Software and Vendor

Selection
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CASE 6-1
Opening Case
Oracle Wins Out Over SAP at Welch’s

Source: Based on article written by Robert Westervelt, News Writer, March 3, 2004, Search SAP.com

In March 2004, Welch Foods chose Oracle over SAP. The international juice maker with
sales close to $600 million purchased the Oracle Corporation ERP system to implement
companywide. The plan is to implement the e-Business suite over the next several
months.
The leader of Welch’s ERP selection committee, Larry Rencken, said the
competition between the two software vendors was close. Oracle won the contract when it
discounted its initial price significantly, Rencken said, and after committee members
became convinced that Oracle would be less difficult to implement on a large scale.
“It was a consensus vote from the selection team, and that selection team looked at
functionality, ease of implementation and flexibility—in addition to TCO,” Rencken said.
“While functionality was very close between the two products, ease of implementation
and flexibility was won fairly handily by Oracle.”
Both SAP and Oracle, vying for the purchase, entered into a sort of bidding war for
the project. Welch’s was able to leverage each of the offers to the betterment of the
company. The competition lasted for several weeks, but by the time SAP submitted a
competitive bid, the decision had been made, Rencken said.
“In the end, SAP did come back with a counteroffer that was a very close,
competitive counter, but we [had] already made our decision,” Rencken said. “They were
not as competitive as they could have been in the initial rounds.”
The Welch’s deal proves that no single vendor owns the ERP market, said Joshua
Greenbaum, who owns Daly City, California–based Enterprise Applications Consulting.
“This proves to me that there is still a lot of competition in the marketplace and,
particularly, that SAP does not have a lock on the market,” Greenbaum said. “What this
says is that there are a lot of issues in a competitive deal and that the market system still
works for enterprise software.” The new reality, Greenbaum said, is that many software
buyers can negotiate deals that weren’t possible before the large ERP market became
saturated and the economy became so tight.
Bill Wohl, SAP’s vice president of public relations, called the decision by Welch’s
a “disappointment.” “What happened at Welch’s essentially flies in the face of what is a
clear track record of customer success,” Wohl said. “The reality is that what we have is
strong competition in the market.”
Rencken said that Welch’s is using IBM Global Services to help implement
Oracle’s software suite. IBM is working with Oracle Consulting on part of the
implementation, he said. “We certainly had an infrastructure with a lot of spaghetti code
keeping it together, and now we have a desire for one fully integrated enterprise,”
Rencken said. The project consists of two phases: Oracle Financials and HR in the first
phase, and then Oracle Order to Cash, Warehouse Management, Inventory Management,
and Production and Purchasing.
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PREVIEW
The selection process for Welch’s Foods shows that there is good competition and value in going
through an elaborate evaluation process to determine what ERP best fits the company needs. The
vendor is often blamed for an unsuccessful implementation. The selection of a vendor that best meets
the needs and long-term direction of the company is a critical first step in a successful implementation.
In selecting a vendor, a well-understood selection process needs to be utilized. Depending on a
given company’s experience in purchasing an ERP system, that company may want to bring in a
specialized consulting firm to assist in the selection process. In any event the steps involved in
selecting a vendor generally are based on best fit of an ERP to business functions and the overall ERP
vendor’s product performance in the market.

VENDOR RESEARCH
The first step in selecting an ERP system is generally to research vendor ERP systems on the market
and to identify a short list of vendors who will help to shape business requirements. This process is
especially helpful for companies moving from aging legacy systems and technology to current and
state-of-the-art technology. A state-of-the-art ERP system

