Top 10
Enterprise Resource Planning (ERP) Vendors
Er. Isha
Nagpal
Assistant
professor,DCSE, PPIMT,Hisar
CONTENTS
·
The
Top Ten ERP Vendors
·
Understanding
the ERP Market Space
·
ERP
Moving into Cloud Computing
·
Choosing
between On-premise and Cloud Based Solutions
·
ERP
Vendors by Sector
·
ERP
Vendors in the Manufacturing and Distribution Industry
·
Transport,
Communication, Energy, Sanitary Services
·
Selecting an ERP
Solution
·
A
Few Final Thoughts
The Top Ten ERP Vendors
The
global ERP market has been seeing an average of about 10% growth year on year
since 2006, and while the current global economic slowdown is bound to cause a
dip in this growth pattern, it is a safe bet that the overall trend will
sustain. Growth in ERP markets will almost certainly go back to 10% plus as
soon as the Euro zone crisis subsides.
Understanding the ERP Market Space
Like
every other segment of the IT industry, the ERP industry is evolving rapidly.
The industry has clearly differentiated between very large enterprises and the
small and medium business sectors. It is the second segment that is seeing
rapid growth and the emergence of new players in the ERP business.
ERP
vendors are classified as Tier I, II or III depending on the kinds of clients
they service. The three groups are very distinct and the size and complexity of
their solutions are also very distinct.
In
general, the Industry classifies a Tier I ERP vendor as one that sells
extensively to the Tier I market – a market that has companies with annual
revenues exceeding $1 billion. These companies are invariably multinationals
with a presence in many different geographic regions. Naturally enough, Tier I
ERP products have a high cost of ownership due to their complexity and costs of
implementation and support. While there have been several Tier I vendors
earlier, mergers and consolidations have shrunk the list considerably. The list
of Tier I ERP vendors is now very small and consists of just two entries – SAP
and Oracle.
Tier
II vendors sell ERP products that suite mid-sized companies that have revenues
in the range of $50 million to about $1 billion. The products of Tier II
vendors are specifically built to handle this market and cater to a single or
multiple locations of deployment. Naturally, Tier II solutions are easier to
manage and support and cost correspondingly less as well. Often, Tier II
solutions are confined to a specific industry vertical. This group sees
considerable competition and is comprised of about 20 well-known companies.
Tier III
ERP solution providers target companies that have revenues of $10 million to
$50 million. Solutions provided by these companies are simple to implement and
support and have correspondingly lower cost of ownership. Many ERPs in this group
are single location installations and built for a single vertical. While they
are easy to manage and deploy, the risk is that a company could soon outgrow
the solution and hence some kind of migration path must be kept in mind when a
small but rapidly growing company selects a Tier III solution.
ERP Moving into Cloud Computing
Another
interesting development in the ERP space is the advent of cloud computing
solutions. A number of users are beginning to use cloud based ERP solutions.
These solutions typically provide a lower cost of ownership – initial startup
costs can be lower by as much as 30% to 50% as compared to an ERP solution
hosted within your own premises. This becomes even more relevant for companies
with a large geographical expanse. Typically, the first movers to the cloud
were the relatively smaller companies and mid-range companies were the next to
consider a move to the clouds. Large companies were the most conservative in
this regard.
Since
ERP implementations can be very complex, smaller companies are able to
experiment more easily with cloud solutions. The very large companies have all
made very significant investments in their existing ERP systems and hence may
not be so keen to change.
Nevertheless,
it is clear that the Software as a Service (SaaS) model will influence the ERP
industry considerably in the future. Generally, SaaS is associated with lower
costs due to following a rental model for using software and due to a ‘pay as
you go’ approach. It is not clear how this will apply to ERP solutions, but the
move to the cloud is indisputable. There are several concerns about the cloud,
but these are also being addressed as the technology matures and finds
widespread use – some of these are:
Will the SaaS model
imply a standardized solution?
What happens to any
earlier ERP investment?
