Users consistently rate best-of-breed supply chain software as better than ERP in most functional areas.
But often, companies go ahead and buy ERP (enterprise resource planning) software anyway, due to muddled decision-making and internal politics, according to new research by industry analyst Dan Gilmore.
In two new reports, Gilmore also finds that integration costs are now becoming a less persuasive argument for choosing ERP over BoB (best-of-breed).
During an interview with eWEEK.com, Gilmore said that he did in-depth surveys with 160 companies—as well as about 40 one-on-one discussions—to arrive at the results presented in his new reports on supply chain execution and supply chain planning.
In the supply chain execution study, for example, respondents gave BoB software an “overall average” rating of 6.46 for functionality, in contrast to only 4.17 for ERP.
In the area of “flexibility to adapt to changing business requirements,” BoB got an overall average rating of 6.00, as opposed to 3.57 for ERP.
And when it came to “ease of use by end users,” BoB scored 5.46 as an overall average, in contrast to 4.34 for ERP.
Further, in several categories, the leaning toward BoB turned out to be even keener among a subgroup of users who indicated strong knowledge about the differences between BoB and ERP.
On the question of “ease of use by end users,” for instance, the particularly knowledgeable respondents gave scores of 6.65 and 4.10, respectively, to BoB and ERP software.
Although customers see ERP as catching up to BoB in some functional areas, ERP is perceived as still lagging behind in others, Gilmore said during the interview.
“In the [supply chain] execution area, ERP is [viewed as] further ahead in WMS [warehouse management systems] than in transportation,” according to Gilmore, who also edits the SupplyChainDigest industry newsletter.
“In [supply chain] planning, ERP is further ahead in VMI [vendor managed inventory] and demand planning than in complex inventory optimization,” he told eWEEK.com.
Gilmore said he was curious, too, over whether perceptions of ERP and BoB software are different among IT personnel from how they are among business/operations managers, for example.
In cross-tabulating the answers from IT staffers against the overall results, the analyst discovered that although IT personnel still rated BoB higher on many key criteria, the gap between the ratings was not as big as among the overall survey population.
“We believe this simply reflects the fact that, in general, IT personnel are somewhat less close to the detailed functional requirements of the business,” he wrote in his supply chain execution report.
Companies lean toward ERP
Yet despite the perceptions of superiority generally accorded to BoB, companies often opt for ERP instead.
“Lets put it plainly. Today, business/operations managers almost never want the ERP solution, while IT is much more likely to push for the ERP module,” according to Gilmore.
Moreover, decisions in favor of ERP are often made at high levels of the enterprise, even when hands-on managers have already recommended BoB.
“ERP vendors tend to have high-level contacts,” Gilmore told eWEEK.com. Sometimes, an ERP vendor will nail down a supply chain contract because the customer hopes the vendor “might do the company some favors in other [IT] areas,” he said. “The [selection] process can be rife with politics.”
Also, according to Gilmore, the integration costs of BoB are often overrated as a justification for using ERP.
“Clearly, integration costs can sometimes be an issue. But these costs have been coming down,” Gilmore said.
By and large, customers would like to see improvements in ERP and BoB software alike, according to the analyst.
“Theyd like ERP vendors to bring more domain expertise to the table. But they also want BoB vendors to wrap more consulting capability around their products, and to do a better job of articulating the differences they can provide. A software module is not a solution,” he said.
Moreover, BoB vendors also need to learn how to compete against ERP better, Gilmore told eWEEK.com.
“The main focus [of their] sales training has often been to battle each other, instead.”