Thursday, August 30, 2007
Wednesday, August 29, 2007
True Story: Missing Assets Equal to A Year's Sales
You don't think finance and accounting matter in small business? Here's a true story, and it's about a small business like the ones I write about, in fact one I was involved in, not a large publicly traded company. $3 million worth of assets went missing, but nobody took them. Where do you think they went?
It is sparked, I admit, by news of Dell, Inc. Last week the New York Times reported Dell to Restate More Than Four Years of Earnings. Here's a quick summary of that story:
Dell said that it would restate its financial statements for 2003 through the first quarter of 2007, concluding an internal investigation into accounting errors.
Dell said that the restatements would shave off between $50 million and $150 million in cumulative net income.
I know, that seems like standard large-company stock market stuff, but here's a true story of Creative Strategies International, which was then a medium-sized high-tech research and consulting company owned by Business International and based in San Jose, CA. Call it CSI. I should add that this story preceded the change in ownership to the Creative Strategies that is now the brainchild of Tim Bajarin, still exists, and is still in San Jose, CA.
I need to emphasize this, because I like Tim Bajarin and he's done a great job with the company since he took it over. I'm pretty sure the corporate entity even changed, I know the ownership changed, so I assume there's no harm in telling an old story. And I think there might be a lesson here.
Shortly after I started to work there, there was an audit called by the parent company in New York. And, as you suspect from reading the title of this post, assets were missing. In fact, quite a sizable chunk of assets. In a company of 20 or so employees, selling $4 million or so per year, roughly $3 million worth of assets had disappeared.
Needless to say, the parent company was not amused. But there was no theft, no embezzlement, just bad accounting.
What do you think happened? Of course you have no idea, but let me give you a hint first, then think about it. The assets were accumulated research, not chairs or tables or computers or gold bullion, but research. Does that tell you the answer?
It turned out that CSI created what we called group studies, research studies that we'd design to cover some interesting new market in high tech, develop, finish, and then sell to multiple buyers. For example, a study in telecommunications would be created and developed and sold to 10 or 20 or more companies in the telecommunications markets. If you could sell a study that cost $25,000 to 20 companies for $5,000 each, they got a good study -- market forecasts, competitive analysis, etc. -- at a great price, and CSI made a healthy profit.
So have you figured this out? As the studies were created and developed, consultants were paid real money to research markets. They took real checks home and cashed them and paid mortgages and things. They also took planes to places and interviewed people, and purchased some secondary research, sometimes developed primary research, all of which cost money.
All of this spending should have been expensed as product development expense. It was just like computer programming in terms of tax treatment and standard accounting. You aren't really building an asset, you're incurring an expense. Product development is almost always an expense, even though it sometimes generates technology that goes into products that get sold for money.
Somebody doing the numbers assumed that since this would be cost of sales when the studies were finished and sold, and instead of calling this money development expense and subtracting it from profits, they'd call it assets, as if it were inventory, and subtract it from profits as direct costs.
It may have seemed logical at the time, but over time many of those group studies were started but not sold. If the sales were disappointing, instead of spending the full $25,000 and finishing the study when only two clients signed up for $5,000 each, they'd just dump the project.
And there's the rub: nobody went back to those supposed assets, the accumulated investment in product, and wrote it off. It remained on the books as assets, for several years, until the parent company audited. Nobody had purposely or intentionally done anything wrong, there was no fraud, no charges, no money recovered; just several very unhappy people.
I guess I'm some kind of weirdo, particularly as I was a literature major and journalist-writer before I got into business, but I like the business numbers and I think they're important. Maybe it's from stories like this one. No, I wasn't the accountant, I was one of the researchers, but I was also a vice president and those were bad times for all of us, not just the bookkeeper.
from Planning, Startups, Stories by Tim Berry
I've posted here several times on paradox in planning. This morning I'm fascinated by what Marc Andreessen calls the paradox of deciding to fire an executive.
It takes time to gather data to evaluate an executive's performance. You can't evaluate an executive based on her own output, like a normal employee -- you have to evaluate her based on the output of her organization. It takes time for her to build and manage her organization to generate output. Therefore, it takes longer to evaluate the performance of an executive than a normal employee.
But, an executive can cause far more damage than a normal employee. A normal employee doesn't work out, fine, replace him. An executive doesn't work out, it can -- worst case -- permanently cripple her function and sometimes the entire company. Therefore, it is far more important to fire a bad executive as fast as possible, versus a normal employee.
Solution? There isn't one. It's a permanent problem.
He continues with a quote from Andy Grove, co-founder of Intel, who noted that you always fire an executive too late. "If you did it fast enough that it wasn't too late, you wouldn't have enough data, and you'd risk being viewed as arbitrary and capricious by the rest of the organization."
I've cited Marc Andreessen's posts on startups several times in recent months, cataloging it in my mind, and somewhat on this blog, as an excellent take on the high-end elite startup that is a prime candidate for venture capital. His latest in that series, however, part eight on Hiring, managing, promoting, and firing executives, applies quite well to all business, across the range. It applies equally to the growing and healthy established small business, and, for that matter, the larger enterprise as well.
While you can find a lot of good advice on how to find an executive, how to recruit, and how to select, there's not so much on how to fire an executive. I had an attorney who used to say that the time to fire a person was "as soon as you start asking yourself that question." Andreessen's is better: when you start asking the question, start gathering data.
In this post he also talks about how to manage an executive. It certainly hits home for me when he points out that you don't just build the team, you also have to manage.
"While respecting someone's experience and skills, you should nevertheless manage every executive as if she were a normal employee. This means weekly 1:1's, performance reviews, written objectives, career development plans, the whole nine yards. Skimp on this and it is very easy for both your relationship with her and her effectiveness in the company to skew sideways.
"This even holds if you're 22 and she's 40, or 50, or 60! Don't be shy, that will just scare her -- and justifiably so."
This is the eighth in Marc's series on start-ups -- perhaps the best yet.
Tuesday, August 28, 2007
Analyzing ERP's success in organizations.ERP success stories will reveal that they were made possible through deliberate and hard work. The assessment of enterprise planning resource and defense enterprise planning resource are important tasks in this context.
