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School of Business and Economics Indiana University South Bend

K507–Enterprise Resource Planning – 2008 Fall – ERP Project

Comparative analysis of ERP vendors:


SAP, Oracle, and Microsoft

Koenraad Adams, Eric Piazzoni, and In-Saeng Suh


koenraadadams@hotmail.com, ericpz@gmail.com, isuh@iusb.edu

Abstract

This is a study of the comparative analysis on the enterprise resources planning (ERP)
vendors, SAP, Oracle, and Microsoft. We research on functionalities, cost, features, and
target market for each vendor.

Keywords: ERP, SAP, Oracle, Microsoft, SME

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1. Introduction
ERP system is an integrated information system to support the business within different
organizational parts of an enterprise. The leading global providers are SAP, Oracle, and
Microsoft. ERP packages are designed to be customizable to concrete needs of an
organization and to its legacy systems. The customization of ERP modules for a concrete
user is performed with special tools and using specific or standard programming
languages. Due to already mentioned general ERP characteristics, customization and
implementation usually require specialized knowledge and significant resources.

SAP was founded on April 1, 1972, by five IBM employees. It developed its first product
(financial accounting software) in close cooperation with its first customer. The company
grew initially around ERP and solidified its market leadership by being a pioneer in the
move from mainframe to client-server computing with its R/3 ERP solution introduced in
the 1990s. From there, SAP expanded into a much broader set of applications for other
functions in the enterprise: customer relationship management (CRM), supply chain
management (SCM), product life-cycle management (PLM), and supplier relationship
management (SRM). By bundling and integrating these applications, SAP became
known for high-quality, comprehensive enterprise solutions, which SAP or SAP-trained
SI consultants would then customize.

Oracle was founded in 1977 as Software Development Laboratories. The first Oracle
program was written in assembly language, ran on PDP-11 and with 128k of
memory. The software was never "officially" released though. Version 2 which was
released in 1979 was the first to be released. The company had changed its name by then
to Relational Software Inc. Business grew and by 1982 they had changed their name
again, this time to Oracle and in 1987 the company went public. Today, Oracle remains
one of the leaders in the ERP industry.

A few of the firsts Oracle brought us are:

 The first commercially-available SQL-based database (1979)

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 The first database to support symmetric multiprocessing (SMP) (1983)


 The first distributed database (1986)
 The first database product tested to comply with the ANSI SQL standard (1993)
 The first 64-bit database (1995)
 The first web database (1997)
 The first proprietary RDBMS to become available on Linux (1998)
 The first database to support XML (1999)

Microsoft Dynamics AX is a line of business management solutions that provides


financial management, business intelligence, human resource management, project
management, customer relationship management (CRM), manufacturing, supply chain
management solutions, collaborative workspace, and configuration and development.

The Information Technology


views quadrants Gartner
Consulting produces each year as
a type of benchmark to see where
each provider stacks up against
their competition. In 2007,
Gartner released the quadrant on
the left. While many will argue
that Gartner‘s methods are too
simplistic and don‘t give a truly
accurate view of what the
decision makers face, it is still a
good place to start when
comparing products. Gartner ranks venders in two areas, Completeness of Vision and
Ability to Execute. Using various qualifiers based on the rankings, the solutions are
places in one of four quadrants:
 Leaders score higher on both criteria; the ability to execute and completeness of
vision. Typically larger industry developed businesses with vision and potential
for expansion

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 Challengers score higher the ability to execute and lower on the completeness of
vision. Typically larger, settled businesses with minimal future plans for that
industry
 Visionaries score lower on the ability to execute and higher on the completeness
of vision. Typically smaller companies that are unloading their planned potential
 Niche players score lower on both criteria: the ability to execute and
completeness of vision. Typically market fledglings
In 2007, both Oracle and SAP were placed towards the bottom of the Challengers
Quadrant. This would indicate they have the ability to execute, though maybe not that
well as they are towards the bottom of the quadrant, and they don‘t seem to have a great
deal of vision. But is that all there is to look at?

In this study, we focus on functionalities and features, the total cost of ownership, and
target market of the ERP vendors: SAP, Oracle, and Microsoft Dynamics.

