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Dennis Keeling

Business Software Analyst - Ovum

&

Chief Executive - BASDA

Business Application Software Developers’ Association

The cost of implementing Business Solutions

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Background

1983 Formed consultancy

Developed means of evaluating business systems

Financial Times, Daily Telegraph, US Journal of Accountancy

BBC ‘The Software Show’, CNN, FT TV, Sky

Founder & Chief Executive - BASDA, Business Application Software Developers Association

Author: Corporate Financial Systems - Ovum

Business Age:acknowledged as the world’s leading authority on business & accounting systems

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UK-based, not-for-profit, international standards body

300 + members from SAP, Oracle, Microsoft – Sage

Accounting, Human Resources, Logistics, Manufacturing, Taxation & Web-based applications

Established 10 years, significant growth in 2000

Elected General Council - Cross Industry

Recognised by EU, FEE, BoE, DTI, Inland Revenue, HM C&E & HM Treasury, UN/CEFACT, Microsoft

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Types of business applications Tier 1 - Enterprise-wide

• J D Edwards, Oracle, PeopleSoft, SAP

• Full suite, Workflow, Self-Service Portals, 4GL environment for specialist systems

Best-of-breed• Agresso, Coda,

• Financials + MIS, Definable interfaces to other systems

Tier 2 - Mid-range• Exchequer, Exact, Microsoft (Great Plains, Navision), OpenAccounts, Sage ES, Scala, SunSystems

• Financials, order processing, assembly

Tier 3 - Entry-level• Sage Line 50, TAS Books, Quick Books, Simply Books

• Financials, invoicing

Tier 4 - Home / Office• Microsoft Money, Money Manager, Quicken,

• Cash Books

Specialist• Alphameric, Baan, eResult, IFS, Intentia, Misys, Siebel

• Banking, Hairdresser, Hotels, Complex Manufacturing, Plant Hire, Retail, CRM

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Implementation: key messages

Stick to vanilla business processes.

Use the vendor’s consulting services if you can.

Tier 1 software costs more than tier 2 to

implement.

The licence fee alone is a poor indicator of

implementation costs.

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Ovum report – cost of implementation

0 10 20 30 40 50 60 70 80 90 100

Sage Tetra

Scala Enterprise

Microsoft Business Solutions

Exchequer

SAP R/3

PeopleSoft

Oracle

JD Edwards OneWorld

Tier 1

Tier 2

Euro (000s)

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Factors Affecting Implementation Costs

Method of roll-out• Central ‘Template’ Implementation

• Separate implementations – 3rd parties

Type of System• Decentralised standalone

• Enterprise-wide

Implementation Partner• Software developer

• ‘Big 4’ Consultancy + implementation partner

Method of Implementation• Vanilla ‘best-of-class’

• Specialist developed system or processes

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Implementation Strategies

Package developer or third party

Effective project management

Tight specification & implementation plan

Implementation methodologies

Fit of package – vanilla v specialist developed

System tuning

Consultancy requirement

Deployment in more than one country

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Main Implementation Scenarios

Single (Tier 1) Enterprise-wide (ERP) system

Strategic (Tier 2)

stand-alone system in each operation

Two Tier Strategy - ERP (Tier 1) for large industrial units and stand-alone

systems

- Mid-range (Tier 2) for local medium sized and smaller units.

Disparate Systems

Best of Breed

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1. Single Tier 1 solution

The ERP Dream

Centralised infrastructure • one single database for accounting, order processing, manufacturing and human

resource functions.

Consolidated information from head-office down to the lowest

subsidiary.

Drill-down from the consolidated Profit & Loss to the underlying

transactions at the point of entry – anywhere in the world.

International world-wide deployment.

Advanced financial management reporting and analysis.

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ERP – the dream was rarely met

Cost of implementation and total cost of ownership.

Localisation issues outside of North America and the

UK.

Complexity of Tier 1 applications for the smaller

subsidiary and branch office.

Technical infrastructure problems in remote locations.

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2. Strategic Tier 2

Quality of management information and financial

reporting.

Scalability in terms of concurrent users.

Restricted scope of the product suite – Workflow, CRM, HR.

Decentralised rather than centralised infrastructure.

Ability to deploy the application on an international basis.

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3. Two Tier Strategy - Tier 1 & 2

Cost of implementation of Tier 1 solutions due to their complexity.

Cost of deployment and support of Tier 1 solutions.

Availability of the technical infrastructure in 3rd world countries.

Stand-alone solutions are more suitable than a centralised

solution for the medium-sized, smaller operation.

Localised solutions easier to implement in some countries than

configuring a centralised solution.

Standardise on two vendors to allow effective application

integration in a centralised strategy.

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4. Disparate solutions

Best-of-Breed - Specialist solutions Architecture R&D Spend Scope of product range International deployment Upgrade – bespoke solutions

300 BASDA members – 60% specialist solutions 40% standard package – 60% custom designed

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Head Office

Country Office Country Office

Regional OfficeRegional Office Regional OfficeRegional Office

Manufacturing PlantManufacturing Plant

Sales Office Sales Office

WarehouseWarehouseWarehouseWarehouse

Sales OfficeSales Office

Architecture

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Architecture

Central services• Mainframe type configuration

Decentralised • Subsidiary stand-alone solutions• Employee Portals

Wide-area networks• EDI – Value Added Networks• 3rd World counties?

Internet• XML – open standards• SMTP / HTTP technology

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Infrastructure

International deployment

Localisation issues

• Tax, Legal, Language, Currency, Character Set

Template approach

ERP in smaller subsidiaries – in 3rd world

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Head Office

Country Office Country Office

Regional OfficeRegional Office Regional OfficeRegional Office

Manufacturing PlantManufacturing Plant

Sales Office Sales Office

WarehouseWarehouseWarehouseWarehouse

Sales OfficeSales Office

Information roll-up

Group Personnel

CentralizedPurchasing

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Information roll-up

Consolidation software

• Monthly / quarterly / annually

• Financial information only

Informal daily operating controls

• Key performance indicators (KPI)

Drill-down from HO to smallest subsidiary

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Total Cost of Ownership

Initial Cost of Purchase

Capital cost of IT equipment • workstations, servers, printers, networks, etc.

Initial software licence fees • often based on number of application modules purchased and the number of

concurrent and casual users.

Implementation • External consultancy costs

• Configuration and customisation

• Training – either ‘train-the-trainer’ or individual external training

• Internal staff costs – implementation, customisation and training

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Total Cost of Ownership

On-going Running Costs.

Hardware maintenance and support charges • internal & external.

Application software maintenance and support charges• internal and external.

Cost of upgrades• hardware, consultancy, customisation and internal costs.

Cost of maintaining the infrastructure• telecoms, licences.

Management time • solving operational and technical problems.

Depreciation of initial capital costs • normally spread over 1 to 5 years.

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Summary

Licence fee - no indicator of total cost

Cheapest implementation• By software developer

• Vanilla ‘best-of-class’

• Template approach

Major Issues:-• Total Cost of Ownership

• International deployment

• Standardisation of configuration

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Contacts

Dennis Keeling

tel +44 (0)1494 680907

fax +44 (0)1494 680424

E-mail dkeeling@ dkeeling.com

Web http:// www .dkeeling. com

BASDA

tel. +44 (0)1494 677699

fax +44 (0)1499 681894

E-mail info @ basda.org

Web http:// www.basda.org

http:// www.ebis-xml.net