ERP success stories need not necessarily mean that an organization needs to be contended with what they have achieved. They must think of extending the scope of enterprise operations so that many and thereby be a role model for more ERP success stories.
Some of them requiring attention are as follows:
Jada precisions Plastics co INC and IQMS ERP softwareThe manufacturing Company Jada Precisions Plastics INC was not happy within the initial ERP systems that were established to help them in raising the competence levels. The software definitely helped them to reduce the complexity of the labor but it was not the ultimate answer.
They finally got the much desired results from IQMS ERP software. The software was instrumental in giving the results. Upon analysis it was found that the former ERP systems tried to give ready made solutions to their problems in the form of packaged solutions while the later facilitated tin creating an automatic system for data transfer. This resulted in ERP success.
The point to be learned from this issue is that the ERP vendor should provide appropriate solutions based on the requirements of the client and not on the basis of his services. They are meant to make one understand the critical success factor for ERP implementation.
Eiffel ERP software's implementation in U.S. based chemical company.In this situation their main challenges of the software lay in facilitating communication between the corporate office and the manufacturing unit that uses very old systems on one hand and managing a new chemical plant. Both these process had to be done simultaneously with the second process coming under the control of the first one after the intervention of ERRP software. Deciding this is like squaring upon critical success factor for ERP systems.
The main challenge with the first issue was that the data processed by the corporate office was to be reverted and resend by the manufacturing setup which was using primitive systems that were not capable of processing large information. The manufacturing unit neither required the whole information nor had the ability to process the same. This was the critical success factor for ERP implementation.
Eiefeel ERP system was designed to filter the required information and storing the rest till the retrieval. In the meanwhile ERP also processed the complex information in order to suit the capability of manufacturing unit.
The issue with the second process was that the newly setup unit had to become a part of the manufacturing unit. The problem was that the new process could work on the latest software whereas it had to be coordinated with the old manufacturing unit. The new software was designed to do the very old process but by making use of the latest equipments and thus ERP success followed. This again points the facts that ERP has to be designed based on the systems in the organization.
WinMan ERP in Athena controlsSuccess stories usually explain how ERP facilitated organizations to reach milestones. This story has a different style. They explain the concrete steps that are to be taken in an organization in order to attain the maximum benefits from ERP. This company is a concrete example and a living proof to substantiate the fact regarding the steps that a company needs to take and in not believing that a more implementation of ERP will give the necessary impetus for success in the organization.
The basic factor for success in this company is backed by the fact that they believed software to be a tool and not the solution to the enterprise problems. This is backed up by the fact that the company successfully combined the business practices with the nuances of the software. This process took place during a crucial time for the company i/.e. when they experienced a sudden deflation of profits.
They had a successful collaboration with Winmap software to unleash the enterprise Solutions. The cordial work atmosphere among the two prevailed over any mishaps. They experienced an increase in the profits level and various aspects of business like inventory management, cost reduction and so on. The facts and figures were amazing and would not have happened if the company had not used the circumstance like a platform for doing their best and understanding the fundamental mistake of not aligning software with business process.
Intitutive ERP Software in San Antonio's LighthouseSanAntonio's Lighthouse is a company that provides employment opportunities to the visually challenged and others undergoing some form of physical hazards. The company's core business is to manufacture products that best suit them to carry on a trade or profession of their own choice. In addition to making them the company also sees to that it reaches the end user.
The market trend underwent a sea change. The company decided to change their strategy in order to ensure that the customers received the products in the correct time. The pressure from competitors circle also led them to think an alternative for their existing distribution system.
The company had also ventured into selling goods and services online. They went ahead with Intitutive ERP systems as it gave them advantage of services like Microsoft Environments and platforms. The implementation process and shipping time were drastically improved. The company was able to realize its full potential and sailed in tune with the market demands.
SAP ERP Solutions in TISCO (Tata Iron and steel company Limited)The steel majors prompt response to market change and shifting to customer orientation from product coupled with the implementation of ERP will speak more than volumes of their success for the timely action. The company is now able to reap benefits in all aspect and make further progress in each and every operation of an enterprise.
The company decided to implement SAP ERP 3 after careful consideration for they matched best with their requirements. In addition the company also forecasted on what would happen to their operations in the future while making this choice .This anticipation helped them to obtain the proper solution at the right point of time. The implementation process took a long span of about a year owing to the volume of operations and the major steps to be taken.
The company never got bogged down by the reported failure rate of ERP implementations especially in bigger units and kept continuing their endeavors with vigor to get the best and make the whole process learning cum experimental one. The net result brought substantial increase in profits. The speed at which they worked (and without even the minutest error) deserves great appreciation and is accorded as one of the main contributing factors for the success.
Monday, August 27, 2007
Below article explains in brief what is ERP software.
What is ERP software ?
ERP software means Enterprise Resource Planning systems. ERP systems are large computer systems that integrate application programs in accounting (i.e., accounts receivable), sales (i.e., order booking), manufacturing (i.e., product shipping) and the other functions in the firm. This integration is accomplished with through a database shared by all the application programs.
When you first see an ERP program, the application programs are similar to those with which you are already familiar. So the production scheduling, billing a customer, processing a payroll and other tasks are done in ways that should be pretty familiar to those of you who have worked with these applications over the years. So what is the big deal? Integration! ERP systems tie these, usually separate, applications together. When a customer service representative takes a sales order it is entered in the common database and in the other applications where it is needed, for example, in the manufacturing backlog, the credit system and the shipping schedule. No more carrying little pieces of paper back and forth. Or writing translation programs to get the information from one function to another. Sounds great, right? Read on!
ERP systems work in real-time, meaning that the exact status of everything is always available. Further, many of these systems are global. Since they can be deployed at sites around the world, they can work in multiple languages and currencies. When they are, you can immediately see, for example, exactly how much of a particular part is on-hand at the warehouse in Japan and what its value is in Yen or Dollars. This is a pretty amazing accomplishment. Sound too good to be true? It is --- all this doesn't come free.