Risks of governance, security and vendor lock in.
In
spite of the relevance of these concerns, it is clear that more cloud based ERP
solutions will emerge. Very recently, Larry Ellison announced that Oracle would
now be embracing cloud technology. Although he did not mention cloud based ERP
solutions, he did throw his weight behind the technology.
Implementation
sizes of cloud based ERP solutions will increase slowly and this is a space
that must be watched carefully.
Choosing between On-premise and
Cloud Based Solutions
A large
number of case studies are available about both cloud based and on-premise
deployment of ERP solutions. From a study of these, the key reasons why either
is selected can be easily discovered.
Companies
that chose on-premise hosting often do so largely because of the following
reasons:
Leveraging existing
systems – companies that had substantial investment already in on-premise
hardware or software wished to leverage that to reduce overall costs.
Ensure connectivity
with legacy systems – in some cases legacy systems were critical to the business
and the company wanted to ensure that these stayed connected to the final
solution. This was easier with on-premise installations.
More predictable
performance – many companies are still uncomfortable with the cloud and prefer
the security of on-premise installations to ensure that the systems stay under
their control.
Compliance issues – at sometimes there are compliance issues such as those
mandated by HIPAA etc that are easier to meet if the solution is hosted
on-premise.
On
the other hand, companies that selected cloud based solutions favored the
following reasons to do so:
Lower initial cost
– with a pay as you go model, initial costs are a fraction of the on-premise
model. This makes ERP affordable for many companies that would otherwise not be
able to consider such solutions.
Rapid deployment –
since no installation is done on your premises, the roll out is much faster.
All you have to do is to ensure that PCs are connected to the Internet.
Very little IT
staff is needed to manage the ERP.
Upgrades are
managed by the service provider and are transparent to you. In a traditional
on-premise hosting, an upgrade sometimes causes reversal of customizations
which can be a major loss of capability. This even prompts some companies not
to upgrade.
Scaling up is easy and involves very little additional expenditure. Your costs
increase as your capability to pay does.
ERP Vendors by Sector
ERP
solutions are such a specialized field and the necessity of domain expertise is
so critical that solutions and their providers can be easily broken down by
sector. Each sector has its own top 10 list. Of course, many of the players are
common to all domains – SAP, Oracle and Microsoft
being
the main examples. But variations tend to creep into the Tier II and Tier III
end of the market.
This
study looks at the following major sectors of Industry:
Manufacturing &
distribution industry
Transport,
communication, energy, sanitary services
Service sector
Retail sector
Details
of the top players in each sector are tabulated below along with their market
shares. In some cases, where the market is extremely fragmented at the lower
end, it is difficult to identify the last few of the top 10 and a grouping
called ‘other’ captures the rest of the vendor list.
ERP Vendors in the Manufacturing and
Distribution Industry
This market
is dominated by SAP, Oracle and Microsoft in that order and together they
command a 55% market share. A number of Tier II vendors also have considerable
market share. The lower end of the market is very fragmented with 26% going to
a large number of vendors each of whom has less than 1% market share. Here is
what the list looks like - (All figures are in
percentages – in this and subsequent tables).
Transport, Communication, Energy,
Sanitary Services
In this
sector, the top 3 remain unchanged but as the table below will show; their
market share is increased by nearly 20%. As a result, SAP, Oracle and Microsoft
cover nearly 73% of the entire market in this domain. The remaining vendors
share about 11% between themselves and a much smaller proportion goes to the
‘others’ group. The table of relative standings in this section is as shown
below.
Service Sector
The trend
of the big three maintaining their dominance continues unchanged. The lower end
of the market is more fragmented and only seven companies that have a market
share of 1% or more can be identified. The position of the major players in
this space is shown in the table below.
Retail Sector
In the
retail sector the dominance of SAP, Oracle and Microsoft continues. Microsoft
improves its position in this sector, coming out even with Oracle. In Tier III
service providers, we find new entrants in the list with small vendors taking
up nearly 11% of the market space. The table below shows the relative positions
in this domain.
