Enterprise Financial Application Software: How Some of the Big ERP Vendors Stack Up

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Enterprise Financial Application Software: How Some of the Big ERP Vendors Stack Up
S. McVey - December 25, 2001


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 following:

JD Edwards OneWorld
Lawson Software Financial Performance Management
Oracle Oracle Financials
PeopleSoft PeopleSoft e7.5

Although 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 Weights

Figure 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.

Of 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 notes: "JD Edwards - Creating OneWorld of Mid-sized ERP Users" and "JD Edwards and Numetrix Ponder the Future as One".)

Figure 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 client.

Figure 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.

Results and User Recommendations

Based 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:

  • While 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 skillfully.

  • Incompatibilities 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.

  • When 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.

Finally, 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.

Note: 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.

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