In addition to the technical details, the way the hardware and software are organized, and technically how the logic of the system functions, there is another aspect to understanding ERP. It is the management and implementation issues associated with the systems that may be the most important of all. Whether you are considering the use of ERP, are faced (forced?) with implementation, or are just generally concerned about the management issues involved in using ERP systems, you should understand some of the tradeoffs involved.We are all concerned about keeping up with new technology and the challenge that this poses. The pervasive promotion and use of ERP systems suggest that, for this technology, we need to understand the scope of these systems and have a basic knowledge of how they work. Fortunately, learning about ERP is not so much learning all-new concepts and ideas, but rather learning about new ways to do things that we already have been doing and the ERP terminology associated with them. This means, whether you are a general manager, information system executive, an accountant, or a student, you already know more about how ERP works than you think you do, but you still need to learn the managerial issues associated with the degree of integration they support.
What are the hidden costs of ERP?
Although different companies will find different land mines in the budgeting process, those who have implemented ERP packages agree that certain costs are more commonly overlooked or underestimated than others. Armed with insights from across the business, ERP pros vote the following areas as most likely to result in budget overrun.
- Training - Training is the near-unanimous choice of experienced ERP implementers as the most underestimated budget item. Training expenses are high because workers almost invariably have to learn a new set of processes, not just a new software interface. Worse, outside training companies may not be able to help you. They are focused on telling people how to use software, not on educating people about the particular ways you do business. Prepare to develop a curriculum yourself that identifies and explains the different business processes that will be affected by the ERP system. One enterprising CIO hired staff from a local business school to help him develop and teach the ERP business-training course to employees. Remember that with ERP, finance people will be using the same software as warehouse people and they will both be entering information that affects the other. To do this accurately, they have to have a much broader understanding of how others in the company do their jobs than they did before ERP came along. Ultimately, it will be up to your IT and businesspeople to provide that training. So take whatever you have budgeted for ERP training and double or triple it up front. It will be the best ERP investment you ever make.
- Integration and testing - Testing the links between ERP packages and other corporate software links that have to be built on a case-by-case basis is another often-underestimated cost. A typical manufacturing company may have add-on applications from the major?ae-commerce and supply chain?ato the minor?asales tax computation and bar coding. All require integration links to ERP. If you can buy add-ons from the ERP vendor that are pre-integrated, you're better off. If you need to build the links yourself, expect things to get ugly. As with training, testing ERP integration has to be done from a process-oriented perspective. Veterans recommend that instead of plugging in dummy data and moving it from one application to the next, run a real purchase order through the system, from order entry through shipping and receipt of payment?athe whole order-to-cash banana?apreferably with the participation of the employees who will eventually do those jobs.
- Customization - Add-ons are only the beginning of the integration costs of ERP. Much more costly, and something to be avoided if at all possible, is actual customization of the core ERP software itself. This happens when the ERP software can't handle one of your business processes and you decide to mess with the software to make it do what you want. You're playing with fire. The customizations can affect every module of the ERP system because they are all so tightly linked together. Upgrading the ERP package?ano walk in the park under the best of circumstances?abecomes a nightmare because you'll have to do the customization all over again in the new version. Maybe it will work, maybe it won't. No matter what, the vendor will not be there to support you. You will have to hire extra staffers to do the customization work, and keep them on for good to maintain it.
- Data conversion - It costs money to move corporate information, such as customer and supplier records, product design data and the like, from old systems to new ERP homes. Although few CIOs will admit it, most data in most legacy systems is of little use. Companies often deny their data is dirty until they actually have to move it to the new client/server setups that popular ERP packages require. Consequently, those companies are more likely to underestimate the cost of the move. But even clean data may demand some overhaul to match process modifications necessitated?aor inspired?aby the ERP implementation.
- Data analysis - Often, the data from the ERP system must be combined with data from external systems for analysis purposes. Users with heavy analysis needs should include the cost of a data warehouse in the ERP budget?aand they should expect to do quite a bit of work to make it run smoothly. Users are in a pickle here: Refreshing all the ERP data every day in a big corporate data warehouse is difficult, and ERP systems do a poor job of indicating which information has changed from day to day, making selective warehouse updates tough. One expensive solution is custom programming. The upshot is that the wise will check all their data analysis needs before signing off on the budget.
- Consultants ad infinitum - When users fail to plan for disengagement, consulting fees run wild. To avoid this, companies should identify objectives for which its consulting partners must aim when training internal staff. Include metrics in the consultants' contract; for example, a specific number of the user company's staff should be able to pass a project-management leadership test?asimilar to what Big Five consultants have to pass to lead an ERP engagement.
- Replacing your best and brightest - It is accepted wisdom that ERP success depends on staffing the project with the best and brightest from the business and IS divisions. The software is too complex and the business changes too dramatic to trust the project to just anyone. The bad news is a company must be prepared to replace many of those people when the project is over. Though the ERP market is not as hot as it once was, consultancies and other companies that have lost their best people will be hounding yours with higher salaries and bonus offers than you can afford?aor that your HR policies permit. Huddle with HR early on to develop a retention bonus program and create new salary strata for ERP veterans. If you let them go, you'll wind up hiring them?aor someone like them?aback as consultants for twice what you paid them in salaries.
- Implementation teams can never stop - Most companies intend to treat their ERP implementation as they would any other software project. Once the software is installed, they figure the team will be scuttled and everyone will go back to his or her day job. But after ERP, you can't go home again. The implementers are too valuable. Because they have worked intimately with ERP, they know more about the sales process than the salespeople and more about the manufacturing process than the manufacturing people. Companies can't afford to send their project people back into the business because there's so much to do after the ERP software is installed. Just writing reports to pull information out of the new ERP system will keep the project team busy for a year at least. And it is in analysis?aand, one hopes, insight?athat companies make their money back on an ERP implementation. Unfortunately, few IS departments plan for the frenzy of post-ERP installation activity, and fewer still build it into their budgets when they start their ERP projects. Many are forced to beg for more money and staff immediately after the go-live date, long before the ERP project has demonstrated any benefit.
- Waiting for ROI - One of the most misleading legacies of traditional software project management is that the company expects to gain value from the application as soon as it is installed, while the project team expects a break and maybe a pat on the back. Neither expectation applies to ERP. Most of the systems don't reveal their value until after companies have had them running for some time and can concentrate on making improvements in the business processes that are affected by the system. And the project team is not going to be rewarded until their efforts pay off.
