ERP Strategy & Selection SeminarERP Strategy & Selection Seminar
September 2010
Ronan O'Shea, Managing Director
Siamak Razmazma, Director
Agenda
Part I: ERP Background and General Concepts
Part II: ERP Classification
Classification of ERP II by Customer Size
Classification of ERP II by Design Strategy
Historical View of ERP Evolution
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Part IV: ERP Licensing Models – SaaS Focus
Part III: ERP Selection Approaches
Integrated Solution Design and Selection
Elements of Solution-Design Approach
Classification of ERP II by Business Process
ERP Selection Methodology
Part I
ERP Background and General Concepts
Historical View of ERP Evolution
2009
PresentMRP II (Manufacturing
• Manufacturing Planning
• Financial Management
• Order Management
• Human Resource
ERP (Enterprise Resource Plan)
• XRP (Cross Resource Planning)
• cERP (Collaborative ERP)
• CRM (Customer Relationship Management)
• SRM (Supplier Relationship Management)
• SCM (Supply Chain Management)
• GRC (Governance Risk Compliance)
• EAS (Enterprise Applications Suites)
ERP II (Extended ERP)
Web Technology
SOA (Service Oriented
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1980
1990
2000
• Inventory on-hand
• Inventory Shortages
• Material Planning
MRP (Material Requirement Plan)
• Inventory Movements
• Financial Transactions
• Cost Management
MRP II (Manufacturing Requirement Plan)
Mainframe Computing
Client / Server Architecture
SOA (Service Oriented Architecture)
Virtualization
Open Integration
SaaS
Part II
ERP Classification
Classification of ERP II by Customer Size
Company Size Small Lower Mid-Size Upper Mid-Size Large
Annual Revenue Range
Under $50M $50M to $250M $250M to $1B Over $1B
# of Staff Less than 100 101 to 300 300 to 500 Over 500
# of ERP Users 5 to 20 20 to 150 150 to 250 Over 250
Organization Characteristics
Single location, country-specific, PC or LAN based, off-the-shelf systems with lower cost and complexity
Multinational, very limited scalability, limited complexity, sold thru ERP resellers
Multinational, less scalability, some complexities and sophistications, sold through ERP resellers
Global, infrastructure and transactions scalability, sophisticated reporting and analytics
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and complexity through ERP resellers and analytics
Representative ERP Brands
MAS 90, Microsoft GP, NetSuite, Intuit, ACCPAC, MS Small Business, Epicor, Expandable, IntAcct
Microsoft, NetSuite, Expandable, Epicor, Exact, QAD, Oracle Accelerate, SAP Business One, SAP All-in-One, SAP ECC
Microsoft, Lawson, QAD, Oracle, SAP, Oracle JDE, Oracle Peoplesoft, SSA Global
Oracle EBS, SAP, Oracle Peoplesoft
• The classification by customer size including annual revenue, number of employees and number of potential users is the most common way to compare the ERP packages.
• The dominant ERP packages in the small and mid-size market are specifically designed for this market.
• Oracle EBS and SAP ECC use special pricing models for small and mid-size market. The core ERP components are the same for all the companies regardless of their size.
Services
Industries
Basic
Industries
Classification of ERP II by Design Strategy
Each ERP is designed to support and
automate the most common business requirements across
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Project
Industries
Process
Manuf.
Discrete
Item
Manuf
Production
Industries
requirements across different industries having similar strategies and execution
environments
Classification of ERP II by Design Strategy
ERP Primary Design
ERP Secondary Design
ERP
Industries ERP Design Scope
Services and Distribution
ProjectsProcessManuf.
Discrete-Item Manuf.
