Study: Choice of ERP vendor irrelevant to success

A forthcoming study says ERP packages offer few advantages for companies looking to optimize their financial operations.

The Hackett Group, Answerthink Inc.'s business advisory firm specializing in benchmarking company performance and in offering best practices solutions, will publish a report next week entitled "Financial Application Choice Is Irrelevant In Achieving World-Class Performance."

In the report, The Hackett Group states that of the 150 major companies included in its analysis, the top 10 percent designated as world class were using six different ERP packages from enterprise vendors Baan, J. D. Edwards & Co., Lawson Software Inc., Oracle Corp., PeopleSoft Inc., and SAP AG.

"Ninety-six percent of companies that implement one of the top three ERP finance packages (Oracle, PeopleSoft, SAP) are not world class," said Greg Pleasants, senior business adviser for application ROI business advisory services.

"When we looked at the distribution of what ERP packages companies were using, there was little difference between world class companies and non-world class companies," Pleasants added.

Hackett used 150 companies from its customer database to analyze the results.

According to company spokesman Gary Baker, the fact that The Hackett Group sells best practice advice does not take away from the value of its findings.

"Virtually 80 percent of the Fortune 100 and 93 percent of the Dow Jones industrials turn to us for an evaluation of how to improve the quality of finance, IT, HR, and other back-office operations," said Baker.

The current research was designed for companies looking to improve the value of their ERP packages, said Baker. To that end, Hackett benchmarked hundreds of responses broken down by organizational, functional, and technical processes.

"We measure, for example, the percentage of electronic purchase orders versus the total number of purchase orders and ask how long it takes to close out the month and how many line items are budgeted," said Pleasants.

For its financial benchmarking, Pleasants ticked off a number of other metrics used by Hackett, including how many full-time equivalent employees support the finance function measured as a percent of revenue, how many journal entries have errors in them, what percentage of time a company uses spread sheets for budgeting, and if there are self-service applications in place for financial managers to run their own reports or is it under central control.

The real differentiators, according to Pleasants, are best practices such as the use of "evaluated receipts in accounts payable." Also known as invoiceless payments, the use of pay upon receipt eliminates the manual intensive process of matching receipts to purchase orders after the fact.

Pleasants also suggests that corporate credit cards that have limitations as to what type of items can be purchased eliminates the pre-approval process and also reduces errors.

The report gives a number of "do's" and "don'ts" for CFOs looking to improve their financial processes. The action items on the plus side include ensuring that organizational structure can incorporate best practices, that an ERP solution fits within the current IT environment, and that if a best-of-breed approach is taken, a company must ensure that new components can be integrated into the current architecture.

On the "don'ts" side of the ledger, the report advises not to spend time or budget on new upgrades as a way to solve a problem and not to delve too much into the minutiae of comparing speeds and feeds of one solution versus another. Unless a vendor offers a feature or function that is not available from its competitors and is of mission-critical importance to the company, the report says most ERP solutions are a commodity with few real differences.

However, while Hackett found most features within ERP applications similar, ERP vendors appear to be aware of the problem and are now more likely to tout their integration platforms, for example NetWeaver from SAP and the Customer Data Hub from Oracle, as a product differentiator rather than fighting a features war with competitors.

Fred Studer, vice president of ERP marketing at Oracle, disagrees with the Hackett findings.

"Not all ERP systems are made the same," Studer said.

The fact that all Oracle ERP applications work off the same Oracle technology stack gives its customers the ability to standardize on far fewer transactional stores of information.

"Once we go through standardization, automation, and integration (using the same stack) then a customer has a great abundance of quality information," said Studer.

The study will be made public on Tuesday, May 18.

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