- Post-ERP depression - ERP systems often wreak cause havoc in the companies that install them. In a recent Deloitte Consulting survey of 64 Fortune 500 companies, one in four admitted that they suffered a drop in performance when their ERP system went live. The true percentage is undoubtedly much higher. The most common reason for the performance problems is that everything looks and works differently from the way it did before. When people can't do their jobs in the familiar way and haven't yet mastered the new way, they panic, and the business goes into spasms.
Thursday, August 23, 2007
I am beginning to think there is considerable confusion between true ERP systems and simple software programs. And I have to admit, I take offense when a company refers to their product as an ERP system, when in fact, it appears to be a software package with functionality focused in one or two operational areas.
I realize I'm probably overly sensitive on this subject, but ERP is my career and my livelihood. It consumes both my time and my thoughts. So yes, when I read about software suppliers I've never heard of refer to their new or improved product as the "next ERP" or the "ERP alternative", I get a bit disturbed.
Although there are certainly different tiers of ERP packages, ERP at the core is an enterprise wide system. My company, Technology Group International, is not a tier one product like SAP or Oracle, but we do offer an enterprise wide solution. We are a tier two ERP provider that offers significant functionality and quite honestly we are proud of our product. We've spent over fifteen years developing and supporting one core product - Enterprise 21. On average, my development team has well over eight years in tenure with both my product and my company. They are dedicated people. And thus, I feel compelled to be dedicated to them and defend their honor when I read of new products with limited functionality being labeled as ERP systems.
A true ERP system requires significant development time. It is not something that can emerge instantaneously. It needs to grow and be nurtured. It has millions of lines of code and thousands of screens and tables. My development staff has worked hard creating a product for which we can all be proud. It is a software package that includes functionality not just in accounting, but in all aspects of sales, manufacturing, and the entire supply chain. It reaches across the organization to provide a solution set for a company and not just a departmental fix.
Even though I know my company and my product are far from perfect, I feel confident in our product claims and the image we portray to the buyer. If I say we have ERP software, it is because I believe we have a true ERP system that offers a full solution. As fast as I am to sing our praise, I'm also quick to discuss our weaknesses in a given area or market. But as my husband states, not everyone is as vocal as I am or as open about every subject imaginable.
In response to the ongoing feed of ERP news and announcements, I say buyer beware. If you are considering the purchase of an ERP system, make sure it is a true ERP system and not just an ERP wannabe. Look deep into the functionality it offers, perform scripted demonstrations, and check references. Make sure you are buying a real ERP system and not simply a software application that is clinging to popular technology buzzwords.
The applications documented as part of the component inventory are mapped back to the business processes that use them. Prepare an association matrix, mapping the applications to business processes.
When this mapping is completed, there will be several paths from the top of the organization to the lowest level components in the organization, that could be visualized.
Store the Information
Store this information in a repository. As shown in the example above, there is a significant amount of information uncovered by the dependency model. A repository is very beneficial in storing and organizing this information.
If this is a Business Process Engineering (BPE) initiative, store this information in the project repository.
Use Business Dependency Modelling to:
· determine the effects of change on other business processes during a Business Process Engineering (BPE) initiative,
· determine the dependency of a business or organization on its suppliers and other external entities (e.g., financial services, telecommunications services),
· determine the risk of exposure to your organization should the business of your suppliers (or other external entities) fail due to business problems such as failure to achieve legislative compliance.
To develop a Business Dependency Model, the business must be thoroughly analyzed. The model is built by linking the technology components to the business components.
Tips and Hints
A modelling tool is very helpful to complete this analysis. As a minimum requirement, a repository is required to store the information gathered in building the dependency model. Entering the data into a modelling tool allows for a detailed analysis of business scenarios.
Tuesday, August 21, 2007
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In the Roles and Responsibilities Charts, there are four types of roles defined:
Responsible These are the individuals who perform a task (i.e., the doer). These individuals are responsible for the action within the task (e.g., entry of the data into the system). Responsibility can be shared between several individuals.
Accountable This is the individual who is ultimately accountable for the task. This is the individual who has the power to say yes or no, or has the power to veto an action or decision. Only one Accountable role can be assigned to a task.
Consulted This is the individual who is consulted before a final decision is made or the final action is taken. This is a two-way communication, between the individual who is consulted and the Accountable role.
Informed These are the individuals who need to be informed after a decision has been made or an action has been taken.
List Roles within the Process
Look at all of the roles (or people) involved in the business process under study. List these roles. Give each role/person a functional role title.
Monday, August 20, 2007
Friday, August 17, 2007
For each of the activity cost pools, a cost driver must be determined.
There are basically three types of cost drivers:
· Volume: The cost driver is based on units of work (e.g., number of orders.) The cost of the activity increases as more units are processed.
· Time: The cost driver is based on the length of time taken to complete the activity. The cost of the activity increases based on the length of time required to complete the activity. It does not matter how many products are produced (e.g., when retooling machines, the cost driver is the length of time required to complete the retooling of machines).
· Charge: The cost for the entire activity is charged directly to the cost object (e.g., all costs associated with the retooling of machines for a product is charged directly to the end-product).
In general, a charge-type cost driver is used very rarely. The most common drivers are volume and time. The driver used depends on the nature of the activity. The cost of the activity may increase based on the number of units handled or based on the length of time required to complete the activity. It could also be a combination of these two driver types. For example, the time required to test a product may vary based on the product under test and the number of units to be tested. The costs of testing increase as more products are tested. As well, the testing time will vary based on the complexity of the products (e.g., a complex software program takes longer to test the a simple software program). Say it takes four hours to test a simple program and ten hours to test a complex program, and all other costs are the same with respect to testing the two types of programs. The cost of testing two simple programs (i.e., 2 programs * 4 hours/program = 8 hours) is less the cost of testing one complex program (i.e., 1 program * 10 hours/program = 10 hours).
Measure the Cost Drivers
Once the cost drivers have been identified for the various activities, they must be quantified. For the same period that the costs were captured, the count for the activity driver must be determined. For example, if the driver for the Purchasing process is Purchase Orders, determine the number of Purchase Orders processed during the period for which costs have been captured.
