Vendors of enterprise resource planning software are apparently making little progress in differentiating their brands, according to a recent survey by The Yankee Group.
Users who were asked to evaluate major ERP vendors such as Oracle Corp., SAP AG, IBM Corp. and PeopleSoft Inc. said they find them to be more alike than different, according to Jon Derome, an analyst at the Boston-based research firm. That means repeat business is a key to success in the ERP marketplace, and up-selling to one's installed base will be crucial to vendor survival, he said.
Derome said the perceived difference between the major ERP vendors is a "flat line," which in turn means rival upstarts have an opportunity -- if they give the customers what they want: less emphasis on technology innovation, more flexibility, ease of integration and implementation and excellent service.
"The ERP vendors received very low preference ratings, and buyers are uninterested in the corporate attributes software makers are pushing," Derome said.
The Yankee Group surveyed 350 business decision-makers in companies that run software from various ERP vendors and found that Oracle was the one company whose software respondents would be most likely to implement or recommend. Oracle won plaudits from 32 percent of those surveyed. PeopleSoft was touted by 29 percent of the respondents, and SAP was backed by 26 percent. J.D. Edwards, Microsoft Great Plains and IBM were all cited by 14 percent.
Those numbers are all well below the 50 percent level that would be considered a healthy recommendation rating, Derome said.
Asked to name their "favorite" ERP vendor, 19 percent of the respondents cited Oracle, 16 percent named SAP, 15 percent said PeopleSoft and 10 percent picked IBM. And in terms of differentiation between brands, virtually all of the major vendors were clustered just above what was considered an average score, according to the study.
Asked about the survey, users offered their own critiques.
John Schindler, CIO at lighting fixtures maker L.D. Kichler Co. in Cleveland, said that companies generally have too much vested in their ERP systems to scrap an installation even if they wanted to. While some of the ERP vendors might have an edge in a specific industry, their overall performance is about the same, said Schindler, whose company uses PeopleSoft software.
And Schindler, a former Oracle user, said support is handled poorly by companies across the board.
"It's a license to steal, and the dollar amounts are reaching levels that are not justified," he said. "All the majors use some sort of percentage increase annually, which builds over time to an annuity that is just out of line." Moreover, justifying the cost of changing from one vendor to another is virtually impossible. "You become a very captive audience, and software vendors know it."
While vendors do try to best one another in offering new features, "within a short time, their competitors provide something comparable, or slightly better," said William Gabby, the North American operations manager at agribusiness Cargill Inc.'s Global Financial Solutions unit in Minnetonka, Minn.
Gabby's company runs a mix of PeopleSoft, J.D. Edwards and SAP applications.
"Frankly, as a customer, we probably spend less time on a regular basis comparing with their competition unless we are in a negotiation mode or looking at software replacement," he said. "If you can keep the customer from having compelling reasons to look at alternatives, you can generally keep the customer."
The large ERP companies do appear to be similar, and they tend to push hard on what differentiates them from their competitors before they close a sale, said Chris Alderson, a program director at Air New Zealand Ltd., an Auckland-based airline that uses PeopleSoft ERP applications. But "what it really comes down to is the people you interact with from project to project," he said.
Joshua Greenbaum, an analyst at Enterprise Applications Consulting in Daly City, Calif., said that none of the top-tier vendors get "rave reviews" for customer loyalty. But to say there is no brand loyalty is a stretch.
"In enterprise software, customer loyalty and satisfaction has not been a priority, as it should be -- in particular how the sales force deals with customers. Too often, this is adversarial and not mutually beneficial," said Greenbaum.