Aberdeen Group: Research Brief
Functionality and Total Cost of Ownership (TCO) remain significant factors in Enterprise Resource Planning (ERP) strategies and decisions. The depth and breadth of functionality deployed, along with the cost of software, services and on-going maintenance combine to provide a price performance index of ERP. The Aberdeen Group Research Brief, The Cost of ERP Functionality, compares the price of functionality of seven major ERP vendors. The following summary is a QAD-interpretation of the report.
The Cost of ERP Functionality
Aberdeen received 830 responses from users of ERP systems, asking them questions about their evaluation process and actual costs/benefits from their installed applications. This report aims to quantify the usage of those ERP systems, as well as the costs, broken out by major vendor, including QAD.
Functionality, TCO and Ease of Use are the top three selection criteria in ERP evaluations.
Aberdeen, based on a previous study, considers five types of IT costs in calculating TCO/ROI:
- Cost of purchased software
- Cost of services to implement and customize the solution
- Cost of maintenance (typically over a three year period)
- Cost of dedicated IT staff to support and manage the ERP solution.
- Cost of dedicated line of business (i.e., operations) staff to support the system (super-users, etc)
Cost types 1, 2, and 3 are considered "hard" costs, while types 4 and 5 are seen as "soft" costs. Aberdeen found that approximately 73 percent of total costs are represented by "soft" costs – regardless of company size or sector. These are also the least known or least measured costs.
Out of 24 [Aberdeen] chosen modules, companies had deployed an average of 10.5 modules (44 percent of total), and they used about 71 percent of the available functionality of those deployed modules. Multiplying these figures together to come up with a weighted average of total functionality used, the average customer used 31.2 percent of functionality (44 percent x 71 percent). This forms the basis of the vendor comparison in the rest of the document.
The table below demonstrates how the vendors fared in functionality rankings:
Finally, Aberdeen divided the total costs of ownership, per respondent feedback, by the amount of functionality shown in Table I, to arrive at a cost per functionality metric. QAD ranks 2nd in total cost per functionality gained - and 1st in annual maintenance costs; biggest advantage over Infor and Oracle (41 percent and 44 percent more expensive than QAD, respectively). (See Table 2)
Aberdeen concludes: "While QAD is the second lowest in terms of total cost per user, it drops to number three in terms of software only, and number four when adding together software and services. This implies that while the initial cost of QAD is higher in terms of functionality used, the relative total cost of ownership drops when spread over a longer period of time." (pg. 3)
Download the Aberdeen Report and subsequent news articles on the QAD Web site: The Total Cost of ERP Functionality.
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