BOX 6-1 High-Level ERP Purchase Process

1. Vendor research and information gathering
2. High-level vendor demonstrations and evaluation
3. Needs and requirements assessment using current legacy systems, business process reengineering analysis,
or both
4. Development of request for bid or proposal (if needed or desired)
5. Release request for bid to vendors
6. Analysis and selection Evaluation of bids
Functional evaluation
Technical evaluation
Vendor-detailed demonstrations
Contact references
Develop a total cost of ownership
7. Vendor(s) negotiation Contract review and change
Pricing—software, maintenance, and consulting support
8. Purchase system (let the fun begin)

purchase will likely mean the replacement of the current hardware and software infrastructure.
Identifying and researching all aspects of a vendor package and the platform that the hardware and
software runs on will assist companies in determining the total cost of ownership (TCO).
In general, identifying vendors today is not overly difficult. Using current Web search engines is
a good starting point. It also helps to know what packages the competition uses. An exhaustive list of
vendors, even if you do not research them completely, is important for a successful implementation.
Another strategy to identify vendors is to ask department managers and subject matter experts if they
know of vendors that should be considered. “The Process Is Important,” so including end users will
help with change management issues later in the project. It will also help to gain and secure trust for
later in the implementation.
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The following should be considered when researching vendors and gathering information:
• Other businesses using the vendor
• The vendor’s financial position
• The vendor’s implementation philosophy and support issues
• The hardware and software infrastructure used to support the ERP
• The vendor’s direction and currency of software
• The vendor’s release and upgrade strategies
• The vendor’s user-base involvement in defining future functional changes
• The vendor’s development and maintenance resources
Some ERP vendor systems (e.g., SAP) are designed for and can scale to a large number of users,
whereas other systems (e.g., Great Plains) are geared for a small number of users. Many ERP vendors
have similarly geared their application for a specific industry.

For example, PeopleSoft has historically focused on government and educational organizations,
whereas SAP has focused on the manufacturing industry. Oracle PeopleSoft is also known for human
resource (HR) applications, whereas SAP is well known for production and supply chain management
(SCM) applications. In recent years these large vendors have tried to diversify their systems by
expanding their application modules through acquisition of other software companies.

Oracle now owns the Peoplesoft ERP along with its own e-Business Suite. Nonetheless, they still
focus on certain industries and are known for applications in certain functional areas of business. It is
therefore important for businesses evaluating ERPs to pay close attention to these criteria before
selecting the software.

The IT infrastructure criterion is important because a company not having the resources to invest
in new infrastructure may want to acquire an ERP application that will work on an existing platform.
Some ERP vendors have structured their applications to work on specific platforms with specific
database and third-party software. In that case, having the vendor install a “sandbox” application for
demonstration purposes on the company’s existing infrastructure can be very helpful. If they are not
committed to the project for the long run, both in terms of resources and time commitment, the
implementation is doomed for disaster.

The majority of ERP vendor relationships with organizations are long term. Vendors are
constantly upgrading or releasing new applications requiring a business to remain close to what is
happening with the system. This requires long-term resource commitments from the organization.

ERP System Research Table

Item Description

User Base How many companies are using the system and for what purposes. Identify
competitors using the system.
Financial Position If publicly traded, this information is fairly straightforward. If not, the ERP
vendor information may not be available until such time later in the purchase
process. It should include sales revenues, profits, growth, research and
development, and any outstanding debt.
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Implementation Issues and This can be accomplished through calls to companies using the software or IT
Support researching companies that survey and collect this type of information on a
regular basis. Be sure information is current. What may have happened three
or four years ago may not be accurate.
HW/SW Infrastructure Fit and ERP vendors usually support more than one platform. Identifying and
Scalability documenting the platforms will provide a better understanding of the
scalability of the system and ultimate fit with the company’s direction.
Vendor Direction This information should be tracked through the vendor history of change and
upgrades to the system along with a statement of direction from each
vendor. The ability to implement a stated direction is important; hence,
knowing the history is critical to understanding the hype versus the reality.
Currency of Technology Like legacy systems, a vendor’s software is often written in older
technology. In some sense every vendor goes through this because
technology is changing rapidly, but the ability to migrate to new
technology must be understood and documented during the research
process.
Release Strategy How often are there releases to the system, and what is included in the
releases? Are fixes timely and minor upgrades included periodically? What is
the timing for major releases, and are there defined upgrade paths? Are
there vendor costs related to upgrades?
Development and This is an area that sometimes requires some exploration. It is difficult to
Maintenance Staff compare apples to apples because the “size” of the ERP vendor system will
have an effect on the development and maintenance staff. One should really
look for a disproportionate number within an ERP vendor and across ERP
vendors.
System Update Process This is a key area. It helps to understand how much your company’s direction
and long-term needs will be met by the vendor. A company’s involvement in
further defining the functional direction of an ERP system is important to
understand and document in the vendor research process.