Look to existing systems for cost driver measurements. For example, if the purchasing function uses a computer system, it should be fairly easy to determine the number of purchase orders processed in a given period.
Tips and Hints
Identifying cost drivers can be difficult. The key thing to remember is what is driving the activity or process. What causes this process to happen? For example, the business process of Purchasing is driven by Purchase Orders. The drivers may not be apparent if only the costs from the general ledger (G/L) are used. Look back at the process maps and flowcharts.
Wednesday, August 15, 2007
CIOs have expressed growing concerns over the Total Cost of Ownership (TCO) of enterprise software and have highlighted costs as a contributing factor in the decline of IT investments. As a result, software vendors are trying to develop more structured "Ownership Experience" strategies and, in some cases, have focused R&D efforts and resources on improving the ownership experience for customers. In response to these executive concerns, PeopleSoft launched its Total Ownership Experience (TOE) initiative 16 months ago, followed by other major application vendors with varying kinds of programs for, and degrees of success in, controlling costs and improving the overall ownership experience.
A team of consultants each with over 15 years of expertise in enterprise application software and every phase of the ownership lifecycle, has reviewed and evaluated key software features that directly impact the ownership experience of enterprise applications. Some of these feature sets included: advanced data loading and moving during the implementation phase, task-oriented navigation for the usability phase, and user-centric performance testing for the maintenance phase. This research offered an objective assessment of these detailed features, validated through in-depth interviews with the panel of consulting experts distinguished by multi-vendor and multi-lifecycle experience.
The resulting study provides a comparative, multi-vendor assessment across the three major phases of the application lifecycle: implementation, application usage, and ongoing support and maintenance. The players and software versions evaluated in the study included:
• Microsoft Great Plains version 7.5 and previews of Microsoft Great Plains version 8.0
• Oracle E-Business Suite 11.5.9
• PeopleSoft Enterprise 8.8 and 8.9 and EnterpriseOne 8.11
• SAP mySAP Business Suite R/3 4.6 and SAP R/3 Enterprise 4.7
• Siebel 7.5 and Siebel 7.7.
From a summary perspective across the ownership lifecycle, PeopleSoft demonstrates consistent advantages for the key features evaluated in this study. The research validates PeopleSoft's leadership for key ownership features in three categories:
PeopleSoft features for implementation rated higher than Microsoft's, SAP's, and Siebel's in enabling implementation teams to install, implement, and deploy enterprise applications through comprehensive configuration wizards and pre-packaged integration packs for all major enterprise application vendors. Oracle also rates consistently high in the areas of configuration, data loading, pre-packaged integrations, and web services. PeopleSoft has made more progress than other vendors in enabling and streamlining its configuration and integration tools.
Across the features evaluated, PeopleSoft and Siebel rated highest in terms of the usability features evaluated. The task-oriented organization of application screens and the consistency of screen layouts across all modules in PeopleSoft applications improve end user productivity and enables end users to complete tasks faster and with fewer errors.
Microsoft Business Solutions usability is limited due to a continued reliance on a "thick client" architecture for most of the applications, and SAP was found lacking in task-oriented dashboards.
Maintenance, Support, and Upgrades:
PeopleSoft rated consistently high across the maintenance feature set primarily due to the ability to proactively and rapidly isolate and resolve application issues through embedded diagnostics scripts, thorough test scenarios and scripts, and streamlined upgrade process. Specifically in relation to Microsoft Business Solutions, PeopleSoft's complete web enablement streamlines the upgrade process compared to an offering like Microsoft Great Plains, which operates in a client-server environment and requires the client to be upgraded as well.
The results of this evaluation by this consulting team can provide guidance to decision makers on how to evaluate the major enterprise application vendors relative to the ownership experience, which impacts both the cost of ownership and the value derived from the applications.
Key Research Findings
Each phase of the enterprise application lifecycle has potential pitfalls that can affect the ultimate success or failure of the ownership experience. For example, if an enterprise software application is not installed completely or correctly, then the rest of the implementation will have problems. Maintenance costs often reflect repetitive tasks, such as upgrades performed many times over the lifecycle of an enterprise application, while poor diagnostics tools lead to unpredictable downtimes and business disruption. Finally, usability features affect end user adoption, and poor usability can lead to increased costs due to lost productivity.
The experts looked at these potential outcomes and identified the key feature sets that enabled implementers, IT, or end users to successfully implement, maintain, or use the applications of the five vendors.
Then, based on its primary and secondary research, the team rated each vendor as to whether it offered the feature and then rated how successfully each implementation, usability, and maintenance feature set contributed to the ownership experience. Vendors received either a full circle for a full offering, a half circle for less than a full offering, and an empty circle for no offering. The following analysis represents a compilation of a detailed vendor-to-vendor comparison by application.
The implementation phase includes the initial installation of the software, its configuration, the initial load of data into the new application, and any work that might be required for the application to interface properly with the IT environment of the customer, such as integration with other applications, and whether the integration is batch or real time.
The implementation phase is typically broken into three major steps:
1. Software installation
The installation step is important since an incomplete or incorrect initial installation of the software can lead to significant lost time in further steps of the implementation.
Streamlined configuration tools are critical in keeping an application implementation project on time, since, during configuration, all the specifics of customer business requirements are captured and shared across implementation staff.
Finally, the integration step is typically one of the most challenging - with many hidden and unanticipated costs. Three factors - the complexity of the applications to interface with, the complexity of the business processes between applications, and the complexity of the integration tools that may require multiple experts and multiple types of expertise - make it difficult to establish detailed project plans and thus to accurately estimate project costs. For
the analysis and comparison of vendor approaches to implementation, the experts utilized seven criteria:
1. Application installation wizard
2. Advanced configuration
3. Process modeler
4. Advanced data loading and moving
5. Process-oriented integration
6. Pre-packaged integration between vendor applications
7. Built-in web services integrations.
PeopleSoft and Oracle emerge with the most comprehensive feature set for the
implementation phase. PeopleSoft excels in the areas of application installation wizard, advanced configuration, advanced data loading and moving, pre-packaged integration between vendor applications, and built-in web services integration. Oracle shows strength in advanced configuration, the process modeler, advanced data loading and moving, and builtin web services integration, but not in pre-packaged integration between vendor applications. SAP and Siebel slightly address all seven criteria, while Microsoft is clearly
lacking in four areas - advanced configuration, process modeler, advanced data loading and moving, and process-oriented integration repository.
