Dynamics Outgrows Oracle and SAP in Recent Poll

The following article appeared on February 16 in MSDynamicsWorld.com.

Dynamics Outgrows Oracle and SAP in Recent Poll

In the current economic downturn, the market share of Tier II smaller ERP providers has risen significantly while those of ERP heavyweights SAP and Oracle have dropped proportionately and Microsoft Dynamics edged slightly ahead. According to a 2010 survey by vendor-neutral ERP consultants Panorama Consulting Group, the market share of Tier II ERP vendors grew from 23% to 30% last year while ERP leader SAP dropped from 35% to 31% and Oracle from 28% to 25%. Microsoft Dynamics held its own, growing slightly from 14% to 15% during the same period. Panorama’s 2008 survey was based on 1,300 respondents worldwide from 2005 to 2008 while the 2010 survey was tallied from 1,600 participants last year.

Panorama President Eric Kimberling said the market changes reflect that small- and medium-sized companies have been moving ahead with ERP implementations in the downturn while larger firms have been holding back on upgrades and modifications.

“Microsoft is a better fit and more appealing in a downturn,” Kimberling said. “It has a much lower cost and is very predictable (in implementation).” Even though the rise in Dynamics’ market share is slight, it is still significant in light of the declines for SAP and Oracle, he added.

The 2010 survey also ranked Microsoft Dynamics No. 2 behind SAP on ERP vendor short lists by prospective buyers and seventh of the top 10 in selection.  In its 2008 report, the Denver, Co.-based consulting firm pointed out that the cost savings for Microsoft Dynamics is great, with an SAP implementation averaging $16.8 million in total costs compared to $12.6 million for Oracle, $2.6 million for Microsoft Dynamics and $3.5 million for Tier II applications. In that detailed study, Panorama concluded that Dynamics was gaining in popularity because of its markedly lower pricetag; Dynamics was favored by users, who like the familiar Microsoft interface, but less popular with executives, who cited a somewhat higher business risk.

Business Intelligence

One cause for higher risk worries in the earlier study was Dynamics’ lack of business intelligence tools, Kimberling said. However, Microsoft may have alleviated that concern with Dynamics’ addition of FRx financial reporting tool, he said.  FRx is already slated to be replaced by Management Reporter and augmented with self-service reporting in Office 2010.  Also contributing to a higher perceived risk factor with Dynamics is the small- to mid-sized market it serves rather than the software itself, he said. Smaller customers lack the sophistication of larger enterprises and often try to cut corners and/or implement the software without recognizing the need for specialized help, he said.

Project Duration and Cost

Comparative marks for project implementation in the earlier study also were a mixed bag for Microsoft Dynamics, which averaged two weeks to two months less than Oracle and SAP, respectively, but, on the downside, showed the largest variability in project completion. The major factors extending project duration for Dynamics ERP installs are large numbers of modules and/or users and complex business processes, Kimberling said. In the latter case, companies often are too quick to customize the software to existing business workflows rather than change their processes to accommodate the software, he said.  While minimizing the ERP impact to the workforce, customizing software with alterations to the source code delays the project and complicates maintenance down the road, he said.

In its 2010 report released early this month, Panorama concluded that more ERP implementations last year took longer than expected (57%) and cost more than expected (59%) but, on the plus side, they consumed 20% less as a percentage of annual revenue (6.9% in 2009 vs. 9% in 2008). However, the “savings” came with a price: 41% of responding companies failed to achieve at least half of the benefits they anticipated from their ERP installations. These results have not yet been broken down by vendor.

“The path to lower costs is cutting the scope or key project activities that are critical to success,” Kimberling said, citing factors like training, hardware and project management. “You don’t necessarily need to spend more but you need to have realistic expectations and take the right steps to make sure you succeed. This is even harder now with less resources.”

Managing Organizational Change

In addition, the 2010 study concluded that most companies do not effectively manage the organizational changes that ERP sets in motion, with nearly half citing poor communication between management and employees as a contributing factor. Many companies also were adjusting to a new CEO during their ERP implementations while significant numbers were coping with layoffs or a merger or acquisition.
The problem is that there is a management/employee “disconnect,” Kimberling said. New ERP systems impose change and stress on the workforce when employees are already worried about their future, he said. But management wants to push ahead with ERP systems now to retain “head knowledge” and increase efficiency to do more with less, he said. In this environment, some companies are cutting organizational change activities related to their ERP installs, which “doesn’t bode well” for their projects, he said.

