A review of new software products for your business

Accounting and ERP survey 2005*

By Michael Burns

*This is an expanded version of a Test Drive column that appeared in the September 2005 issue of CAmagazine.

Welcome to our seventh annual survey of accounting and enterprise resource planning systems. The survey now includes new or updated responses for 55 systems as of June 2005. The systems cover the entire spectrum – from QuickBooks and Simply Accounting to mid-market systems from Sage and Microsoft to high-end products from SAP and Oracle. For the first time, both PeopleSoft Enterprise and JD Edwards are included.

Vendors realize CAs are often the decision-makers for ERP investments. Several see a big difference between selling in Canada and in the US. Canadians are a much harder sell, since they analyse a purchase every which way before taking the plunge, whereas Americans decide more quickly. The US decision-makers are often sales types, while the Canadians are often accountants.

To make some sense of the huge array of systems, we placed each one in a tier based on customer revenue and employees and product cost. This is a convenient, albeit not perfect, means of differentiation. For example, an organization with low revenue may have a global vision or complex business processes that put it in a higher tier. We have changed the criteria somewhat by adding number of employees and changed a few numbers to match the market more closely.

	Tier 1	Tier 2	Tier 3	Tier 4	Tier 5
Customer  revenue	> $200M	$50M-$199M	$10M-$49M	$5M-$9M	< $5M
Customer  employees	>500	100-499	50-99	10-49	1-9
Licence fees	> $300K	> $150K	> $50K	> $5K	> $100
Implementation  fees : licence  fees	> 2:1	>1.5:1	>1.25:1	>1:1	<1:1

We tried something new this time to get a more accurate answer from the vendors on the functional questions. In previous surveys, the vendors could respond with Yes, No, Third party, Customization and Future date. This year we asked each vendor to provide a number to indicate the degree of fit for each functional question with a 6=In current release; 5=In next 6 months; 4=Minor modification or workaround; 3=Third party; 2=In next year; 1=Major modification or workaround; 0=Not available.

We also added 33 questions this year. One of these relates to application service provider costs. ASPs host the system on their Internet site, which is typically equipped with state-of-the-art technology and security. This allows clients to avoid the costs associated with managing the computer and associated database. You pay a monthly fee for each user on the system and access the ASP over the Internet. ASPs are still fairly rare but they are gaining a higher profile because of vendors such as NetSuite.

Business performance management
This year, we also asked vendors whether they offered business performance management , also called corporate performance management and enterprise performance management. BPM is an umbrella term encompassing all of the processes, methodologies, metrics and systems needed to measure and manage the performance of an organization. It includes strategic planning, scorecarding, budgeting, forecasting, consolidation and business intelligence. BI is simply a means of turning data into information useful for decision-making. It comes in many forms – from producing a traditional report on your desk every Monday morning to slicing and dicing information using online analytical processing.

One of the engines driving the growing interest in BPM is Sarbanes-Oxley. But even though BPM can help with compliance, it cannot compensate for a lack of processes or people ignoring procedures. Still, BPM offers a lot more than potentially helping with compliance. For larger organizations relying on spreadsheets for budgeting, forecasting and consolidation, BPM is a solution. For any organization, it offers valuable assistance in strategy and alignment with strategy.

How many people in your organization know the company’s strategy or critical success factors -- the things it must do well to be successful? Just as important, do you know how well you are doing in relation to those CSFs? BPM can be very helpful in providing tools to measure your performance using scorecarding. This is usually a balanced scorecard that measures important key performance indicators linked to the CSFs.

Microsoft
Nancy Teixeira, Microsoft product manager for ERP solutions, emphasized the importance of BPM when she talked about Microsoft’s ERP strategy. Microsoft conducted more than 2,000 interviews with users of accounting and ERP systems to determine what should be included in future releases of Microsoft Business Solutions. The company heard that users want a solution that delivers rich functionality combined with high adaptability, at a low cost.

Microsoft will use three guidelines for future development: tailoring the system to the user, collaboration and enabling insight on performance (a component of BPM). Tailoring a system to the user might mean letting different users see data differently depending on their role. Collaboration will be achieved using Microsoft SharePoint Services, which includes tracking document changes and assigning different version numbers for auditing and rollback.

By now, you have probably heard about Microsoft’s Project Green, which was initially a radical move toward a unified code base for all of the company’s business solutions. Now the project is being conducted in two phases. The first phase, now under way, will continue to 2007. It includes a common user interface, portals and business intelligence across systems. Phase two will lead to a unified code base built on the three guidelines discussed above as well as extracting the best practices from each of Microsoft’s existing business solutions.

Best practices
Have you ever wondered what best practices really mean? According to the usual definition, they are meant to improve efficiency and effectiveness and help achieve operational excellence. But what does that mean for any specific organization? You’re going to have a hard time finding anything specific to your industry. Even if you do, be careful. A best practice may be great for another company but a disaster for you. The implementation costs could also be prohibitive. It’s not best practice if the costs outweigh the benefits. Teixeira said Microsoft’s adaptable business solutions will allow companies to configure the system to their own particular needs.

Best practice also refers to learning from others. It’s about measuring how you are faring compared to previous years or to others – and even more important, doing something about it.

Sage
According to Craig Downing, Sage Software’s VP and GM for ACCPAC, mid-market companies don’t choose an ERP system based solely on financials. One of the trends today is to provide end-to-end functionality. This includes the back office (financials, distribution, manufacturing, etc.), the front office (CRM, eCommerce, portals, etc.) and business performance management.

