By Michael Burns
Welcome to our fourth annual survey of accounting systems and enterprise resource planning (ERP) systems. Last September, we concentrated on financial and distribution systems for medium-sized businesses (mid market) and included 22 products in our charts. This year, we extended the products to include manufacturing and added 34 products to the list.
 And for the first time, the results of our surveys of product users are available.
First, let's get a few definitions out of the way. Enterprise resource planning is an accounting system with the ability to automate all or most business processes across an organization. Mid market has a number of definitions, but for our purposes, mid-market companies have revenues ranging from $5 million to $250 million.
What the vendors are saying
This year's survey is based on a questionnaire sent to vendors in April. It comprised questions on cost, application, a target market, install base, technology, unique features, and more than 100 detailed questions on generic, financial, distribution and manufacturing functionality. Since we cannot accommodate all the data here, we recommend consulting our vendor analysis.
In order to make sense of the many systems available, it is useful to allocate each system to a tier, as shown on the chart. There is usually something wrong if you are considering products that are more than one tier from each other. For example, if you compare a product from tier 1 on the chart with a product from tier 3, it does not usually make sense.
We have used customer revenue in the chart to assist in identifying which tier would make sense based on company size. Revenue is just one indicator of company size and the need to spend more dollars. Other factors include complexity of business process, volume of data and company vision. A company that has a global vision, including systems that automate finance, distribution, manufacturing, e-commerce and customer relationship management, will need to make significant investments in accounting or ERP systems. We have also used the licence fees of the products and ratio of implementation to licence fees as criteria to allocate products to tiers.
Costs
Using the data from our survey, we calculated that the average cost of an accounting/ERP system was $3,000 per user with an average of 25 users, leading to an average of $75,000 for licence costs. On average, the ratio of implementation to licence cost was 1:1 so that the cost of an implementation would also be $75,000. The more comprehensive systems such as SAP, PeopleSoft or Oracle will usually have much higher implementation to licence ratios of 2:1 or 3:1.
Applications
Again, a few definitions are in order regarding some of the nonfinancial applications in our survey. Warehouse management typically includes bar coding, use of radio frequency for warehouse activities such as receiving or picking, plus optimization tools for picking and shipping. Manufacturing systems function differently, depending on whether they are used for discrete products such as jackets or radios or for processed products such as food or petroleum. The system will also differ if the products are made to order or customized, compared with manufacturing to stock or to create inventory that could be shipped to multiple customers.
Customer relationship management
Contact management is available as a stand-alone system in products such as ACT, Maximizer and Goldmine. Contact management is also a subset of customer relationship management (CRM), which includes salesforce automation, marketing automation, customer service/call centre, field service management and a help desk.
For the past few years, CRM was hyped as a must-have technology that would maximize the customer relationship or would seamlessly coordinate all customer touch points. Unfortunately CRM has generally not been viewed as a good investment. In some cases, millions of dollars have been invested without a tangible return on investment. However, it is still early in the life cycle of CRM products. Products and business processes continue to improve, new products are about to be launched and prices will fall.
Watch out for Microsoft to release its own CRM solution, which is targeted to small and medium-sized companies. Microsoft CRM's solution will have the advantage of being tightly integrated with Outlook. It will also be integrated with several accounting / ERP systems that Microsoft just happens to own now or will own soon.
Online analytical processing
Online analytical processing allows you to slice and dice your business across multiple dimensions — across regions, product groups, and customer classes, with graphics and drill-down capabilities. It has been around for years but most accountants don't know what it is. This is a shame, as online analytical processing could significantly enhance the value of accountants to their clients. Rather than just prepare the same old financial reports, accountants could use it to help clients analyse operations so as to make better decisions about future investments.
Best-of-breed
When you look at the charts, you will notice that no product includes functionality for all applications, although some systems such as Oracle come very close. Also, many vendors responded with third party to the missing applications. A "best-of-breed" strategy is often used to select the most suitable application from different vendors or third parties. Typically, best of breed solutions are less expensive than an ERP that has it all. The biggest problem with best of breed is integration between the systems. It is not just a question of integrating the systems but keeping the integration intact as both systems evolve. Integration could be very basic in exporting and importing files. It gets more complicated if updates can occur in both systems and if synchronization of data is required. Finally real-time updates across systems can be a challenge. The good news is some vendors have taken the trouble to provide tight links between their systems and will maintain these links in the future.
On the horizon is a technology called .NET or eXtensible Markup Language (XML). These Microsoft technologies hold the promise of sharing data across different systems, but we are probably one to two years out before all the developers agree on the standards and have enhanced or rewritten their systems accordingly. Usually .NET and XML are discussed in terms of electronic commerce, allowing interaction with suppliers, partners, customers and employees — regardless of platform or device — but it also provides tools for best-of-breed vendors to work together.
