Want to Save $10 Million or More on ERP? Don’t Buy Oracle or SAP

You want to play with the ERP big boys (SAP and Oracle), instead of the so-called Tier II ERP providers (Epicor, Infor, Lawson)? Then you better be prepared to pay a lot more ($9 million to $13 million) and plan for a longer implementation (two to three months longer).

And guess what: At the end of, say, your Oracle ERP implementation, your executive team is actually going to be less satisfied with the software’s results than it would have been from a Tier II ERP provider.

That’s according to new survey results from ERP consultancy Panorama Consulting Group. The data, gathered from December 2005 to November 2008, is culled from 670 participants who have implemented ERP during the last three years. In the study, Tier I providers are SAP, Oracle and Microsoft; Tier II include Epicor, Exact, IFS, Infor, Lawson, NetSuite, and Sage. (To read about NetSuite’s 10-year journey to profitability, see “NetSuite’s SaaS ERP Story: After 10 Years, an Upstart Finally Turns a Profit.”)

Here are some survey highlights (or low lights, depending on which ERP provider you select):

The majority of respondents (77 percent) had chosen a Tier I provider (SAP 35 percent; Oracle 28 percent; and Microsoft: 14 percent). The rest (23 percent) went with the Tier II.

So, what was the total cost of the average EPR implementation? SAP $16.8 million; Oracle $12.6 million; and Microsoft $2.6 million. Tier II average: $3.5 million. (Microsoft’s figure is pretty impressive.)

And how long did it take respondents to fully implement the ERP solution? SAP 20 months; Oracle 18.6 months; and Microsoft 18 months. Tier II: 17.8 months.

Now, the multimillion-dollar question: How satisfied are the executive team and users with the ERP solution? SAP 73 percent (Panorama’s “satisfaction rating”); Oracle 62 percent; and Microsoft 69 percent. Tier II: 70 percent.

“Tier II vendors have clearly stepped up their strategies to compete with the ‘big boys’ of Tier I,” noted Eric Kimberling, president of Panorama Consulting Group, in announcing the survey results. “But now that the field has more qualified players, the burden is on the buyer.”

These survey results are the second part of Panorama’s in-depth ERP study. In the first piece, Panorama’s data showed that today’s ERP rollout has only a 7 percent chance of coming in on time, will probably cost more than what companies estimated, and will likely deliver very unsatisfying results. Which can lead to outright nightmare ERP scenarios or even shareholder angst leading to halted ERP implementations.

All that led me to prognosticate that even with the high importance companies place on their ERP systems today, an ERP backlash is imminent at companies of all shapes and sizes. I think I now need to modify that statement to: “an ERP backlash is imminent at companies using Tier I ERP providers.”