When Jackson Laboratory completes the implementation of its new enterprise resource planning (ERP) system in April, you can be sure that CFO Lee Wilbur will be a happy man. The genetics research institution, in Bar Harbor, Maine, began the effort more than two years ago, and, along the way, the $97 million, 1,200-person lab has experienced both success and frustration. The stability of the software — in this case Oracle Corp.’s new, Webcentric 11i suite of products — posed an issue, as did the availability of a new order-management module that the laboratory decided was worth waiting for.
One aspect of the implementation, however, wasn’t an issue at all, despite the fact that the company’s CFO led the ERP project. Wilbur and his colleagues wasted little time evaluating the capabilities of Oracle’s financial software — the general ledger, accounts payable, and related functions that are typically described as the “core” of most ERP packages. “The financials were very similar among all the companies we considered,” says Wilbur. “Oracle did offer a grants-accounting module, which no one else we looked at did, but that was the only difference we noticed.” For more on the Jackson Labs ERP implementation, read “Of Men and Mice.”
ERP software is so complex that it may come as a relief to prospective buyers that some aspect of the package is virtually a commodity. Analysts say that because the core financials are typically among the first modules an ERP vendor develops, they are usually robust and mature, with each vendor tweaking its own products to match improvements made by others. “Vendors won’t admit it,” says one analyst, “but they really don’t devote many resources to the core financials.” In fact, the Web sites of many vendors barely mention their core financials at all, preferring to devote maximum verbiage to customer relationship management (CRM), business intelligence, and other technologies that represent growth markets.
Dennis Byron, an analyst at IDC, says those applications will help ERP sales grow at a compounded annual rate of 13 to 14 percent through 2006, outpacing the low-single-digit growth of IT budgets overall. “But very little of that growth will come from financial applications,” he says, although treasury management, business intelligence, and profit-optimization applications will see relatively strong sales.
Where does that leave companies that are in the market for the core financial applications offered by ERP vendors or vendors that specialize in accounting software? Buying decisions will be based less on the capabilities of the products themselves, analysts say, and more on the capabilities, viability, and suitability of the vendor(s) in question. “The needs of the finance department,” says Byron, “remain a key driver for ERP sales, along with the needs of the manufacturing side. But since there are only so many ways you can do a general ledger or an accounts payable application, a feature-for-feature comparison usually doesn’t make sense.”
Instead, analysts say companies should find a vendor that’s a good fit based on its vertical industry expertise, underlying architecture, licensing terms, product direction, and financial health. But other factors can also intrude. As companies grow through mergers and acquisitions, they often find themselves relying on a host of different ERP systems. Standardizing on one brings a certain order to potential chaos, but can be expensive and disruptive. Flowserve Corp., a Dallas-based manufacturer of flow-control equipment, has made nine acquisitions since the mid-1990s, and has taken a hard look at the ERP issues that have resulted. Its solution: quasi-standardization. “We’re trying to limit the number of vendors to four,” says CFO Renée Hornbaker, but, she says, “if we were to acquire a company running another major ERP system, would we change it over? Probably not. The internal time and resources needed to do that are prohibitive.”