for SAP customers than for Oracle customers. User penetration is almost three times greater for SAP customers than for Oracle customers, probably affecting budget allocation. This hypothesis has to be verified in additional studies. If it were to be disproved, this would mean that more users can be supplied with a similar budget proportion.

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Oracle SAP

Budget for ERP system as percent of overall IT Budget(DACH, Oct. - Dec. 2008, n1 = 14, n2 = 18)

Source: RAAD




ConclusionIT-Budgets

No difference could be ascertained regarding the IT budgets between Oracle and SAP customers. One reason is, that the number of answers is insufficient for establishing clear differences.A difference in the proportion of the budget to the revenue cannot be observed either. The answers display particularly high fluctuations.

Proportion of Oracle or SAP budget to total IT-BudgetThe comparison of the normalized values for license expenses per user and license expenses per employee results in no significant difference between Oracle and SAP customers.The question, whether Oracle or SAP customers provide more funds as budget for their respective vendor therefore cannot be answered.

Future studiesThe sample available for this study was not large enough to conclusively provide a differentiation between the essential variables compared, the IT budget and the Oracle and SAP budgets, respectively. The budget proportion will presumably be higher for SAP customers than for Oracle customers. User penetration is almost three times greater for SAP customers than for Oracle customers, probably affecting budget allocation. This hypothesis has to be verified in additional studies. If it were to be disproved, this would mean that more users can be supplied with a similar budget proportion.



Introduction

Software Costs



Conclusion

IT Budgets



ConclusionThe cost types and cost influencing variables for Oracle and SAP customers examined in this study do not differ in most of the cost structures. Basing on simple cost types and cost influencing variables, an attempt has been made to establish with which vendor, if any, IT could be realized more efficiently. The basic condition for the comparison was that the queried customer groups of the respective vendors were as similar as possible regarding size, industry and corporate affiliation. The groups were also very similar regarding the examined projects – generally release changes – and the structure of the IT organisation.

Software costsAn expected difference was ascertained regarding maintenance rates. However, it has to be taken into consideration that new SAP customers also have to pay a standard maintenance rate of 22%. The significant difference is thus only valid for existing customers. For the most important comparison variable, the license costs per user, no difference could be ascertained between the groups, even though SAP customers have significantly more license expenses per company. However, the number of licensed users is also higher, when compared to Oracle customers. On the whole, some results are based on very few answers. Additional data has to be collected here in future studies, in order to obtain more precise answers.

Implementation costsThe investigated cost influencing variables for implementation costs also show no significant differences between the user groups, although the analyzed medians clearly differ from each other in some cases. This resulted partly from the wide spread within the respective user groups, but also from very few responses to a number of questions, especially regarding the internal and external person days employed. The result, that Customisation projects take significantly longer for Oracle customers was therefore unexpected. An explanation could not be derived from the existing data, and would require additional investigations.



ConclusionSupport, Maintenance, Operation

Most of the software costs incur for support, maintenance and operation. The results for both vendors are very near to each other in these regards. The major cost influencing variables, like the number of employees for, respectively, support, maintenance and operation, and application development do not differ, but are very much alike. A difference becomes visible only regarding the purchase of external services for application development. Oracle displays a lower median here. However, due to the relatively few responses, this is not significant compared with the SAP group. In future studies, more detailed investigations regarding the costs for support, maintenance and operation will have to be performed in order to to work out the differences between Oracle and SAP.

IT-BudgetsThe IT budgets as a global yardstick for comparing the expenses of companies both in total and as regards a specific vendor would generally be, in spite of different definitions, an appropiate approximate value in order to determine: Are more funds spent on one vendor in comparison to the other? This could not be confirmed, because only a few companies allowed insight into their budgets and budget distribution. At least the tendency could be established that SAP customers allocate a larger share of their budget to SAP than Oracle customers do for Oracle applications. This will surely remain an exciting issue in future.

ProspectIn conclusion, it can be established that with this study, first results were obtained for directly comparing costs between Oracle and SAP by interviewing their respective customers. This however, can only be the first corner stone for additional studies, to ascertain in more detail where the relative strengths or weaknesses of the respective software vendors lie. Numerous openings were determined in this study. In future, besides asking “How much does this cost?”, it should also be asked “What do Oracle and SAP bring for their respective customers?”. Perhaps, such an investigation should start with the question: “Does the success of a company correlate with its choice of software vendor?”



Appendix



Definitions

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

4500000

Oracle SAP

Licences overall(DACH, Oct. - Dec. 2008, n1 = 29, n2 = 27)

Source: RAAD

Median (50%)

Upper Quartile(75%)

Lower Quartile (25%)

97,5% Quartile

2,5% Quartile

VisualisationA variation of the Box Plots was chosen for the visualisation, because they offer a quick-to-grasp impression of the data distribution. The median is drawn as the location parameter. In contrast to the mathematical average, the median is robust against outliers in the distributions. Due to the fact, that many outliers can be found, the mathematical average was abandoned and only the median was shown. For additional information regarding Box Plots and median, see:http://de.wikipedia.org/wiki/Boxplothttp://de.wikipedia.org/wiki/Median

With help of the Mann-Whitney-U-Testwe tested whether the distributions, and thus the medians, significantly differ from each other. Alpha = 0.05 was selected as significance level. For additional information regarding the test, see: http://de.wikipedia.org/wiki/Mann-Whitney-U-Test



Legal notice

Copyrights:© 2009 RAAD Research GmbHAll rights, including reproduction, duplication or utilisation, respectively communication of the contents of the present document are reserved. No portion may be reproduced, handed down to third parties, especially by using electronic systems, processed, duplicated or used for official rendition in any form without the written consent of RAAD Research GmbH. We reserve the right to update or modify the contents.

Exclusion:The information contained in this study originates from sources pertained as reliable. The information was processed with professional care. However, RAAD Research does not assume any guarantee regarding the accuracy, integrity or adequacy. RAAD Research does not assume any liability for errors, omissions or inadequacy in the information contained in this document, or for interpretations of such. The responsibility for the selection and inspection of the material lies exclusively with the reader. The Estimates expressed in this document can change at any time, without prior notice.

Thanks:Here we wish to thank the IT managers and the persons responsible for the budgets in the companies, who have given us insight in their IT environment.

Trademarks:The trademarks mentioned in this study belong to the respective owners.



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