Vendors: It’s Not That Bad

“It’s not as bad as you think.” That was the most common response from the major ERP software vendors when confronted with customers’ complaints about their software upgrade practices.

The vendors dispute AMR Research’s estimate that the cost of upgrading amounts to an average of 18 percent of the original software and Gartner’s assertion that it sometimes reaches 30 percent. PeopleSoft says its averages are 10 percent to 20 percent, J.D. Edwards says it’s 10 percent to 15 percent, and SAP claims 5 percent to 10 percent. Upgrading gets more efficient the more users you have, responds AMR Research, because you still have to do the same planning and testing whether you’re upgrading 50 or 5,000 people, which may help account for SAP’s low percentage?its customers are primarily big companies.

The dramatic shift in the underlying architecture of these products?from client/server to Web based?has a lot to do with the hassle that customers are seeing, say the vendors. Bug problems that early on plagued Oracle and J.D. Edwards’s upgrades can be attributed, at least in part, to this change, the vendors say.

Major ERP upgrades also spark hardware shopping sprees that drive up costs, says Brian Vogt, vice president of professional services for Walldorf, Germany-based enterprise software vendor SAP. “Companies say, As long as we’re upgrading our ERP system we may as well upgrade our databases and operating systems too,” says Vogt. “It becomes part of an overall hardware upgrade that companies do every three to five years anyway.” While Vogt acknowledges that SAP’s latest ERP upgrade, MySAP.com, demands more horsepower than its forebears, he insists that it’s possible to stay with the OS and database from the previous version.

Customers also bump up upgrade costs when they choose different best-of-breed vendors instead of a single vendor for ERP and its dependent systems (like supply chain and CRM), say vendors.

Vogt argues that companies could upgrade quicker and cheaper if they paid more attention to the changes in jobs and work methods that come with upgrades. “IT can do the technology testing, but companies need to be more proactive in having set testing procedures for new business processes,” he says. “The primary reason the cost of upgrades go up is not the technology; it’s because customers can’t make decisions about what they want to do with their business,” echoes Mike Gregoire, senior vice president of PeopleSoft Global Services for Pleasanton, Calif.-based enterprise software vendor PeopleSoft.

The vendors all acknowledge that they are hearing complaints but say the economy?not the time window between releases?is the primary aggravant. “The pressure has increased dramatically to lengthen the support period for older versions,” says Hank Bonde, COO of Denver-based enterprise software vendor J.D. Edwards. In response, all the vendors have extended support for their older software to an average of about five years, but they all defended what they cited as an industry standard time window of about three years. Especially in new categories of enterprise software, such as CRM, customers are pushing for more frequent upgrades, adds Bonde, because they are hungry for new functionality.