Enterprise Financial Application Software: How Some of the Big ERP Vendors Stack Up
Written By: Steve McVey
Published On: December 25 2001
Enterprise Financial Application Software: How Some of the Big ERP Vendors Stack
The subject of this case study is a large series and single-title book
publisher that needed to replace a decade-old, highly customized financials
system. Though accounting personnel had grown adept at using the existing
system, it was clearly unable to keep pace with the client's evolving
business model - one that included some ambitious E-commerce initiatives.
In addition to providing considerable flexibility in the areas of budgeting,
management reporting, and royalty calculations, the new system would need
to be cost effective. The candidate vendors and packages included the
Financial Performance Management
all were large, well-known ERP software companies that seemed to offer
the type of capabilities our client required, we were determined to delve
beneath the marketing brochures to perform a thorough, statistically valid
comparative evaluation of the options.
We began by presenting the client with a repository of thousands of detail-level
criteria arranged hierarchically in our financial application decision
model. In a series of meetings, the client project team reviewed the criteria
and selected those that best captured their requirements. Access to the
superset of criteria greatly facilitated the creation of the Request for
Information (RFI) that was distributed to the vendors on the short list.
After receiving completed RFIs from the vendors, the responses were validated
and entered into the decision model. The charts that follow were derived
from the model and provide a useful way to compare vendor performance
relative to each other in different categories. Each circle or "dot" represents
a vendor option. The size of the dot indicates how a particular vendor
performed overall. High-level criteria that contributed to the overall
ranking were corporate viability, strategy, services and support capabilities,
product functionality, technology, and cost. In this selection engagement,
the finished model contained over 1500 detailed criteria. Each category
is assigned a value that represents its priority relative to other categories,
or "weight." Figure 1 shows weights for high level categories in the model.
Figure 1. Relative Importance of High Level Categories Represented as
2 shows how the four vendors compare in terms of corporate viability and
corporate strategy. Corporate viability examines a vendor's overall financial
success and measures the ability of its management to effectively operate
the business. In judging a company's financial viability, we look at fundamental
metrics such as those used to reflect liquidity, profitability, and market
growth. Corporate strategy or vision reflects how the vendor plans to
sell, develop, and support its product over the long term. It is important
that a prospective client evaluate how well a vendor's strategy aligns
with its own long term vision.
the four vendors, Lawson trails the rest. Lawson falls in the lower left
quadrant showing that it scored lower than the other vendors in both viability
and strategy. The reasons? Lawson has achieved great success in the health
care and retail industries, a focus that makes its suite less effective
at addressing publishing industry issues. JD Edwards, Oracle, and PeopleSoft
lie on the right hand side of the graph with Oracle positioned in the
upper quadrant and the others in the middle. Though they fared better
than Lawson, none of the other vendors achieved a weighted average above
71% in viability, an effect due partly to the general ERP market malaise.
Oracle performed better than the others in viability, but JD Edwards ranked
highest in vision as its product strategy aligned best to the client's
long term objectives. (For more on JD Edwards, see TEC Technology Research
Edwards - Creating OneWorld of Mid-sized ERP Users" and "JD
Edwards and Numetrix Ponder the Future as One".)
3 compares financials functionality to available technology platforms.
The client was unwilling to commit to particular database and server platforms
due to uncertainty caused by a lack of a focused corporate hardware strategy
and the prospect for new acquisitions. Thus, the capability to support
multiple platforms was an important criteria at this stage of the selection
process. Figure 3 shows an interesting result: Lawson, the lowest ranked
vendor overall, offered the most choice of platforms, while Oracle and
JD Edwards fall to the rear. Oracle's lack of support for third party
platforms results from the market dominance of its own platforms and development
applications. (For more on Oracle, see TEC Technology Research note: "Oracle
Co. - Internet Paradigm Boosts Application Growth".) Only Lawson Insight
and PeopleSoft offered compatibility with platforms of interest to the
4 shows the trade-off between required financials functionality and initial
and ongoing costs (product cost). Initial costs include the license fees,
implementation, training, and hardware. Ongoing costs include product
maintenance, upgrades, and additional training. It is critical for these
costs to be factored into the decision at an early stage. For instance,
implementation costs can balloon to 15-20 times the initial product cost.
Training costs can often bring unanticipated expenses as well. In terms
of cost, PeopleSoft fared poorly against the other vendors; its initial
license fee was more than twice that of the nearest competitor, Oracle.
Since cost was a heavily weighted criterion in this selection and PeopleSoft's
functionality offering failed to match its extravagant price, its overall
ranking suffered. (For more on PeopleSoft, see TEC's note "PeopleSoft
- Are Business Intelligence and e-Commerce Enough?") JD Edwards offered
the best balance of functionality and cost effectiveness, falling within
the publisher's proposed budget.
and User Recommendations
on the above analysis of data in the decision model, our client was able
to clearly differentiate the vendors and bring out the strengths and weaknesses
of each. Some other advantages of performing a thorough, documented selection
process are worth mentioning:
JD Edwards was the overall winner, it still failed to satisfy over
30% of the criteria. Such shortcomings are disconcerting, but can
provide considerable leverage during final negotiations if managed
in key areas of interest to the client are made obvious, as in the
case of PeopleSoft's exorbitant license fees. In this case, the project
team was able to eliminate PeopleSoft from further participation and
clearly document the reasons.
more than one vendor ranks well within a given set of areas (as in
the case of JD Edwards and Oracle in terms of cost and financials
functionality), the decision model provides the supporting material
required to justify further investigations. These include scripted
scenario demonstrations and client reference visits, both of which
were utilized by the publisher in this engagement.
this case brings out an important fact of software selections that is
often overlooked: the best solution almost always involves compromise.
In this engagement, having the results in the selection tool provided
a means for setting expectations among project team members and senior
management. Such disclosure at an early stage can prevent disappointments
later in the selection process.
The results shown have been generated using the Technology Evaluation
Center's patented decision analysis software TESS, which uses the Multi-Attribute
Utility theory (MAU), Analytic Hierarchy Process (AHP) and TEC's patented
decision science to compare vendors and products relative to one another
in a statistically valid model.