2. Functionalities and Features


2.1 SAP R/3
SAP R/3 is a client-server based application, utilizing a 3-tiered model, the presentation
layer, the application layer, and the database layer. SAP R/3 is structured using its own
proprietary language called ABAP (Advanced Business Application Programming).
ABAP, or ABAP/4 is a fourth generation language (4GL), geared towards the creation of
simple, yet powerful programs. SAP R/3 also offers a complete development
environment where developers can either modify existing SAP code to modify existing
functionality or develop their own functions, whether reports or complete transactional
systems within the SAP framework. ABAP's main interaction with the database system is
via Open SQL statements. These statements allow a developer to query, update, or delete
information from the database. Advanced topics include GUI development and advanced
integration with other systems. With the introduction of ABAP Objects, ABAP provides
the opportunity to develop applications with object-oriented programming. SAP ERP
redefines enterprise resource planning – delivering role-based access to crucial data,

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applications, and analytical tools. With SAP ERP, we can efficiently deal with business
challenges in the following areas:

 End-user service delivery – Ensure that employees can readily access the critical
data, applications, and analytical tools they need to perform all their job functions
efficiently and effectively while also supporting a shared-services organizational
model for human resources, finances, and other key processes. SAP ERP offers
role-based access, self-services, and employee interaction center support through
SAP Manager Self-Service, SAP Employee Self-Service, Duet and employee
interaction center support. Plus, SAP Mobile Time and Travel enables employees
in the field to report time and expenses offline.
 SAP ERP Financials – Ensure compliance and predictability of business
performance – so the organization can gain a deeper financial insight across the
enterprise and tighten control of finances. SAP ERP Financials automates
financial and management accounting and financial supply chain management.
The solution also provides rigorous support for corporate-governance mandates
such as Basel II and Sarbanes-Oxley.
 SAP ERP Human Capital Management – Optimize the HR processes with a
complete, integrated, and global human capital management (HCM) solution.
SAP ERP provides this HCM solution for organizations of all sizes and in all
industries. You can maximize the potential of your workforce, while supporting
innovation, growth, and flexibility. The SAP ERP HCM solution automates talent
management, core HR processes, and workforce deployment – enabling increased
efficiency and better compliance with changing global and local regulations.
 SAP ERP Operations – Manage end-to-end procurement and logistics business
processes for complete business cycles – from self-service requisitioning to
flexible invoicing and payment – optimizing the flow of materials. SAP ERP
Operations also helps discrete and process manufacturers manage the entire life
cycle of product development and manufacturing. The solution automates the
entire manufacturing process and reduces costs by controlling and adapting the

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manufacturing process in real time – and increases customer satisfaction by


delivering higher-quality products.
 SAP ERP Corporate Services – Helps organizations manage their most cost-
intensive corporate functions by supporting and streamlining administrative
processes in the areas of real estate; enterprise assets; project portfolios; corporate
travel; environment, health, and safety compliance; quality; and global trade
services. SAP ERP Corporate Services is a complete and integrated solution that
maximizes transparency and control, while reducing financial and environmental
risks and enhancing safety of employees.
 Performance management – Support the entire life cycle of performance
management, delivering real-time, personalized measurements and metrics to
improve business insight and decision making. SAP ERP supports financial
analytics, operations analytics, and workforce analytics, as well as consolidated
financial and statutory reporting; planning, budgeting, and forecasting, strategy
management and scorecards, and risk management.

2.2 Oracle
An Oracle database system is a platform with at least one application running on it to
access and process the data. Data is stored logically in the form of table spaces and
physically in the form of data files. The recommended structure for an Oracle database
is the institute RAC--Real Application Clusters. Multiple instances, usually on different
servers, attach to a central storage array. This offers better performance, scalability and
redundancy for the users.
There are various versions of the Oracle database management software. In addition,
Oracle divides it‘s product into various editions to track marketing and sales.
 Enterprise Edition – The full suite of performance, scalability, security and
reliability stored on either a clustered or single server. Runs on all standards and
available with a large number of applications.
 Standard Edition – Provides Enterprise level functions for mid-sized
organizations. Sold through Oracles 400 Value Added Resellers.
 Standard Edition One – low end—minimum five users—entry level package.