The Cloud

Panorama’s latest survey found that SaaS (Software-as-a-Service) and hosted ERP solutions are faster to implement and cost less than on-premise applications. The downside: they are far more likely to exceed budget estimates due to excessive vendor hype, the report said. In addition, SaaS and hosted solutions tend to be more appropriate for small- and mid-sized companies and narrow functions such as CRM or purchasing, the report said. Microsoft Dynamics does not currently have a SaaS or hosted ERP offering (although various partners and resellers do offer hosted solutions), but Kimberling predicted that Microsoft will develop one because so many mid-market companies perceive that SaaS/hosted is a way to tiptoe into ERP without a big, upfront cost, he said.

Kimberling also predicted that IT budgets are beginning to loosen up and companies that skimped to get by last year are beginning to look at adding tools like FRx that can improve operations. As for other future trends, Kimberling said that SAP and Oracle will try to grow their respective markets by extending down from the enterprise to the mid-market. Although this will provide more competition for the Dynamics product line, Microsoft is already “well entrenched,” and has its name and branding on its side, he said.

GovCon Tech Tip: Strategies for Internal Tech System Refresh

Based in Rockville, MD, SysArc is the preferred provider of network support services, computer repair and technical support services to government contractors throughout Maryland, Virginia and the Washington DC area and frequently teams with PVBS. Contact Tim Brennan via email at tbrennan@sysarc.com if you have any questions.

In these challenging economic times, companies are trying to limit capital expenditures whenever possible and many are postponing further investment in their technology infrastructure.    Is this the best strategy for your organization and are there better options?

It is certainly understandable to try and postpone spending during cash f low challenges. The answer to this question is, it depends.  If your current infrastructure is performing well, is stable and your employees are not complaining about lost productivity because your systems are crashing or they are running slow, then it might not make sense to invest in new systems.  Since the average life expectancy of a server is 3-5 years, a desktop is 3-5 years, and a laptop is 2-4 years, most companies only need to address the issue of obsolescence and replacement every few years. Organizations that follow industry best practices typically replace 20-25% of their IT equipment each year to stay current and then amortize the cost over a 4-5 year period.

The operating system and applications that are running on the server or desktop/laptop also need to be reviewed during any replacement/upgrade consideration as they might be outdated and no longer supported.  For example, if you use Microsoft Windows for your server operating system, it should be version Server 2003 or later.  However, there are still a number of companies that are chugging along using older custom application that operate on 10-year old technology.

If, on the other hand, you are experiencing poor response time, system crashes, downtime, or other problems, you may be sacrificing productivity and revenue for the relatively lower cost of new equipment.  Specifically, the cost of replacing your ailing technology will be far less than the ongoing cost to support and maintain the old equipment.

In order to provide you with additional insight into the overall health of your infrastructure, a high-level Network Assessment should be completed regularly (every 1 or 2 years).  An Assessment will not only help determine the current state your environment, but it will often include specific recommendations to enhance and optimize your technology in order to more fully support  your business initiatives. This type of assessment can be done in a few hours for small environments and a few days for larger, more complex environments.

Recent Gartner Note on VAR Challenges and How Dynamics NAV Helps

Gartner released a note at the end of 2008 discussing the treacherous future that faces many companies that sell tech products. PVBS has helped many companies that sell products to the Federal Government such as Force3 and Four Points Technology. The Dynamics NAV solution for government contractors and resellers from PVBS is ideal for companies that provide services AND sell products to the government.

The Gartner report is titled: 122908-predicts-2009-vars-face-difficult-future and can be requested by clicking here.

CRM Plus NAV Gives Government Contractors a Competitive Edge

More and more government contractors are deploying CRM (customer relationship management) software to complement their Microsoft Dynamics NAV implementation. The combination gives you a detailed and comprehensive look at the health of your contracts.

CRM helps you understand the relationship between critical decision makers at your government customer’s program office and your company. The solutions in the Microsoft Dynamics product line integrate very well.  It’s possible to connect the valuable financial data and information in Microsoft Dynamics NAV to the sales-oriented CRM tools and ensure that a government contractor has up-to-date and consistent data across both systems.
 
Read our interview with Rajev Bricksin, vice president of our partner DynLink, to see more ways how the combination of Microsoft Dynamics CRM and Dynamics NAV help government contractors win more business.

Federal Market Research Update

Our friends at Market Connections offer some great tips for companies that are looking to invest in Federal Government market research.  On their blog, company president Lisa Dezutti posted a good article entitled “Questions to Ask Before Pursuing Research.”  Questions include: Is a decent amount of the required information already available?  Can we afford to conduct research the right way?  Is management willing to act on the results? And, is it even possible to act on the results?