Let's examine each of the seven feature sets in the installation category.
• Application installation wizard
Both Microsoft and Siebel offer a streamlined installation wizard that is comprehensive and well packaged. PeopleSoft offers an application installation wizard that removes manual steps and automates key installation processes, including the configuration of the underlying database. By contrast, while SAP also uses wizards, its installation procedure and wizards are proprietary and more complex and very often require the implementers to step out of the automated process to handle tasks that were omitted during the planning phase. Oracle has improved its installation wizard tremendously over previous releases, but still the wizard is inconsistent across modules and requires additional manual steps to be accomplished outside the wizard.
• Advanced configuration
PeopleSoft has gone further than any vendor in enabling the application to be configured by product or by business processes. For example, the PeopleSoft Setup Manager configuration tool enables implementation staff to connect to
documentation online and navigate through the documentation by selecting product and features directly from the configuration screen. Both Siebel and Oracle provide advanced tools to support the definition of business processes and data flows. SAP provides tools that are more complex and require more technical expertise. Microsoft limits end user ability to fully configure applications.
• Process modeler
PeopleSoft provides 1,200 pre-defined models that cover PeopleSoft best practices business process flows. Oracle Workflow allows for business processes
to be modeled using a drag-and-drop designer and produces a visual diagram of the business process. With Siebel, customers can add pre-defined or custom business processes, branching, and sub-processes to create a workflow process tailored to their unique business requirements. SAP offers functionality in process modeling only within the context of its own applications. The ability to manipulate existing business processes within Microsoft Great Plains is limited and requires customization work. Process modeling is independent from integration but is a critical step for developing processoriented integration (see below).
• Advanced data loading and moving
Microsoft simply does not allow advanced data loading and moving. Oracle iSetup automates and simplifies the initial setup of data. Oracle iSetup is a question-driven wizard that automatically generates applicationrelated parameters and flows such as chart of accounts, expense policies, and rules.
PeopleSoft provides advanced data-loading and moving capabilities, including the ability to load data online from Excel spreadsheets into PeopleSoft applications through component interfaces. SAP provides a free set of tools and procedures that make it possible to transfer data from a variety of sources without any programming. Siebel has a set of proprietary tools for the data load; the tools can be used as batch loading for information that must be reloaded on a regular basis, once the mapping of data is done.
• Pre-packaged integration between vendor applications
PeopleSoft Process Integration Packs deliver all levels of required integration: data transformation, routing, cross-reference maps, and standard-based connectors/adapters for a complete end-toend integration. PeopleSoft currently provides five pre-packaged integrations for key SAP and Oracle business processes out of the box. These pre-packaged integrations replace the need for custom integrations, thereby saving customers up to 60% off the cost of custom integration. While not offering pre-packaged integration packs, Oracle
maintains adapters to most commonly used applications. Its adapters do help reduce the effort for custom integration. SAP encapsulates integration tasks within its NetWeaver platform, but still requires deep technology expertise to complete the integration. Siebel Universal Application Network provides a common interface layer for Siebel Application to interface with non-Siebel applications but requires third-party components. Microsoft introduced a toolbox for integration to replace Great Plains integration tools (Integration Manager). It is reported to be a great improvement over the previous proprietary tools but has not yet reached a level of usability and completeness comparable to other vendors.
• Process-oriented integration
Within Oracle E-Business Suite, Oracle Workflow supports basic process-oriented integration and the modeling of it. Siebel's approach to process-oriented integration is to publish all its process-oriented business services as
web services. PeopleSoft's new interactive integration repository enables customers to display integration points from a business process point of view and generate integration process plans. SAP's integration approach has been very focused on business processes, but it relies heavily on proprietary technologies. Microsoft Integration Manager includes a set of templates that allow the control of the underlying business logic.
• Built-in web services integrations
PeopleSoft provides built-in web services and fully supports industry standards for web services. In addition, Oracle supports web services integration at every layer of its application framework (database, middle-tier, and application layer) using open connector standards such as SOAP, WSDL and UDDI. Siebel's strategy is to expose all its business processes as web services to deliver
business services-driven integration. SAP provides integration based on web services through its SAP NetWeaver platform.
The usability phase includes all key functionality that is related to the application ease of use. Usability covers topics such as ability to perform tasks with the minimum amount of errors, intuitive use of the application, end user productivity, ability to learn how to use the application effectively with the minimum amount of training, number of screens or clicks required to perform a specific task, support for novice as well as advanced users, alignment with industry standard interfaces, response times, and ease of adapting application
terminology to customer business cases. With this kind of scope to the issue of usability, it does provide value to evaluate and build an objective comparison on the usability of various applications.
Usability, in fact, can impact positively or negatively the total ownership experience. First and foremost, usability has a direct impact on end user adoption, which can make or break a deployment. Poor usability can lead to on going hidden costs through lower end user productivity, error-prone applications, or applications that are misaligned with a company's business processes.
Five criteria were involved in the analysis assessment of usability:
1. Task-oriented navigation
2. Navigation configurability
3. Task-oriented dashboards
4. Web client
5. Integrated office productivity.
Both PeopleSoft and Siebel have obviously made usability a key deliverable to customers and, among the five vendors, provide the fullest feature set for usability, including taskoriented navigation, the ability to configure navigation, task-oriented dashboards, and web clients. Only SAP provides no task-oriented dashboards, and Microsoft provides no web clients.
Let's examine each of the five feature sets in the usability category.
