SAP, Baan begin fixed-price battle

SAP and Baan will next week both launch fixed-price ERP implementations aimed at luring small and medium-sized companies into the fold. Both say Microsoft is a business partner. SAP's other partners are Compaq and Supply Chain Group. The ERP software market leader is guaranteeing a complete SAP multi-module solution, including all hardware and services, for a fixed cost and with implementation completed within a fixed time.

SAP and Baan will next week both launch fixed-price ERP implementations aimed at luring small and medium-sized companies into the fold.

Both say Microsoft is a business partner. SAP's other partners are Compaq and Supply Chain Group. The enterprise resource planning software market leader is guaranteeing a complete SAP multi-module solution, including all hardware and services, for a fixed cost and with implementation completed within a fixed time.

Supply Chain chief executive Lindsay Rewcastle says the cost of the package will average at around $50 per user per day, with implementation completed within three months. Compaq will provide the hardware and finance, Microsoft its SQL Server database and Windows NT operating system, and Supply Chain the SAP R/3 software, implementation, training and support.

The Baan-on Board initiative includes hardware, a Baan ERP licence, report writers and SQL Server, along with three years' support, maintenance on all components and fixed implementation costs. Financing will be provided by Baan Capital.

Baan general manager Mike Murphy says companies generally know how much the licences and hardware will cost them from day one. He says a fully installed system up to go-live with a vanilla implementation will start at $200,000, including 70 base ERP modules. Murphy says Baan-on-Board will enable customers to go live within eight to 16 weeks. Pricing will be pitched at 10 concurrent users up, and after the base system is installed will increase as the user expands functionality.

Both vendors have customers using the new fixed-price solutions. For Baan, it's Napier-based meat processor Medallion Foods. SAP has live implementations at the Armbro Group, Alliance Textiles and garment manufacturer Coats Spencer Craft.

Fixed-price ERP could be what the market wants. It contains costs and project implementation time. It is also a way of allowing the vendors — SAP in particular — to move down the food chain. In a small country like New Zealand, a full-blown ERP solution from SAP is just too expensive for anything other than the biggest organisations — and that top end of the market is becoming saturated.

Even in big markets such as North America and Europe, there's been a noticeable slowing down in ERP revenues as users review the massive costs involved and the time it takes to implement the systems.

It's a world first for SAP and, given that New Zealand is often considered a test bed by vendors, has the potential to be a new model for SAP in other parts of the world.

One of the other major ERP vendors, PeopleSoft, was unaware of the fixed-price moves by its opposition. But managing director Frank Anderson was quick to dismiss it as not much of a big deal.

"The detail is sketchy. It sounds like they're trying to put a spin on something that's not so important anyway," he says. "SAP is so expensive. This is real try-hard stuff. In New Zealand we've operated successfully in the second tier of the market for the past two years.

Anderson says PeopleSoft is also "working in those areas" with Microsoft and Compaq.

It may need to. Last week PeopleSoft corporate announced a 77% decline in its first-quarter operating income. US market researchers say after huge recent growth in the enterprise software industry, business applications software took a plunge late last year and early this year.

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