Horizontal VerticalMixed with
Solution Partners
1 IFS ���� ���� ����
2 QAD ���� ���� ���� ����
3 Epicor Vantage ���� ���� ����
4 Oracle JDE ���� ���� ���� ����
5 SAP All-In-One ���� ���� ���� ���� ����
6 SAP ECC ���� ���� ���� ����
7 SAP Business One ���� ����
8 Oracle Peoplesoft ���� ���� ����
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8 Oracle Peoplesoft ���� ���� ����
9 Ross ���� ���� ����
10 Infor LN (Baan) ���� ����
11 Oracle EBS ���� ���� ���� ���� ����
12 Microsoft GP ���� ���� ���� ����
13 Microsoft AX ���� ���� ���� ����
14 Microsoft SL ���� ���� ���� ����
15 Microsoft NV ���� ���� ����
16 NetSuite ���� ���� ���� ����
Horizontal - ERP primary design is for various industries
Vertical - ERP primary design is for a specific industry
Mixed with Solution Partners - ERP is designed to leverage preset third-party solutions
Classification of ERP II by Business Process
Operating Processes
Market & Customers
Vision & Strategy
Product & Services Design
Marketing & Sales
Production & Delivery
1
2
3
4
5
4
55
4
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Production & Delivery
Customer Invoicing & Services
Management Processes
Financial Resources
Human Resources
Information Technology
Environment, Health, Safety
External Relationship
5
6
7
8
9
10
11
7
7
8
8
Part III
ERP Selection Approaches
Integrated Solution Design and Selection
Business Requirements
Solution Design ERP Selection Phase 3
Define target business applications
landscape
Business process optimization &
automation
End-to-end
ERP Selection Phases 1 & 2 Initial
Roadmap
Final Roadmap
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End-to-end integration of target
business applications
System of Records design for target
business applications
Integration cost and plan with existing
business applications
Roadmap
Benefits of Solution Design Approach
• Process Models for complex business needs
• Goes beyond the capabilities of a specific application
• Leverage of existing business applications
• Assessment of the leading technologies such as SOA
• Comparison of different IT infrastructure models (SaaS, Outsource, Hosted)
• Calculation of Total Cost of Ownership
• Process Optimization
• Process Automation
• End-to-end data integration for the target biz apps landscape
• System of record to create a lean data environment and efficient data governance
Purchasing Sub-Ledgers
Sample High Level Architecture
Entity: A Entity: B Entity: C
Quote/Contract
Billing
Building Mvt
GL, AR, AP
Asset Mgt
Purchase
Quote/Contract
GL, AR, AP
Billing
Purchase
Asset MgtQuote/
Contract
GL, AR, AP
Billing
Purchase
Inventory
RFQ Supplier Vendor Accounts Accounts Credit
Source Data
External Data
TBD
Mixed Data Source
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General Accounting
RFQ Management
Purchasing
Supplier Management
Receiving
Vendor Master
Accounts Payable
Accounts Receivable
Collections
Credit Management
Project Accounting
(TBD)
Asset Accounting
General Ledger
Cash Management
BudgetingReporting
Managerial Reporting
Financial Statements
Consolidation
Vendor Billing
Enterprise Financial Systems (EFS)
Sample Solution Design Model
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Calculation components for allocations are
not supported by ERP packages
Sample Solution Design Model
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Elements of Solution-Design Approach: Data Integration Across Business Processes & Systems
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Elements of Solution-Design Approach: Systems of Records
• Product and services catalogs
• Technical Documents
• Customer Service Information
Data Inside & Outside of Firewall
• Material Requirements Planning
• Lead Times
• Sourcing Data Attributes
• Demand Data Attributes
• Production Schedules
• Available To Promise Data Attributes
• Available To Build Data Attributes
• Stocking Strategy Data
System of Record in Exact
Web
Services Supply
Chain
Package
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• Statutory Reports
• Management Reports
• Analytical Data Source
• Consolidation
• Inventory Valuation
• Billing
• Cash Management
• General Ledger
• Payables
• Receivables
• Assets
• Item Master
• Price Master
• Customer Master
• Supplier Master
Systems of Records in MS GP
• Marketing Campaigns
• Prospect Management
• Contracts
• Quotes
• Sales Organization
• Sales Compensation
System of Record in SFDC
Microsoft
GP ERP
Salesforce
Automation
Package
Elements of Solution-Design Approach: Example of Business Process Automation
NetSuite
Softrax
MS GP
Sales Process Business Rule
Complex configuration
Simple configuration
Simple configuration
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Revenue Recognition Source
Billing Automation