• Task-oriented navigation
A task-oriented navigation is designed to allow users to use business process based navigation to complete tasks. PeopleSoft delivers an easy-toread
graphical layout that displays task-based terminology and icons representing the
portal registry content. Navigation pages not only have a consistent layout throughout the application, but users can more easily and quickly locate navigation items by scanning the new 2-level navigation shortcut collection. This process based flow for the application is consistent from the top level portal page down to the specific application pages, where application pages have process driven recommended actions and selectively show only the fields that are relevant to the current stage of a specific business process. To ensure optimal design of this task based navigation metaphor, PeopleSoft performs usability tests with at least 100 customers per application per release. This continuous investment in customer driven solution design enables PeopleSoft to continually improve usability and explains the high degree of usability
compared to other vendors. Oracle's screens can be rearranged slightly to align better with the customer's business processes and tasks, but this ability is not systematic across all modules and requires a high level of expertise in Oracle. Within SAP, navigation can be customized but requires custom development on top of the SAP Portal, which is part of SAP NetWeaver and is not currently used by most customers.
Both Microsoft and Siebel have focused much development effort on usability and both deliver a simplified user interface, leading to applications that are relatively easy to navigate.
• Navigation configurability
Most vendors provide tools to the technical staff and the implementation team to customize the application interface in order to better fit the business needs and business processes of the customer. Microsoft provides only limited
tools to customize the application interface. All modifications made to Microsoft Great Plains' interface and navigation are done through custom coding rather than configuration and wizard-driven, point-and-click tools. With PeopleSoft, Oracle, and Siebel, it is easy to create customized and personalized navigation pages and choose to use these pages in addition to, or instead of, the default navigation pages that are provided out of the box. SAP requires advanced programming to achieve a level of configuration and customization of the interface that might be fit for the average user.
• Task-oriented dashboards
Microsoft and Oracle offer only limited functionality with task-oriented dashboards. Through task-oriented, pre-built dashboards that organize key tasks, such as applicant job tracking and reporting, PeopleSoft delivers greater
productivity to end users. PeopleSoft is so focused on usability and end user productivity that new releases can ship only when a majority of new users tested can complete key tasks without any assistance in a timed usability exercise. Siebel also supports taskoriented dashboards that are end user-oriented. By comparison, vendors such as SAP have not fully migrated their interface toward a more task-oriented navigation and still require users to click back and forth between multiple screens to complete the various steps necessary for a specific business task.
• Web client
All PeopleSoft modules and applications, including PeopleSoft Enterprise One, are fully web-enabled and do not require the download of any application code on the end user workstation. This feature facilitates upgrades that are very transparent to the end users and that do not require the attention of either the end user or the technical staff regarding client side issues. Siebel has added 100% web deployment in the most recent version of its software. Previously with Siebel, some code had to be downloaded to the client. While Oracle claims to be 100% web enabled, some code components are still downloaded to the client. And unfortunately, Oracle's web architecture is not consistent across all Oracle modules. SAP is not yet fully web-enabled. By contrast, Microsoft's applications are still mostly client-server, and release upgrades can trigger
significant disruption to business operations through additional downtime and
unnecessary incremental costs to upgrade each end user workstation.
• Integrated office productivity
Microsoft has developed the most integration points between its business applications and its desktop applications, such as Microsoft Office and Outlook. Siebel provides basic integration between its sales force automation modules and email. Meanwhile, PeopleSoft CRM provides integration to standard
desktop software tools like Microsoft Office Suite and Lotus Notes as well as mobile devices including laptops, Pocket PC and Blackberry devices to ensure user adoption and enable new levels of user effectiveness. Integration with personal productivity tools is an area that remains underdeveloped for Oracle and SAP, but each vendor does offer some capabilities in this area.
Maintenance, Support, and Upgrades
The maintenance includes all post-implementation activities that are required to keep the application operational under normal and stressed conditions. It includes on going support, upgrades (patches and minor and major upgrades), all diagnostics and tuning activities managed by administrators to maintain the application running in optimal conditions, and the archiving of historical data.
Maintenance costs have an important impact on the overall ownership experience, due to the traditionally labor-intensive and repetitive nature of these activities. Diagnostics and tuning facilitate the upgrade process by staying current on releases, while poor diagnostics tools lead to unpredictable downtimes and business disruption. Seven criteria were involved in the expertise assessment of the maintenance phase:
1. Diagnostic and technical support
2. Remote and online support
3. Performance diagnostics and tuning
4. Patch management
5. Automated upgrade process and toolsets
6. User-centric performance testing
7. Data archiving.
In this phase, PeopleSoft offers the fullest feature sets covering diagnostic and technical support, performance diagnostics, patch management, user centric performance testing, and data archiving. PeopleSoft, Oracle, and SAP all offer full performance diagnostics and tuning. And PeopleSoft, Microsoft, and Siebel fully address patch management, while only PeopleSoft and Siebel fully address the issue of user-centric performance testing. All vendors have basic automated upgrade tools, and all have shown progress in addressing maintenance improvements to the ownership experience.
Let's examine each of the seven feature sets in the maintenance, support and upgrade category.
• Diagnostic and technical support
Microsoft, SAP, Oracle, and Siebel support is delivered the "traditional" way: a knowledge base on the web and phone calls with technical support. PeopleSoft is the only vendor to provide a built-in diagnostic framework through embedded diagnostics scripts that let customers send secure, realtime production system snapshots to PeopleSoft's support center. This unique capability ensures faster issue diagnosis and resolution. With SAP, Oracle, and Siebel, diagnostics and resolution information is exchanged between the customer and the vendor through tailored emails that depend on the availability, the responsiveness, and
the knowledge of the vendor's support staff. In some cases, support requires extensive communication and exchange of files such as log files that contain the exact configuration of the customer implementation.
• Remote and online support
All vendors provide some form of a remote support and online capabilities to help customers self-diagnose issues. Both PeopleSoft's and Oracle's online support databases are rich in content but can be time consuming to navigate. Siebel provides some support content over the web but, once a problem has
been logged online, always promotes interaction with the customers over web self service support. SAP has recently introduced multiple web sites to provide better post implementation information to its customers, but the efforts remain fragmented across various interaction points with customers.
• Performance diagnostics and tuning
Oracle, PeopleSoft, and SAP provide a built-in, instrumented performance monitoring tool that tracks the application performance in real time as well as by component. The tool provides comparisons to average performance levels to proactively identify and troubleshoot non-performing components. Siebel supports industry-standard application response-time management that implifies
performance tuning across all tiers of the Siebel Smart Web Architecture and supports proactive performance monitoring by a third-party ARM-compliant monitoring application. Because it requires third-party software, Siebel is not rated as highly. With Microsoft, performance monitoring is done at the platform level (Windows/NT); no specific application performing tools are available.