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 Express Edition – primarily intended for students to learn how to code


applications for Oracle. It is small, free and his limited capacity.
 Oracle Personal Edition – ―High end‖ functionality but sold to single-use
developers.
 Oracle Database Lite – designed to run on mobile devises.

Though this looks like a large number of options, there are really only three true choices
and they are based on the size (number of seats) of the organization. Of the other three, 2
are for developers and the other just provides access to database information from a
mobile devise. Oracle does, however, offer some other ―flavors‖ to offer as well.
Oracle has grown dramatically mostly through acquisitions. Their product lines include.
 PeopleSoft Enterprise
 Siebel
 JD Edwards
 Hyperion
 Agile
 AutoVue
 Fusion

Not counting the other products (PeopleSoft, JD Edwards etc.) Oracle Business Suites
alone have over 140 different applications which can be installed on their platform.
These include:
 Enterprise Performance Management – A tool which aides in the executive
decision making process by supporting a broad range of strategic, financial and
operational management processes.
 Business Process Outsourcing – an application which seems to work as an
extranet and allows organizations track the non-core business processes which
have been outsourced.
 Customer Relationship Management—tracks what is going on in the sales
department. Allows other departments (finance, production) know what they can
expect. It will also allow the marketing groups know how effective campaigns
have been.

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 Customer Self-Service Solutions—allow customer place orders themselves


without the supplier having to have someone enter the order. This reduces the
risk of order entry errors. Production or warehouse groups receive the order right
away and can act on it much quicker so turn around takes less time.
 Financial Management Solutions—provides and tracks data for finance
operations, governance, risk, compliance, and performance management.
 Human Capital Management – ―tracks all aspects of the Human Capital needs,
from core human resource (HR) transactional functionality through service
automation and delivery to complete enterprise talent management solutions.‖1 It
provides the needed resources and has proven to reduce the costs.
 Procurement – Insures that the supply chain stays on top of productions needs
and maintains the most cost effective method of doing so.
 Project Management—maintains record of current projects statuses and
communicates with those needing the information in order to insure projects are
proceeding as they should.
 Transportation Suite—insures shipments reach their destination as well as,
―lowers transportation costs, improves customer service and asset utilization, and
provides flexible, global fulfillment options.‖2

These are just a handful of the applications available. Essentially, whatever the need,
Oracle has a way to meet it.

2.3 Microsoft Dynamics


Financial Management
Microsoft Dynamics AX accounting and finance solutions help you track and analyze
business information. You can easily manage your general ledger, payables, receivables,
inventory, sales process, purchasing, analytical accounting, cash flow, bank
reconciliations, fixed assets, and collections.

1
"Human Capital Management Solutions." Oracle, The World's Largest Enterprise Software Company. 19
Nov. 2008 <http://www.oracle.com/applications/human-capital-management.html>.
2
"Transportation Management." Oracle, The World's Largest Enterprise Software Company. 19 Nov. 2008
<http://www.oracle.com/applications/scm/transportation-management/index.html>.

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Business Intelligence and Reporting


Microsoft Dynamics allows you to manage budgets, create and consolidate reports and
look for trends and relationships in any part of the business.
Human Resource Management
Microsoft Dynamics allows the management of applicant and employee information:
payroll and benefits, skills mapping, recruitment and employee registration, and skills
development. In addition the system helps you ensure your organization is meeting
government reporting requirements accurately and on time.
Project Management
Project management and accounting applications allow project managers, accountants
and executives to improve their project profitability and adapt to changing conditions. In
addition manage resources, forecast costs and budgets, track time, and expenses. Lastly,
manage contracts and billing.
Customer Relationship Management
Customer relationship management solutions enable management of customer groups,
create and launch marketing campaigns, track customer activity, manage sales and after
sales. It also enables automation of many day to day tasks for sales, customer service,
field service, call center, and marketing professionals.
Manufacturing
It provides an integrated suite of manufacturing applications that give you the tools to
plan, manage, and execute a top of the line manufacturing operation. The manufacturing
process consists of product configuration, scheduling and shop floor, and supply and
capacity requirements planning.
Supply Chain Management
This improves inventory management, management of single or multi-site warehouses,
demand planning, order processing, and online collaboration with suppliers.
Collaborative Workspace
This extends the reach of business applications, information and process to employees,
customers, and partners with role based delivery through a single web-based portal.
Configuration and Development

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Customization capabilities enable programmers and system administrators to add new


functionality and modify existing functionality quickly and with limited coding.

