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For companies that require it, ERP is the lifeblood that courses through business operations, from sales, marketing,...
finance and HR through purchasing, production, inventory management and service. It must integrate with nearly every system and business process. ERP integration and implementation can be lengthy, and are major considerations for any company trying to realize an immediate return on investment from ERP.
When companies evaluate ERP systems, they look at functionality and features, but also at the projected timelines for ERP implementation and adoption by the business. These will all affect ERP ROI.
The following are key questions to ask during this evaluation process:
- Does the ERP system have everything the business needs?
- What specific business benefits will it deliver?
- How much will the ERP system cost, and how long will it take to implement?
- How disruptive will ERP implementation be to the company?
- How quickly will employees adopt and use ERP?
Below are ERP product evaluations that focus on implementation and ROI for four market-leading vendors: SAP, Microsoft, Infor and Oracle.
SAP ERP Software Offerings
SAP offers many forms of ERP, including cloud-based, on-premises and hybrid. It sells ERP for companies of all sizes in virtually any industry or vertical. That is the company's strength, along with its 45-year history of providing SAP ERP software to organizations around the world.
The challenge for companies is navigating through all of the SAP ERP software options to find the "best fit" that meets their business needs, provides ease of adoption and helps them realize ERP ROI.
The ERP choices that SAP offers include the following:
- SAP ERP: its oldest system, an on-premises, full-featured version of ERP used primarily by large enterprises;
- SAP S/4HANA: an on-premises version of SAP's newest ERP platform that runs on the SAP HANA database and provides real-time analytics processing alongside real-time transaction handling;
- SAP S/4HANA Cloud: a cloud-based SaaS version of SAP S/4HANA;
- SAP Business One: a private cloud and on-premises ERP suite for small to midsize businesses;
- SAP ERP Business One Cloud: a SaaS version of SAP Business One; and
- SAP Business ByDesign: SAP's SaaS ERP offering in the midmarket space designed to give midmarket businesses an entry point into ERP.
From an ERP ROI standpoint, there clearly is a movement away from on-premises ERP, which requires data center hardware investments and software licensing. SAP recognizes this by providing a plethora of cloud-based offerings; however, it also sees a market for on-premises ERP, so it retains that choice for interested companies. Many of these on-premises ERP users are larger enterprises that want to control their mission-critical data and systems under their own roofs as a strategic business objective. This is a business benefit and return on value that they're willing to pay for.
There are also companies in transaction-heavy industries like retail, stock trading and hotel and airline reservations that want immediate analytic data. For example, teaming real-time analytics with real-time transaction processing can alert a hotel chain of excess room inventory in certain locations so it can add promotions to offer customers incentives and deals. For companies like this, real-time analytics offers a compelling ROI because it adds revenue. However, for many other companies, investing in a system like this is more than is needed.
For companies choosing an SAP ERP system, SAP has a time-tested implementation methodology that includes the following:
- project preparation
- business blueprint
- final preparation
- go-live support
In all cases, the key for businesses working with SAP is to perform thorough planning that includes securing buy-in from C-level executives. Identifying concrete business benefits and ERP ROI goals is crucial. These goals and metrics are baked into a business blueprint, and confirmed during the realization phase of the SAP ERP project, along with models of business processes and system performance goals.
Implementation duration and ROI cost recovery pencil out faster with a cloud ERP implementation, where charges accrue per user and on-premises hardware and software investments are minimal. On the flip side, enterprises opting for an on-premises installation of SAP ERP software can expect upfront costs that run into the millions of dollars. SaaS ERP is not necessarily cheaper in the long run, however, especially if corporate growth results in higher-than-expected monthly subscription costs per user.
The key, whether you are considering on-premises or in-cloud implementation, is data and systems integration. An ERP system touches nearly every enterprise IT asset. Integration can take months or even years, particularly with highly customized systems. This is true for soup-to-nuts enterprise systems like SAP ERP, as it is for other all-encompassing ERP systems that provide similar depth and breadth of functionality.
Infor Cloud ERP
Infor offers both on-premises ERP and cloud-based ERP. Its cloud systems, known collectively as Infor CloudSuite, are purpose-built for selected industries and offered as a complete software suite on a monthly charge per-user basis. Infor CloudSuite products primarily deliver on public clouds that allow SaaS, private cloud and hybrid deployment.
Infor's offerings extend into micro-verticals, such as breweries and dairies. The built-in customization saves staff time because the company doesn't have to develop customized applications internally. Ultimately, this benefit can deliver positive results for the organization's ROI.
Another Infor strength is a mature and uniform implementation methodology that it uses for all versions of its ERP systems, whether they are cloud or on-premises. This methodology is a best practice resulting from more than 5,000 implementations and 10 years of ongoing research and development. It consists of five phases:
- inception, where business requirements definition, high-level process modeling for the new system and project team training take place;
- elaboration, for detailed ERP process modeling and prototype building;
- ERP system construction;
- transitioning, which includes performance testing the new system, training IT and users, and user acceptance; and
- optimization, for ERP system tuning for final production deployment.
End business users and IT engage in the process every step of the way to ensure the project stays on track with business expectations and successful user adoption. Users and IT also have a fail-safe user acceptance step in the last stage of system implementation. This final acceptance test provides additional investment protection. It gives business users and IT a final opportunity to itemize any perceived shortcomings and get these items addressed before a final signoff.
The Infor project methodology is software-focused and does not specifically address the business performance metrics that each company should develop to measure its ROI. These include operational efficiencies, time to market, enhanced revenue opportunities and cost savings, to name a few.
Companies considering Infor should make it a point to get organizational consensus and executive buy-in to these ERP ROI metrics and to discuss them with the vendor early in the project. Organizations should measure and evaluate these metrics against system prototypes and user acceptance tests.