Maintenance Bill annually a month in advanceRecognize revenue 1/12 per month over next 12 months
Software & Hardware Sales
Bill customer in advance
Recognize hardware & software revenue as installed
Recognize revenue separately / differently for each line item on the invoice
System SalesGive away maintenance for first year
Allocate recognition to maintenance
Recognize revenue over the next 12 months to allocate corresponding par of revenue to relevant maintenance
Service, Installation, Training
Bill for services renderedRecognize revenue as objectives are achieved and services are rendered
Sample of Information Package Document
Enterprise Resource Planning & Professional Services
Automation System Strategy and Selection
Enterprise Resource Planning & Professional Services
Automation System Strategy and Selection
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ERP Selection Methodology
Identify key business requirements
Identify initial list of
Analyze key business processes in the scope of new ERP
Create a Solution Design
Create schedule for Vendor activities
Validate the scope, Solution Design and Demo Scenarios
Phase 1: Initiation Phase 2: Evaluation Phase 3: Selection
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Identify initial list of ERP packages
Provide rough estimate of Total Cost of Ownership (TCO)
Refine scope of Phases 2 and 3
Create a Solution Design based on ERP
Refine and validate list of initialERP packages and TCO
Send selection package Infoto vendors
Design and Demo Scenarios with Vendors
Demo Sessions
Reference Checks
Final TCO
ERP Selection Decision
Elements of Solution-Design Approach: ERP Selection Criteria
Functional Features
• Transactional
• Batch
• Reporting
Technology
• SOA
• SaaS
Scalability
• Database
• Applications
• Network
Intangible Elements
• Strong negative perception
• Strong predisposition
• Process leads experience
• Executive opinion / preference
Security
• Role based
• Data attributes level
Total Cost of Ownership
• License / Subscription
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• SaaS
Adaptability
• Ease of configuration
• Navigation
• New processes or business
Integration
• Internal
• External
• Data conversion
• Workflow
• Data attributes level
ERP
• Market position
• Product strategy and roadmap
• Classification match
System Integrator
• Market position
• Solution design match
• Implementation methodology
• Resources and skills availability
• Software support
• Implementation
• System integrator adoption
• Hardware
• Full time employee (FTE)
Part IV
ERP Licensing Models –SaaS Focus
Definitions and Technology
• Distinction between SaaS and Cloud Computing:
– Cloud computing is the computing power characterized by:
� Disembodied computing power (based on internet technology) that is consumed where and when it is needed
� Loosely coupled services running on agile, scalable infrastructure
� Network access to a shared pool of configurable computing resources (networks, servers, storage, applications, and services)
– SaaS refers to the software applications using the cloud computing power
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• SaaS is not:
– Grid computing which is the usage of several computers to process a specific instruction
– Thin Client which is a computer or computer program in the client-server architecture
• Most established SaaS solution models are:
– Software as a Service (SaaS): Providers offer business applications using cloud computing power (for example: NetSuite ERP, ConstantContact, Salesforce)
– Platform as a Service (PaaS): Customers add their own applications to an associated SaaS platform (for example: Salesforce Appxchange, NetSuite SuiteFlex)
– Infrastructure as a Service (IaaS): Rent the infrastructure and the related components (servers, storage, networks)
SaaS Economics
• From economics perspective the main differentiation of on-premise model and SaaS is a shift from capital expense to operating expense.
• The cost saving related to upfront capital expense does not systematically lead to save costs in operating expenses:
– The SaaS model might not make fiscal sense in the following situations:
� Relatively small capital budget
� Organization's flexibility in the capital budget rather than the operating budget
– Other factors impacting the scale of any potential cost savings include:
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– Other factors impacting the scale of any potential cost savings include:
� The efficiency of a company's data center as compared to the cloud vendor's
� The company's existing operating costs
� The level of adoption of cloud computing
� The type of functionality being expected from SaaS applications
• Economics of SaaS for large scale companies is not there yet.