3. The total cost of ERP ownership


Total cost of ownership (TCO) is a significant factor in ERP strategies and decisions. Yet
while both end-users and ERP vendors tend to talk about lower TCO and many vendors
claim it as a point of differentiation. Three different elements of total cost associated with
ERP implementations are actually important:
 Amount spent on software
 Amount spent of external services
 Internal costs
Since as the company grows, the number of users goes up, along with the total cost of
software and services, one can naturally expect a correlation between size of the ERP
deployment and costs. As shown in Table 1, as the number of users goes up, the total cost
of software and services also rises.

Table 1: Average Software and Services Costs by Company Size


Company Average # of Average Average Average 3 Average
Size Users Software Service years total cost
Maintenance
Under $50M 38 $176,597 $126,022 $81,676 $384,295
$50M - $100M 92 $482,941 $351,374 $247,554 $1,081,869
$100M - $250M 195 $695,395 $581,090 $443,066 $1,719,551
$250M - $500M 344 $985,714 $655,263 $346,639 $1,987,616
$500M - $1B 475 $1,364,286 $1,110,000 $617,735 $3,092,021
$1B - $5B 2187 $2,360,577 $2,081,000 $1,479,208 $5,920,785
Over $5B 3365 $2,652,500 $2,102,778 $1,163,531 $5,918,809

Source: Aberdeen Group, July 2007


Table 2 displays software and service costs by vendor, since the ratio of services to
software costs is indicative of both ease of use and ease of implementation. We just
adopted a few major vendors, Infor, Lawson, QAD, SAP and Oracle.

Table 2: Software and Service Costs by Vendor

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ERP Average Average Average # of Average Average


vendor Software Service ERP modules Software + total costs
Service per user per user
Infor $703,261 $494,444 11.0 $9,843 $12,773
Lawson $482,500 $455,556 10.8 $10,521 $11,826
QAD $633,871 $463,158 10.2 $9,741 $12,161
SAP $1,276,667 $1,115,323 11.9 $11,381 $15,067
Oracle $1,929,167 $1,694,231 11.5 $16,882 $20,983

Source: Aberdeen Group, July 2007


Functionality and TCO remain significant factors on ERP strategies and decisions. The
depth and breadth of functionality deployed, along with the cost of software, services,
and on-going maintenance combine to provide a price performance of ERP. Table 3
shows the ERP usage and total cost per user per percentage Point of functionality used by
three vendors, SAP, Oracle, and Microsoft Dynamics.

Table 3: ERP Usage and Costs per User per Percentage of Functionality Used
ERP Average # of Average % of Average # Software +
Vendor Modules Functionality of Users Service + 3
Used Used Yrs Maint.
SAP 12.4 69.1% 834 $702
Oracle 11.3 72.4% 1365 $513
Microsoft Dynamics 10.6 73.2% 116 $607

Source: Aberdeen Group, July 2007

Cost Areas of Microsoft Dynamics AX


The initial average license price per user for Microsoft Dynamics AX is $3,000.
According to Nucleus Research, Inc the average initial license price for a Microsoft
Dynamics AX customer was $571,234 with a low of $50,000 and a high of $2.55 million.
The consulting average expenditure for Microsoft Dynamics AX deployment was
$1,169,745 with a low of $50,000 and a high of $6.8million. The median expenditure for
consulting was $600,000. Pertaining to those customers that made hardware investment,
the average hardware costs were $180,188 while the median cost was $84,750 (Nucleus
Research, 7). Those companies that invested in the internal personnel for deployment and

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ongoing support for the ERP solution the average personnel costs were $346,667 and the
average annual ongoing cost was $192,000. Lastly, training costs on average were
$141,375 with one hundred and ninety-five users, twenty-nine hours of training time at a
cost of $25 per hour.

