In-Depth

ERP Vendor Choice Unimportant, Study Finds

Study says process changes and best practices are key, regardless of which ERP software you’re running

• By Stephen Swoyer
• 05/25/2004

Hackett Group is an AnswerThink-affiliated company that typically conducts research into the best practices of so-called “world-class” companies. (The latter are determined by how well they rank on Hackett’s Business Value Index, which measures efficiency and effectiveness.) In the past, Hackett has identified successful project management practices of world-class companies (see http://www.esj.com/news/article.asp?editorialsId=596).

In determining the effectiveness of ERP software choices, Hackett based its analysis on research into the best practices used at more than 2,400 client organizations. Depending on your own experiences with ERP implementations, what the researchers found may or may not surprise you.

One potentially startling upshot, say researchers Beth Hayes and Greg Pleasants, both senior business advisors with Hackett, is that the choice of an ERP vendor factors only slightly, if at all, into a company’s drive towards improved financial performance.

Hackett identified SAP AG, PeopleSoft Inc., Oracle Corp., Baan (now SSA Global Technologies Inc.), JD Edwards (now owned by PeopleSoft), and Lawson Software as the six leading vendors in the space.

One lesson, write Hayes and Pleasants, is that companies should avoid agonizing over small differences in the core financial features or functionality provided by these six vendors. The leading software packages are mature and boast more or less the same functionality, they note, and even if there are small differences, competitors typically address them quickly. "While new incremental features appear with each major upgrade from package vendors, they are quickly replicated by competitors. As a result, finance functionality is very mature in virtually all of the top vendors’ offerings,” they write.

For example, Hackett researchers say, financial software from SAP, PeopleSoft, and Oracle is used at more than 80 percent of the organizations in its database, as well as at over 92 percent of all companies that achieve world-class performance levels in finance. But none of these vendors is truly used more frequently than the other, researchers say, and all support similar best practices in finance. Not surprisingly, then, 96 percent of the companies that implement software from SAP, PeopleSoft, or Oracle do not achieve what Hackett describes as “world-class” performance in finance.

What, then, is a would-be world-class company to do? Hackett’s counsel isn’t all that surprising: Pick a package—any package—and concentrate on process improvements to ensure significant ROI from your investment.

Hardly earth-shattering advice, but Hayes and Pleasant note that few companies are actually following it: “Companies often embark on implementation projects with appropriate objectives and intentions. But as time goes on and pressure is felt to minimize the drain on budgets and resources, tradeoffs begin to occur.”

Elsewhere, when researchers looked at six organizational and process areas in the purchase-to-pay area of finance, they found that companies which relied on proven best practices more often attained world-class financial performance. Some of the purchase-to-pay best practices included centralization of payables processing, end-to-end process ownership, and minimization of low-value tasks.

“[C]ompanies seeking to become world-class in finance must incorporate best practice processes, organization design and enabling technology—but the specific application vendor is less important since they virtually all support the core required functionality and a vast majority of best practices,” they write.