"discover how to reduce your sap tco," dennis keeling, basda
TRANSCRIPT
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Dennis Keeling
Business Software Analyst - Ovum
&
Chief Executive - BASDA
Business Application Software Developers’ Association
The cost of implementing Business Solutions
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Background
1983 Formed consultancy
Developed means of evaluating business systems
Financial Times, Daily Telegraph, US Journal of Accountancy
BBC ‘The Software Show’, CNN, FT TV, Sky
Founder & Chief Executive - BASDA, Business Application Software Developers Association
Author: Corporate Financial Systems - Ovum
Business Age:acknowledged as the world’s leading authority on business & accounting systems
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UK-based, not-for-profit, international standards body
300 + members from SAP, Oracle, Microsoft – Sage
Accounting, Human Resources, Logistics, Manufacturing, Taxation & Web-based applications
Established 10 years, significant growth in 2000
Elected General Council - Cross Industry
Recognised by EU, FEE, BoE, DTI, Inland Revenue, HM C&E & HM Treasury, UN/CEFACT, Microsoft
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Types of business applications Tier 1 - Enterprise-wide
• J D Edwards, Oracle, PeopleSoft, SAP
• Full suite, Workflow, Self-Service Portals, 4GL environment for specialist systems
Best-of-breed• Agresso, Coda,
• Financials + MIS, Definable interfaces to other systems
Tier 2 - Mid-range• Exchequer, Exact, Microsoft (Great Plains, Navision), OpenAccounts, Sage ES, Scala, SunSystems
• Financials, order processing, assembly
Tier 3 - Entry-level• Sage Line 50, TAS Books, Quick Books, Simply Books
• Financials, invoicing
Tier 4 - Home / Office• Microsoft Money, Money Manager, Quicken,
• Cash Books
Specialist• Alphameric, Baan, eResult, IFS, Intentia, Misys, Siebel
• Banking, Hairdresser, Hotels, Complex Manufacturing, Plant Hire, Retail, CRM
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Implementation: key messages
Stick to vanilla business processes.
Use the vendor’s consulting services if you can.
Tier 1 software costs more than tier 2 to
implement.
The licence fee alone is a poor indicator of
implementation costs.
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Ovum report – cost of implementation
0 10 20 30 40 50 60 70 80 90 100
Sage Tetra
Scala Enterprise
Microsoft Business Solutions
Exchequer
SAP R/3
PeopleSoft
Oracle
JD Edwards OneWorld
Tier 1
Tier 2
Euro (000s)
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Factors Affecting Implementation Costs
Method of roll-out• Central ‘Template’ Implementation
• Separate implementations – 3rd parties
Type of System• Decentralised standalone
• Enterprise-wide
Implementation Partner• Software developer
• ‘Big 4’ Consultancy + implementation partner
Method of Implementation• Vanilla ‘best-of-class’
• Specialist developed system or processes
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Implementation Strategies
Package developer or third party
Effective project management
Tight specification & implementation plan
Implementation methodologies
Fit of package – vanilla v specialist developed
System tuning
Consultancy requirement
Deployment in more than one country
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Main Implementation Scenarios
Single (Tier 1) Enterprise-wide (ERP) system
Strategic (Tier 2)
stand-alone system in each operation
Two Tier Strategy - ERP (Tier 1) for large industrial units and stand-alone
systems
- Mid-range (Tier 2) for local medium sized and smaller units.
Disparate Systems
Best of Breed
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1. Single Tier 1 solution
The ERP Dream
Centralised infrastructure • one single database for accounting, order processing, manufacturing and human
resource functions.
Consolidated information from head-office down to the lowest
subsidiary.
Drill-down from the consolidated Profit & Loss to the underlying
transactions at the point of entry – anywhere in the world.
International world-wide deployment.
Advanced financial management reporting and analysis.
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ERP – the dream was rarely met
Cost of implementation and total cost of ownership.
Localisation issues outside of North America and the
UK.
Complexity of Tier 1 applications for the smaller
subsidiary and branch office.
Technical infrastructure problems in remote locations.
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2. Strategic Tier 2
Quality of management information and financial
reporting.
Scalability in terms of concurrent users.
Restricted scope of the product suite – Workflow, CRM, HR.
Decentralised rather than centralised infrastructure.
Ability to deploy the application on an international basis.
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3. Two Tier Strategy - Tier 1 & 2
Cost of implementation of Tier 1 solutions due to their complexity.
Cost of deployment and support of Tier 1 solutions.
Availability of the technical infrastructure in 3rd world countries.
Stand-alone solutions are more suitable than a centralised
solution for the medium-sized, smaller operation.
Localised solutions easier to implement in some countries than
configuring a centralised solution.
Standardise on two vendors to allow effective application
integration in a centralised strategy.
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4. Disparate solutions
Best-of-Breed - Specialist solutions Architecture R&D Spend Scope of product range International deployment Upgrade – bespoke solutions
300 BASDA members – 60% specialist solutions 40% standard package – 60% custom designed
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Head Office
Country Office Country Office
Regional OfficeRegional Office Regional OfficeRegional Office
Manufacturing PlantManufacturing Plant
Sales Office Sales Office
WarehouseWarehouseWarehouseWarehouse
Sales OfficeSales Office
Architecture
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Architecture
Central services• Mainframe type configuration
Decentralised • Subsidiary stand-alone solutions• Employee Portals
Wide-area networks• EDI – Value Added Networks• 3rd World counties?
Internet• XML – open standards• SMTP / HTTP technology
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Infrastructure
International deployment
Localisation issues
• Tax, Legal, Language, Currency, Character Set
Template approach
ERP in smaller subsidiaries – in 3rd world
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Head Office
Country Office Country Office
Regional OfficeRegional Office Regional OfficeRegional Office
Manufacturing PlantManufacturing Plant
Sales Office Sales Office
WarehouseWarehouseWarehouseWarehouse
Sales OfficeSales Office
Information roll-up
Group Personnel
CentralizedPurchasing
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Information roll-up
Consolidation software
• Monthly / quarterly / annually
• Financial information only
Informal daily operating controls
• Key performance indicators (KPI)
Drill-down from HO to smallest subsidiary
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Total Cost of Ownership
Initial Cost of Purchase
Capital cost of IT equipment • workstations, servers, printers, networks, etc.
Initial software licence fees • often based on number of application modules purchased and the number of
concurrent and casual users.
Implementation • External consultancy costs
• Configuration and customisation
• Training – either ‘train-the-trainer’ or individual external training
• Internal staff costs – implementation, customisation and training
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Total Cost of Ownership
On-going Running Costs.
Hardware maintenance and support charges • internal & external.
Application software maintenance and support charges• internal and external.
Cost of upgrades• hardware, consultancy, customisation and internal costs.
Cost of maintaining the infrastructure• telecoms, licences.
Management time • solving operational and technical problems.
Depreciation of initial capital costs • normally spread over 1 to 5 years.
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Summary
Licence fee - no indicator of total cost
Cheapest implementation• By software developer
• Vanilla ‘best-of-class’
• Template approach
Major Issues:-• Total Cost of Ownership
• International deployment
• Standardisation of configuration
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Contacts
Dennis Keeling
tel +44 (0)1494 680907
fax +44 (0)1494 680424
E-mail dkeeling@ dkeeling.com
Web http:// www .dkeeling. com
BASDA
tel. +44 (0)1494 677699
fax +44 (0)1499 681894
E-mail info @ basda.org
Web http:// www.basda.org
http:// www.ebis-xml.net