Big versus small
The vendors in the survey include huge companies alongside very small ones. Some consultants will recommend selecting a system from one of the bigger companies as they are more likely to be around in the future and will continue to make R&D investments, which can be significant as new technology emerges. On the other hand, a small company typically provides more personalized products and services at lower costs. They also may be able to change more quickly as technology evolves because there is less to change. The litmus test for both small and large companies is the investment they are making in technology. Buyer beware, if they have no plans to offer Web-enabled products in the near future. Remember, there were many casualties when Windows replaced DOS as the dominant operating system.
Customer survey
We issued a satisfaction survey to the actual customers of some of the leading accounting systems available in Canada and sent a confidential questionnaire to more than 300 customers, a third of which responded. We asked each customer to rate the software, the implementer and the developer of the software, and posed many questions that involved costs and benefits.
The developers of accounting systems were asked to provide at least 20 customers (mostly Canadian). We only asked those developers included in the September 2001 CAmagazine article "Everything you need to know about today's mid-market accounting systems." Some developers did not provide e-mail addresses of customers, as such lists were confidential. The following vendors are included in our customer survey: ACCPAC, Bluelink, Microsoft Great Plains, Integra, Lawson, Navision, Sentai, Solomon and SunSystems. Each of these vendors has demonstrated an openness about its systems, which we believe is a very positive sign.
Given that customer names were obtained from the developers instead of independently, there is potential for the survey to be skewed. However, our results indicate respondents answered honestly. This is consistent with the results we got when customers were contacted for reference checks before selecting a new system. It is always surprising to hear negative comments from customers that were given as reference checks, but it does happen on occasion.
Customer profiles
One conclusion from the survey results is Microsoft SQL Server seems to be the database of choice with more than 25% of the surveyed customers using it. If we sampled new customers only, the number of Microsoft SQL Server implementations would have been higher. For example, Navision has offered its system with Microsoft SQL Server in Canada since 1999, and today about 35% of new Navision systems are being sold with the Microsoft SQL Server database. Those individuals who were surveyed for Navision did not contain any customers using Microsoft SQL Server.
Product ratings
We asked customers to rate the generic features of their product, applications, the developer and the implementer. Due to the diversity of products and small sample size, we have only published the survey results for all vendors rather than for each vendor. Ratings were 4 = excellent; 3 = good; 2 = fair; and 1 = poor.
There is a high-level approval for most of the generic features of the systems — with the exception of documentation and reporting. And it seems that vendors are doing a great job on the financial applications, but work is still required for distribution applications and CRM. Generally speaking, the developers still have some room to improve their support and upgrade process.
There was a significant spread between the minimum and maximum ratings for the implementers of the systems. Often, companies selecting new systems spend a lot of time analysing the product and the vendor but not enough time analysing the capabilities of the implementer. The implementer could have been assigned by the vendor, and the implementer or value-added reseller (VAR) may not be the best choice. The vendors have a methodology for assigning leads to their partners that is not well-understood. The vendors need to spread the opportunities to local VARs while matching the right VAR to the prospect. Once a value-added reseller is assigned, the vendors are reluctant to introduce another VAR, as it can easily lead to VARs competing with each other for the same prospect.
Benefits
We asked customers to rate the extent to which the benefits were achieved with their systems using a rating scale where 4 = high; 3 = medium; 2 = low; 1 = negative. Our analysis shows that customers thought increased accuracy and control as well as improved decision-making were very important benefits to the new systems. However, customers did not achieve much benefit in improved customer service, and especially did not achieve much benefit in increased revenues.
Wrapping it up
We would have liked to publish the results by individual vendors for the customer survey but felt it would have not been responsible given the small sample size and diversity in product. Some customer feedback was not positive. We believe many of the vendors surveyed did not know what their customers were thinking. This is a problem not limited to just software developers.
There is a wealth of choice in systems available to mid-market companies. They are now the target for high-end systems such as SAP, PeopleSoft and Oracle, which have realized there are only 500 Fortune 500 companies, and that they all have accounting/ERP systems in place. On the low end of the spectrum, companies such as QuickBooks are now offering solutions to mid market by increasing their capacities with up to 10 users working simultaneously. With the economy in a slump and lots of competition, it is still a buyer's market.
Michael Burns, MBA, CA, is president of 180 Systems (www.180systems.com), which provides consulting advice in the selection and implementation of accounting and ERP systems. He can be reached at 416-963-1296 or at mburns@180systems.com. |