Short List of ERP Vendors

SAP - Founded in 1972, SAP is the recognized leader among ERP vendors, currently claiming the largest
market share. Its solutions are for all types of industries and for every major market. Headquartered in Walldorf,
Germany, with 12 million users, 88,700 installations, and more than 1,500 partners, SAP employs more than
32,000 people in more than 50 countries. Its products include mySAP Business Suite, SAP NetWeaver, and
solutions for small and midsize companies (e.g., SAP Business One and SAP All-in-One) (www.sap.com).

Oracle/PeopleSoft—Oracle technology can be found in nearly every industry around the world and in the
offices of 98 of the Fortune 100 companies. Oracle is the first software company to develop and deploy 100
percent Internet-enabled enterprise software across its entire product line: databases, business applications, and
application development and decision support tools. Oracle provides solutions divided by industry category. The
company promises long-term support for customers of PeopleSoft, which it acquired in 2004. They have 40,000
professionals, working in more than 100 countries around the world. Their three principles are as follows:
simplify, standardize, and automate. Oracle is headquartered in Redwood Shores, California (www.oracle.com).

Lawson—Founded in 1975, Lawson provides industry-tailored software solutions. Lawson’s solutions

include enterprise performance management, distribution, financials, human resources, procurement, retail
operations, and service process optimization. Headquartered in St. Paul, Minnesota, Lawson has offices and
affiliates serving North and South America, Europe, Asia, Africa, and Australia (www.lawson.com).
172 Chapter 6 • Software and Vendor Selection
SSA Global—By acquiring Baan in 2004, SSA Global effectively doubled the company’s size. They claim
to offer solutions that accomplish specific goals in shorter time frames and that they are more efficient with time.
Headquartered in Chicago, Illinois, SSA also has offices all over the world (www.ssagt.com).

Great Plains—Great Plains offers integrated capabilities for financial management, distribution,
manufacturing, project accounting, HR management, field service management, and business analytics. Part of the
Microsoft Business Solutions group of products, its solutions can be tailored according to business needs
(www.microsoft.com/businesssolutions/greatplains/).

Epicor—Epicor focuses on enterprise software solutions for midmarket companies around the world. The
company claims to have solutions to a variety of needs, whether a customer is looking for a complete end-to-end
enterprise software solution or a specific application. It provides solutions for a limited number of specific
industries including nonprofit, distribution, manufacturing, and hospitality. Epicor is headquartered in Irvine,
California (www.epicor.com).
Infor Visual—This ERP software is a flexible, fully integrated, and easy-to-use ERP suite that is widely
deployed across many different types of industries from aerospace to biomedical, capital equipment, precision
tools, and more. Infor Visual ERP is a scaleable solution with powerful technology to deliver real-time
information, streamline operations, and increase profitability and customer satisfaction. With state-of-the-art
advanced planning and scheduling, quality management, customer relationship management, time and attendance,
business intelligence, and warehouse management system capabilities built in, Visual appeals to manufacturers
and distributors with a combination of affordability, depth of functionality, and ease of use.

Plex Online—Plex Online’s full suite of enterprise resource planning, manufacturing execution system, and
supply chain management features let you eliminate the need for costly, time-consuming software and hardware
installations. You gain the flexibility to meet the unique needs of your enterprise. A continuously improved ERP
system means you avoid disruptive updates and the hassle of version control. You’ll better manage and streamline
your operations and realize key achievements such as the following:
• Increased productivity
• Reduced inventories
• Reduced scrap
• Reduced lead time
• Full compliance with ISO, QS-9000, TS-16949, Honda, and other mandates
• Improved decision making through timely and accurate information

IFS—This global enterprise applications company provides software solutions that enable organizations to
become more agile. Founded in 1983, IFS pioneered component-based enterprise resources planning software
with IFS Applications, now in its seventh generation. IFS’s component architecture provides solutions that are
easier to implement, run, and upgrade and that give companies the flexibility to respond quickly to market
changes, new business opportunities, and new technologies.