Downing also says some big changes are happening at Sage, starting with their name. Best Software adopted the Sage Software name in May 2005 for consistency with its parent firm and the Sage brand used everywhere outside of North America. The full transition is to be completed by March 1, 2006. Sage offers a plethora of software solutions, with some products overlapping. The plan is to focus on verticals: ACCPAC Advantage, while still broadly applicable to a wide range of businesses, will be targeted toward professional service-based organizations, MAS 90 and MAS 200 to distributors and ACCPAC Pro Series to manufacturers. However, BusinessVision will still be sold mostly in Canada, as a horizontal solution. BusinessWorks targets a market similar to that of BusinessVision in the US.

Consolidation
Another big trend is the continuing consolidation of ERP vendors. The biggest ERP story in the past year was Oracle’s acquisition of PeopleSoft by in December 2004 for US$10.5 billion. Compared to that price, Microsoft’s acquisition of Navision in 2002 for US$1.3 billion and Great Plains in 2002 for US$1.1 billion look like bargains. Best Software (now called Sage) purchased ACCPAC, including ACCPAC Advantage and Simply Accounting, for a mere US$100 million. In June 2005, Lawson software (an ERP vendor not included in our charts) offered to purchase Intentia for about US$480 million.

AMR Research recently pointed out that in 1999, SAP, Oracle, PeopleSoft, Baan and J.D. Edwards accounted for 59% of the total ERP industry revenue; in 2005, the top five vendors (SAP, Oracle, Microsoft, the Sage Group and SSA, which acquired Baan) now control nearly three-quarters of ERP revenue. There are huge advantages to being a market leader, but also a number of disadvantages. It’s possible to develop a new system much more quickly when you don’t have the baggage of existing code and can benefit from new technology. The competitors of the Big 5 will also offer niche products and services to compete with the giants.

More trends
Vendors have realized the fight for more customers is not won by adding more financial features. They come up with new features to win new clients. This year, many vendors released components of work flow, which automates business processes such as routing purchase orders for electronic approval or alerting management when shipments are late or quotes do not make allowance for a prescribed gross margin. In the past, only the top-tier vendors offered this function. Work flow speeds up business processes, provides improved control and manages by exception.

Another trend, according to John Fahey, president of SYSPRO Canada , and Dale Kehler, the company’s professional services manager, is to take ERP to your point of work using portable devices such as PC tablets and handhelds. You can query the database for information, process transactions or just check your e-mail while in the warehouse or on the shop floor. Portable devices can include integrated bar code scanners. Fahey and Kehler have seen prices drop by half in the past few years for these handheld devices. Matthew Bather, general manager of Exact Software, sees a big push toward Web-based applications and integrated CRM.

Matthew Bather, general manager of Exact Software, sees a big push toward Web-based applications and integrated CRM. Exact’s strategy is based on its e-Synergy system, which is a Web-based application that includes workflow management, CRM, human resource management and eCommerce. The product is tightly integrated with Exact’s back-office systems, so you don’t have any integration issues, and all your information is up to the second (real-time).

Customer survey
This year, we are once again posting a customer survey of accounting and ERP systems to be completed by CAs across the country. The survey rates accounting and ERP systems, vendors and implementers, and provides statistics on potential benefits. We will publish the results in a future issue of CAmagazine. See last year’s results at www.camagazine.com/index.cfm/ci_id/24120/la_id/1.htm. Last year we received 129 valid surveys, and we hope to have more responses this year. Please complete the survey at www.CAmagazine.com/ERPcustomersurvey05. It can be filled out in a couple of minutes. We can accept only one survey per organization, and it must be completed by a CA.

Bottom line
ERP was originally supposed to automate all business processes within an organization. That did not happen partly because new technologies such as CRM and BPM emerged. CRM and BPM vendors offer a best-of-breed  approach, meaning selecting the best system for the application rather than choosing one system for everything. ERP vendors are now giving the best-of-breed vendors a run for their money. This is good news since it increases competition, which leads to better products and lower costs.

The battle for mid-market companies also continues unabated. The big players are prepared to buy market share and if they need to offer big discounts, they will do so. Today, you should expect to keep your accounting or ERP systems for at least 10 years, and a decade of maintenance and services adds up to a compelling business case for vendor discounts.

Even without any Y2K-type threat encouraging companies to invest in new accounting and ERP systems, there are still lots of reasons to do so. Companies grow and change. And many companies still rely on legacy systems. These are often supported by baby boomers who know COBOL and and other computer languages that are no longer used to develop new systems. As the baby boomers approach retirement, a bigger investment will be made in new accounting and ERP systems.

Ironically, some of the ERP systems that were brought in to replace the legacy systems because of Y2K have become legacies in their own right. These systems  were often highly customized to meet specific needs. Now, the companies are held back from moving up to the latest release because of the huge upgrade costs. And they have to shell out a lot just to maintain the systems. These companies are finding that it can be less expensive to purchase a new mid-market system than to upgrade and maintain their legacy systems. Mid-market systems have evolved a lot since Y2K and, as you will see from the charts, offer substantial functionality at competitive pricing. This provides an opportunity for both buyers and sellers of ERP systems.

Michael Burns, MBA, CA, is president of 180 Systems (www.180systems.com), which provides independent consulting service, including review and assessment of existing systems, business case development and system selection. Michael can be reached at 416-963-1296 or mburns@180systems.com.