• Small to mid-size companies might benefit from SaaS economics if they have the right model for the operating expenses vs. capital expense
SaaS Current Trends
• Current trends show high rate of adoption of SaaS solutions.
• SaaS ERP is following the same trend in SMB market.
• SaaS ERP in the large organization market is lagging behind the SMB market trend.
36%
28%Currently Considering
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32%
32%
9%
63%
0% 10% 20% 30% 40% 50% 60% 70%
Not Considering
Currently Using 2008
2007
21%
22%
22%
30%
36%
Marketing automation software
Web 2.0 technologies, such as bolgs, wikis, and RSS
Human capital management
Customer service and support
Sales force automation
SaaS Current Adoption
Figure 2 SaaS Adoption By Application
Growing number of SMB companies are using SaaS business applications
"For which of the following software applications is your firm using SaaS?"
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6%
5%
8%
8%
9%
15%
16%
17%
18%
20%
21%
Other
Product life-cycle management
Software supporting a specific industry process
Supply chain management
Spend management or supplier relationship management
Project-based solutions
Enterprise resource planning
Order mangement
Content mangement
Collaboration software
Marketing automation software
ERP
Base: 103 US packaged application software decision-makes that are currently using SaaS
Source: Enterprise And SMB Software Survey, North America And Europe, Q4 2008
Source: Forrester Research, Inc.
SaaS Dynamic Evolution Waves
• Optimized business Ecosystems
• IT-targeted Ecosystems
2001-2006
Cost Effective
2005 -2010
Integrated
Business Solutions
2008 -2014
Workflow-enabled
Business Transformation
AD
OP
TIO
N
SaaS integration
SaaS tipping points
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• IT-targeted Ecosystems
• Inter-enterprise Collaboration
• IT Utility / SaaS Infrastructure
• Customized, personalized
workflow
• Focus on business transformation
• Stand-alone Apps
• Multi-tenancy
• Limited configurability
• Focus on TCO / rapid deploy
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
AD
OP
TIO
N
• SaaS integration
platforms
• Business
marketplaces and
SaaS ecosystems
• Customization
capability
TIME
Q: Rate the benefits commonly ascribed to the Cloud / SaaS model (1=not important, 5=very important)
Why Choose SaaS?
77.9%
81.5%
83.6%
Low monthly payments
Pay only for what you use
Easy / fast to deploy
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Source: IDC Enterprise Panel, August 2008 n = 244% responding 3, 4 or 5
67.2%
73.3%
77.0%
77.5%
77.9%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Sharing systems / information simpler
Encourages more standard IT
Offers the latest functionality
Less in-house IT staff, costs
Low monthly payments
Why Not Cloud / SaaS Services?
Q: Rate the challenges / issues of the 'Cloud' / on-demand model (1=not significant, 5=very significant)
Availability
Performance
Security
84.8%
88.1%
88.5%
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Not enough major suppliers yet
Bringing back in-house may be difficult
Worried Cloud will cost more
Not enough ability to customize
Hard to integrate with in-house IT
74.6%
80.3%
81.1%
83.3%
84.5%
65% 70% 75% 80% 85% 90%
Source: IDC Enterprise Panel, August 2008 n = 244% responding 3, 4 or 5
Contacts
50 California Street, 17th Floor
San Francisco, CA 94111
Direct: 415.402.3639
Mobile: 650.678.0260
Fax: 415.402.6955
Ronan O'Shea
10 Almaden Boulevard, Suite 900
San Jose, CA 95113
Direct: 408.808.3258
Mobile: 408.406.1461
Fax: 408.808.3363
Siamak Razmazma
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Confidentiality Statement and Restriction for Use
This document contains confidential material proprietary to Protiviti Inc. ("Protiviti"), a wholly-owned subsidiary of Robert Half International Inc.
("RHI"). RHI is a publicly-traded company and as such, the materials, information, ideas, and concepts contained herein are non-public, should be
used solely and exclusively to evaluate the capabilities of Protiviti to provide assistance to your Company, and should not be used in any
inappropriate manner or in violation of applicable securities laws. The contents are intended for the use of your Company and may not be
distributed to third parties.