• Patch management
Applying patches to enterprise applications can be a very time consuming and disruptive activity. SAP, Oracle, and Siebel make their list of patches fully available on the web but provide limited guidance and automated tools to select
which patches are relevant to a specific configuration. PeopleSoft has streamlined this task by offering a Change Assistant toolset that supports the automatic checking of pre and post- requisites and by automatically selecting which patch should be applied for the customer to be current. Microsoft releases new versions of patches for its applications very infrequently (less than once a year), so the features with respect to patch management are well suited.
• Automated upgrade process and toolsets
SAP offers tools to identify pre-requisites and guide technical staff through the various steps of an upgrade. The SAP upgrade process is only partially automated, with many complex tasks to be performed manually. PeopleSoft provides Upgrade Assistant, an automated upgrade tool with well tested and
complete upgrade scripts. Starting with Enterprise Human Capital Management 8.9 customers, PeopleSoft has re-engineered the upgrade process from eight steps to five with Accelerated Upgrades. Now customers can use a visual compare tool to identify customizations and an ETL-based data migration tool to ensure downtime is less than a day. Oracle offers upgrade scripts and tools but with a lesser degree of automation. Microsoft provides basic upgrade automation tools that are adequate for Microsoft's low frequency of releases.
• User-centric performance testing
PeopleSoft allows customers to submit test cases, which are used as part of the application testing and release process. PeopleSoft is the only vendor to test functionality and performance using real customer data on volume database systems. Oracle relies mostly on its database performance test to validate the
performance of its application. SAP offers test services reported to be so expensive that very few customers opt to use them. Siebel has been focused on usability since it released its first CRM application, and user-centric testing is an integral part of its product development cycle. Microsoft delivers good usability but the functionality delivered is less sophisticated.
• Data archiving
Oracle only provides purge capabilities and does not allow customers to archive or restore/reinstate archived data into production. Both SAP and PeopleSoft
provide archive, purge, and restore capabilities natively. In addition, PeopleSoft provides rules-based archiving templates enabling administrators to set up different archiving rules for different regions for better global compliance support. Siebel and Microsoft do not directly offer archive, purge or restore capabilities.
Vendor Approaches to Ownership Experience
Microsoft has no formal ownership experience program defined. Microsoft has developed its cost management strategy based on a very low software price point and close to 100% out-of-the-box deployments with little ability to customize the software. As a result, Microsoft offers basic functionality that does not require extensive training, but it also does not necessarily deliver the full value expected by the customer in view of the ownership experience.
Addressing cost of ownership is at the heart of Oracle's philosophy for Enterprise Applications. Based on the Oracle eBusiness Suite, an integrated suite of applications, Oracle claims that it can lower implementation costs by avoiding unnecessary costs, such as those associated with costly custom integration between applications. Although Oracle's approach has some merit - some measurable benefits have been highlighted through ROI case studies, serious concerns are still being raised regarding what Oracle has delivered to date.
Structured in a formal program, PeopleSoft dedicated over 1,000 developers and $800 million to improve the Total Ownership Experience for customers. Rather than focusing simply on best practices that improve the ownership experience, PeopleSoft has rethought its entire set of applications to ensure that they are built from the ground up to minimize deployment and maintenance costs.
Many users of SAP applications have, over the years, noted the complexity of SAP applications, the resulting high implementation costs, and consequent budget overruns. In response to these issues, SAP today highlights SAP NetWeaver as the centerpiece to SAP's product strategy for decreasing the complexity and cost of ownership for SAP applications. Currently, the impact of SAP NetWeaver on the overall SAP cost of ownership remains to be proven. SAP has not yet provided proof points validating that its customers benefit from
improved ownership experience through the implementation of SAP's latest technology.
Siebel's customer experience initiative was first focused on customer satisfaction and high-level ROI measurements. It is only recently (12+months) that Siebel has focused more specifically on cost-of-ownership issues (mainly in response to customers' complaints). Siebel's improvements to its software development process are guided by the experience and insight gained from close examination of 200 Siebel 7.x deployments.
For this study, the research was organized along key ownership experience criteria that allowed the research to capture quantitative and qualitative information across the major components of enterprise applications. The list of criteria was thoroughly defined to take into account the experience of not only the technical staff, but also end users who must accomplish specific business tasks with the application. The software versions that were compared included:
• Microsoft Great Plains version 7.5 and previews of Microsoft Great Plains version 8.0
• Oracle E-Business Suite 11.5.9
• PeopleSoft Enterprise 8.8 and 8.9 and EnterpriseOne 8.11
• SAP: mySAP Business Suite R/3 4.6 and SAP R/3 Enterprise 4.7
• Siebel 7.5 and Siebel 7.7.
The research also included functional areas such as Financial and Human Capital
Management Systems (FMS & HCM), Supply Chain Management (SCM), Customer Relationship Management (CRM); and application lifecycle phases such as installation, implementation, configuration, usage, maintenance, support, and upgrades. The team broke the entire process down into five steps:
1. Reviewed vendors' web sites and their positioning documents, as well as their online and hard copy documentation.
2. Utilized analyst reports, press articles, and technical reviews that are available to the general public.
3. Validated, using the defined criteria, the information collected in steps 1 and 2 through in-depth interviews with the consulting panel of experts. For the interview process, preference was given to respondents with multi-year experience and experience with the latest version of the application to ensure that the entire application lifecycle was properly covered.
4. Compared and analyzed findings from this primary and secondary research to generate a rating for each vendor on specific criteria. In this comparison and analysis, the respondent's experience with multiple vendors was leveraged as well.
5. Aggregated comparisons and ratings along three major phases of the enterprise application ownership lifecycle.
This research study was funded by PeopleSoft but designed and executed by this consulting team group as an independent, analytical evaluation of the key features important to the ownership experience of enterprise applications. The feature ratings contained in this report provide a summary level comparison among vendors and there may be minor variances based on specific vendor product modules.