Release schedules for Infor ERP vary, depending on the industry vertical. However, Infor clients make the decision when to implement upgrade releases. This is advantageous because clients can more effectively manage change and potential disruption in their organizations when new ERP functionality becomes available.
Microsoft Dynamics 365
Microsoft Dynamics 365 is ERP that includes modules for customer service, field service, talent, finance and operations, project service and marketing. It can be deployed on-premises or in the cloud in a Microsoft-owned data center, or in a hybrid model. The on-premises and hybrid options also support private-cloud deployments. The different options for software delivery enable two-tier ERP strategies, with one ERP platform deployed in headquarters -- sometimes from a different vendor -- and Microsoft Dynamics 365 in other divisions or locations. Microsoft Dynamics 365 includes all the "multis," such as multi-language, multi-country and multi-currency support.
Microsoft Dynamics 365 focuses on office operations, customer-centric applications and project services. It also has strong analytics features, including near-real-time business intelligence using Data Stores, Data Entities, Aggregate Data Entities and integration with Microsoft PowerBI.
Microsoft Dynamics 365 integrates well with other Microsoft offerings such as Office 365. Other strengths include a mobile-first and touchscreen-friendly user interface and a web client with browser-based elements like multiple tabs. The user experience makes use of dashboards, workloads (commonly used combinations of Microsoft applications and features) and task replays. It also includes Workspaces, which guides users and reduces the number of keystrokes needed to find information and finish tasks.
Microsoft Dynamics 365 has drawbacks, however. Its reporting capabilities, particularly financial reporting, are not as well-rounded as its competitors, and support from global system integrators is limited. That aside, it's potentially less disruptive for companies to implement, since it meshes well with Office 365. In addition, users familiar with Office 365 will potentially have a shorter learning curve compared against other ERP systems.
Microsoft issues quarterly releases of Dynamics 365. Built as a Windows-based ERP system, Dynamics 365 offers open APIs to integrate with on-premises systems or other cloud services.
Total cost of ownership (TCO) and return on investment can work favorably for companies using Microsoft Dynamics 365. Subscriptions for the baseline product, Dynamics 365 Business Central Essentials, start at $70 per user, per month. The premium version, Dynamics 365 Business Central Premium, runs $100 per user, per month.
While the software licensing cost doesn't differ greatly from competitors -- and, in fact, competitors may be able to offer a deeper licensing discount -- where the reduced TCO emerges is in the significantly shorter implementation period, which reduces costs and accelerates ERP ROI.
Microsoft Dynamics 365 is highly modularized. Companies can implement the software one module at a time and at their own pace. Human capital management modules are considered weak and companies that require this functionality from their ERP system may wish to look elsewhere. Overall, the Microsoft Dynamics 365 Finance, Procurement and Sourcing, Production and Supply Chain Management modules provide reasonable functionality for most companies.
Companies in the manufacturing, distribution, retail, professional services and public sector industries may find Microsoft Dynamics 365 suited to their needs. Microsoft also caters to vertical needs through its Business Central platform.
Microsoft provides baseline technical support, self-service training and implementation support free of charge. For a fee, customers can also subscribe to Microsoft support services like ProDirect and Premier support, which offer one-hour response times (Premier also offers on-site services and mentoring). Microsoft Consulting Services (and services through business partners) are additional pay-for options available for customer-specific implementation services, training and technical support.
Oracle has been in the ERP market for 30 years. It offers a variety of ERP packages that provide rich functionality and feature sets, with a focus in financial areas like pricing, budgeting, asset management and risk management.
Through the years, Oracle has grown through acquisitions. Its ERP offerings reflect this:
- JD Edwards EnterpriseOne (Oracle acquired JD Edwards)
- NetSuite (Oracle acquired NetSuite)
- PeopleSoft ERP (Oracle acquired PeopleSoft)
- Oracle E-Business Suite
- Oracle Fusion Applications
- Oracle ERP Cloud
The acquisition strategy has enabled Oracle to add functionality and feature sets, while also providing potential customers plenty of choice. But it's also been a double-edged sword, as Oracle inherited large, installed user bases relying on on-premises systems that need ongoing service. Many have yet to be fully integrated with other software in the Oracle product line.
While Oracle still offers these on-premises systems, JD Edwards EnterpriseOne, PeopleSoft, and Oracle E-Business Suite, it's been actively encouraging the user base to move more toward a cloud-based ERP system through Oracle's "customer 2 cloud" initiative. Oracle's pitch is that moving ERP to the cloud reduces TCO over the long term as it mitigates the need for expensive software and hardware updates in data centers, ultimately increasing ERP ROI. From Oracle's perspective, this also reduces time to market for new software releases, as on-premises customers are traditionally slow to implement and install new releases.
In terms of cloud ERP, Oracle offers NetSuite, which it aims at the midsize market. Oracle acquired NetSuite in 2016, and its strength lies in its maturity and large partner ecosystem, as well as comprehensive financial management functions and multinational operations management capabilities. NetSuite is known for its ease of use and flexibility. As a caveat, some partners do not keep up with current releases, so research accordingly.
Oracle's midsize to large enterprise offering, Oracle ERP Cloud, includes core financial management capabilities like project management, revenue management, procurement and risk management. Modules can be implemented by need; for example, by starting with automating the financial close. It works for many industries, and it features powerful embedded reporting and analytics capabilities. However, there have been issues with its cloud services, reflected in performance and upgrade issues. Also, the rapid adoption of Oracle ERP Cloud means that there may be a shortage of implementation partners in some areas, as well as price increases by system integrators.
Christine Parizo contributed to this report.