With the above
background, a final list of the top ten players in the ERP segment is drawn up.
This list takes into account the market share of each player in various market
segments. Where market shares add to the same value, a vendor who has presence
in larger numbers of domains is ranked higher. With this ranking methodology,
the final top ten list is produced below.
In
the next few paragraphs, we discuss each of these companies briefly.
SAP –
Founded in 1972 by five former IBM engineers, SAP is the undisputed market
leader in the ERP space and is the third largest software company in the world.
Its current version has more than 30,000 relational database tables that allow
it to handle extremely complex business situations. While it is an undisputed
number one in the Tier I ERP space, SAP has been criticized at times for being
too complex and difficult to handle. If you are a small or medium company, this
solution is probably more than what your company needs or could potentially
handle.
Oracle
– While Oracle was formerly best known for its relational
database, it was for many years the database of choice for SAP ERP
applications. This cooperative situation had existed since the late 70’s.
However, sometime around 2004, Oracle began to look at building its own ERP
solutions and at the same time SAP began to offer its ERP solutions on the
Microsoft SQL Server database platform as well. The first Oracle ERP product
was Oracle Financials which was released into the market as early as in 1989.
However, post 2004, Oracle began to become a serious player in the ERP market
and is now a well-established number 2 in the Tier I market.
Microsoft
– Microsoft Dynamics is mostly focused on Tier II clients in the
ERP space. It provides solutions in a number of different business domains
including in the Customer Relationship Management domain. A great advantage of
Microsoft products is its great ease of use. This holds for its ERP products as
well.
Infor
– Infor Global Solutions is a privately held company that has
grown rapidly in the Tier II vendor space since 2002. The company has taken an
aggressive acquisition route to growth and continues to follow this path even
now with its acquisition of ENXSUITE in 2011. Infor has a global presence to
match the footprint of the top 3 and has clients in 194 countries. Infor has
solutions in as many as in 14 different domains and it has a very good presence
in each of the four specific domains that were previously discussed.
Epicor
– Started in 1984 and working initially with DOS, Epicor later
converted its products to Windows and followed a merger and acquisition path to
acquire companies selling ERP products and then to offer their solutions as a
comprehensive package. Epicor has a presence in over 150 countries and has more
than 20,000 Tier II / III customers. Epicore likes to call its ERP “the key to
possibilities not yet imagined”.
Lawson
– Acquired by
Infor a couple of years ago, Lawson still maintains a separate identity
although it does display the Infor logo on its web site. Specifically
mentioning that it is tailored for the small to midsized business, Lawson has a
presence in 68 countries and has more than 4,500 installations. Lawson caters
to a large number of verticals and uses this as its USP. Simplicity of the
solution is another key focus area in a market best known for its complexity.
QAD –
The QAD website shows a chain with the logo of the cloud forming
one of the links so we have an idea what is on the company’s mind. The QAD
Enterprise Application is designed to make it easy for first time ERP users to
begin using an ERP in their company with the least amount of migration
problems. The company supports and engages with its customers to ensure that
the return on investment is obtained rapidly.
Sage
– is a UK based company and had its beginnings in a 1981 summer job
when the first version of a type of accounting software was written. This grew
into larger versions until eventually, in 1984, Sage Software was launched as a
company and achieved a fair amount of success. Like many other companies in the
ERP space, Sage has grown by a number of acquisitions and says that
‘acquisitions are part of its DNA’. The cross pollination of DNA appears to
have been very successful given the rate of growth Sage has been seeing.
IFS –
Founded in 1983, IFS focuses on building agile ERP solutions that use SOA
architecture. This implies easy modification and adaptation to user needs. IFS
is most useful four core strategic processes - service & asset management,
manufacturing, supply chain and project management. It has a user base in
excess of 2,000 installations and customers in 50 countries. One key reason for
its success is its sharp focus on specific verticals.