Table 1. The Average 3-Year Cost of an Microsoft Dynamics AX Deployment

Average Data Components


Software $571,234 Average initial license price
Average standalone consulting expenditure of
Consulting $1,169,745
customers interviewed
Average hardware expenditure of customers
Hardware $180,188
interviewed
Average number of personnel needed to
deploy:4
Personnel $346,667 Average time of deployment:13 months
Assumed fully loaded cost of an
employee:$80,000
Average number of users: 195 Average
Training $141,375 training time: 29 hours Assumed fully loaded
hourly cost of an end user: $25
Total $2,409,207 Average initial cost of deployment
Ongoing Costs
Average maintenance rate: 16%
Software maintenance $274,192
Average initial license price.
Average number of FTEs required to support
Personnel $576,000 Microsoft Dynamics AX: 2.4 Assumed fully
loaded cost of a support FTE:$80,000
Average 3-year costs of software, consulting,
Total 3-Year Cost $3,259,399 hardware, personnel, training and
maintenance.

Table 2. The Median 3-Year Cost of an Microsoft Dynamics AX Deployment


Initial Costs
Average Data Components
Software $168,000 Median initial license price
Median standalone consulting
Consulting $600,000
expenditure of customers interviewed
Median hardware expenditure of
Hardware $84,750
customers interviewed
Median number of personnel needed
Personnel $220,000 to deploy:3
Average time of deployment:11

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months
Assumed fully loaded cost of an
employee:$80,000
Median number of users: 120 Median
training time: 24 hours Assumed fully
Training $72,000
loaded hourly cost of an end user:
$25
Total $1,144,750 Median initial cost of deployment
Ongoing Costs
Median annual cost of license: 15%
Software maintenance $75,600
Median initial license price: $168,000
Median number of FTEs required to
support Microsoft Dynamics AX:
Personnel $300,000 1.25
Assumed fully loaded cost of a
support FTE:$80,000
Median 3-year costs of software,
Total 3-Year Cost $1,269,950 consulting, hardware, personnel,
training and maintenance.

3. Target market
SAP serves 75% of the Fortune Global 1000, but less than 1% of Fortune Global million.
The small and medium enterprise (SME) market is a huge opportunity. SAP views SMEs
as its main potential source of growth. As of summer 2006, SAP led the midmarket
segment, but to reach its goal of having 45% - 50% of order entry from SME customers
by 2010, SAP has to address the two most important elements of an SME solution: Total
Cost of Ownership (TCO) and ease-of-use. SAP‘s offering has higher up-front outlays
but lower maintenance rates. SAP aggressively expands SME market via the SAP
NetWeaver platform strategy toward the goal of doubling SAP‘s market cap by 2010.

It would probably be safe to say Oracle targets anyone interested in purchasing an ERP
solution. That wouldn‘t be entirely accurate. It‘s obvious that Oracle has achieved it‘s
success by building for the large Enterprise organizations but they‘ve also been
successful due to their focus on their platform. Enterprise solutions will probably remain
a staple target for them. However, if you look at the products they are now producing
making it easier for smaller organizations to get introduced to their product, it‘s an
obvious sign they are seeking more small to medium businesses in their portfolio. The

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Standard Edition One with a price of $180 per user is a sign of that. They also have a
suite of ‗out of the box‘ applications ready to bolt on once the server is in place. Get the
business used to the Oracle environment when they are small at a competitive price, then
sell more licenses as your software helps them grow seems to be their motto. I can‘t say
that‘s a bad one.

At the end of the day, selecting the best solution comes down to preference. Obviously,
each solution has strengths and weaknesses. But how do you select a solution when one
provider is strong in one area you need while another is strong in another? Additionally,
there are more solutions coming on the scene. Smaller companies who may be able to
provide a different type of service than what the biggest players offer. Another solution
many will consider in the future, especially with the current economic situation, is the
growing Software as a Service trend.3 SAP has already got a jump on the market with
their ByDesign solution. At the end of the day, it will have to come down to what
solution works best for the business making the choice.

3
Maxcer, Chris. "Is SaaS ERP a viable model for manufacturing?" Manufacturing ERP software and
management - SearchManufacturingERP.com. 9 Sep. 2008. 23 Nov. 2008
<http://searchmanufacturingerp.techtarget.com/news/article/0,289142,sid193_gci1329175,00.html>

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School of Business and Economics Indiana University South Bend

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