IFS has a solid, growing presence in the North American business software market. IFS North America
serves medium-size to large companies in a variety of key industries, including aerospace and defense, industrial
manufacturing, automotive, high-tech, construction, and process industries such as food and beverage.

IFS also has a large virtual organization to bring the company even closer to its customers while providing
a better quality of life for its employees.

Other successful large vendors include I2, Intentia International, QAD, IFS, Sage, Glovia, Syspro,
Macola, Solomon Software, Visibility, and Flexi, among others.
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MATCHING USER REQUIREMENTS TO FEATURES
There are two approaches to matching requirements to an ERP system. The traditional approach is to
meet with departments and groups in the organization to define requirements taking into account
legacy system functionality and BPR. A newer approach that has historically been addressed after the
ERP was purchased is a format fit/gap process.

Traditionally, the identification and documentation of user and system requirements can be done
as an exercise by documenting current legacy system functionality and using business process
reengineering to address “best practices” in the industry. This process will provide the company with
the functional requirements on which to select an ERP system. A key component of the document will
need to be how the integrated ERP system cross-functional data flow will affect departments within the
company. In all likelihood this will be very new to the subject matter experts and needs to be
understood fully by them as the project moves forward. This process will assist in selecting an ERP
based on facts and documented needs.

Two major documents are often a result of the functional requirements process. The first is a data
and functional flow of departmental or business processes, including any changes to those processes;
the second is a table or description of functions in each department and the level of importance of each
function. Some functions are absolute requirements, whereas others are “nice to have.”
With departmental functions and business processes documented, the company can now perform
a high-level evaluation of the vendors identified. A request for information (RFI) is sometimes used to
get this information from the ERP vendors. This is a written request to vendors asking for ERP system
information only and is not part of the bid process. In gathering and reviewing the information it will
quickly become apparent how close the company’s business processes match a vendor’s system. This
will also help the company assess if the documented processes are rational and reasonable. Again,
identifying vendor system functionality based on documented processes will help to purchase a system
based on facts.
As with most processes, the data from the RFI will raise questions. This becomes an opportune
time to bring in several of the vendors and have them answer questions related to functionality and
even to demonstrate the system. Seeing a system visually will be important. It will add a level of
believability to the process and start to create more of a sense of momentum to the project.
The second approach to identifying ERP functionality with organization requirements is by
conducting a fit/gap. Fit/gaps is a step in the implementation process but has been usually completed
after the ERP has been purchased. While some vendors will charge for fit/gaps, some organizations
today have made this part of the vendor selection process and found it very beneficial in selecting the
best vendor for their business. The fit/gap process has the vendor walking the organization through the
ERP functionality.

The organization can then see what works for them, what business processes will need to change,
and what changes are necessary for the ERP to work for the organization. Time-consuming
organizations have found that they know just what they are buying and what changes are necessary
before the implementation is in full swing. With this information, the organization can decide on what
changes will be made to the system, if any, and get an estimate on how much they cost. A benefit of
this process is the organization will know up front what changes will be made to the ERP and a cost
estimate in addition to the ERP purchase.
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REQUEST FOR BIDS
The bid process in private industry is not required, but in public institutions it almost always is. It is an
expensive and time-consuming process for both the company and vendor(s), but it can yield significant
software savings when done right. In addition, one of the benefits of bidding is a more detailed
understanding of the ERP system functionality and a willingness of the vendors to work with the
company better to ensure a successful implementation (see Appendix A for a sample bid layout).
The request for bids (RFB), which is sometimes called request for proposals (RFP), should
include the type of ERP system the company wants with specific functionality, along with a specified
hardware and software infrastructure, training requirements, and any specific contract issues required
by the company. If the company has an infrastructure in place it should be clearly stated in the request.
A format to respond to the bid, including a pricing sheet and a clear description of the selection process
and a timeline for selecting an ERP vendor, should also be a part of the RFB. The goal will be to
evaluate bids from vendors, comparing “apples to apples” to determine which system will work best in
the company’s current and future environment.