Consona
Corp – Deriving its name from ‘consonance with the customer’, Consona
is active in ERP, CRM, knowledge management and other related fields. The
company is privately held and has grown by acquiring a number of specialist ERP
companies. If you are doing business in a niche area where Consona has a focus,
you may just be lucky. No one else we know is offering an ERP solution tailored
to printed circuit board manufacturers or to metal wire and cable manufactures.
A solution as focused as this is bound to be better than a generic ERP when put
to use in one of those industries.
Selecting an ERP Solution
Selecting
an ERP solution is a serious exercise and has to be executed with great care.
Companies often go ahead with poorly or incompletely defined requirements and
do not take adequate care in selection of a vendor. It is essential that the
selection process encompass the following:
A structured approach to defining requirements and creation of the
tender document – all departments and stakeholders must contribute to the
requirements definition and be aware of the solution selection process. At the
end of this process, you should be able to define with great clarity what the
final solution will be able to help your company accomplish.
Realistic and
comprehensive demonstrations – Typical vendor demonstrations tend to be
simple and straightforward. You need to see demonstrations that apply to your
specific situation and not to your industry in general. You will have to work
out in advance what part of the activity you want to see demonstrated and how
much of sample data are you willing to provide prospective vendors. Needless to
say, all your shortlisted vendors must provide the same type of demonstration
with identical data.
An
Objective selection – the selection process must be clearly defined with
well selected marking criteria. All stakeholders must be given an opportunity
to rank solutions and make a decision matrix. Ensure due weight is given to the
following criteria in creation of a marking matrix .
Customizability – check carefully how
flexible the solution is and what adding new functionality entails. Determine
how much you can customize yourself without needing to ask for support.
o Technical Fit –
the solution must fit the technology you are already using – for example if you
are solidly on the Windows platform and use SQL Server as the database, you
could opt for an ERP solution built on .Net and using the same database. This
will simplify your manpower issues and make the solution easier to manage.
o Calculate the total
cost of ownership – many costs are not apparent in a vendor proposal –
these could include upgrades to hardware, additional manpower, network costs,
costs of software maintenance and customization and so on. Spend time and
effort to unearth these and calculate as accurate a TCO as possible.
o Do not restrict
your selection list to the top three or four. There are more than 70
vendors in the market and many of the smaller ones offer very specialized niche
ERP solutions. Some of them could fit your business very closely.
o Look
to handle the unexpected – if you want to process a refund based on a
photograph of a damaged carton the customer emails you, can the system handle
the image and absorb it into the workflow?
Easy to use reporting
tools and generation of ad-hoc reports – there are ERP solutions that are
extremely formal about building reports, and this forces your users to rely on
your IT staff. Other solutions allow you a degree of freedom to create any
ad-hoc report you need. Ease of report generation is an important criterion
too.
o Interface with
vendor and client systems – electronic data interchange with collaborators and
clients can often be essential. Ensure that your solution provides this
functionality without needing any additional third party translation tools.
o Security
should be built in from role based security at the individual level all the
way up to the division and the business level.
A
Few Final Thoughts
Anyone
who has worked on ERP solutions knows firsthand how difficult it can be to get
everything right and derive real benefits from the initiative. That of course
is subject matter broad enough to generate another white paper on. But when you
are in charge of the implementation, should you use a big name or a small niche
player?
The
answer, we think, lies in how specialized your business is. If you can fit into
a generic solution with a small amount of customization, then maybe a standard
solution will work for you. However, if you are in a very specialized business,
why should you look for a generic solution in place of something that is
closely tailored to your needs? Such a solution ensures that the software is
built to follow your workflow rather than the workflow being adapted to the
software.
ERP
solutions can be terribly difficult to implement and cause a considerable
disruption at work. A closely tailored solution will cause the minimum
disruption and assure you of the greatest chance of success. The vendors
discussed in this paper are all experienced (the youngest in the ERP business
appears to be Oracle!) and selecting one of them that fits your niche seems to
be a sensible and practical approach.
