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  • Aberdeen Ranks the TCO of Mid-Market ERP Software

    September 4, 2007 Timothy Prickett Morgan

    The manufacturing and distribution sectors of the world economy have always been the backbone of the midrange computer business, and time may have changed a lot of things in the IT landscape over the years, but this is not one of them. There has always been fierce competition between application software vendors in the mid-market, and as long as there are midrange companies, there always will be.

    To try to give manufacturers a sense of where their current and perhaps future ERP software providers stack up, the analysts at Aberdeen Group did a survey of 645 manufacturing companies with between $50 million and $1 billion in annual sales, and tried to case the total cost of ownership (TCO) of the ERP suites running at these companies. The mid-market portion of the study was taken from a larger survey of 1,680 manufacturers of all sizes that Aberdeen talked to for its ERP in Manufacturing study, which is based on interviews performed in June and July of this year.

    Both the mid-market ERP TCO study, which you can get compliments of Lawson Software by clicking here, and the larger ERP study are jammed packed with data. The interesting bit in the mid-market ERP TCO study was the correlation between the revenue of a company, the number of employees on the ERP system, and the cost of the ERP package. Companies with under $50 million in sales had 38 users on average and had a three-year cost of acquiring and supporting their ERP software of $384,295, or $10,651 per user. (This figure includes license and maintenance fees, but not hardware and customization fees.) Moving into companies with $50 million to $100 million in sales, the average end users more than double to 92 users, and software and support costs approach $1.1 million over three years, or $11,973 per user. The next bracket of company size is for firms that have between $100 million and $250 million in sales, that averaged 195 users and ERP software and support costs over three years of over $1.7 million, or $13,002 per user. Companies in the next tier appear to be getting bargains, for firms with between $250 million and $500 million in sales averaged 344 users, but had ERP costs of just under $2 million, or $6,519 per user, over three years. (Can you tell where midrange ERP software suppliers and the giants of the industry, Oracle and SAP, are fighting for new business?) For companies larger than this, software costs per user fall once companies are in the $1 billion or larger category. (The total costs in the Aberdeen report include other services for customization, just in case you do the math yourself.)

    The other interesting part of this study is that Aberdeen tried to distinguish how different software packages from Epicor, Infor, Lawson, Oracle, QAD, and SAP stacked up against each other. Other vendors were lumped together and their numbers averaged. SAP and Oracle shops in the manufacturing industry tend to have larger numbers of end users, and they tend to implement more modules, whether the data set is restricted to midrange companies or the full Aberdeen data set.

    The average midrange manufacturer polled by Aberdeen spends $695,750 on software, and another $560,000 on services over the course of three years, and implements 11 ERP modules. The average mid-market manufacturer has 175 users and spends $13,010 per user on ERP software and support over three years. Epicor and Lawson, as well as the average of the unnamed ERP suppliers, come in under this average for the midrange, and Infor and QAD are right in the same range; Oracle and SAP are twice or more the averages.

    RELATED STORIES

    ‘What Gets Measured Gets Managed’ Applied to ERP

    AMR Research Bullish on ERP Software Market

    AMR Research Says ERP Software Sales to Hit $29 Billion This Year

    AMR Sees ‘Huge Surge’ in ERP Spending, Most Likely at Microsoft

    ERP Market Grew Solidly in 2004, AMR Research Says



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    Tags: Tags: mtfh_rc, Volume 16, Number 34 -- September 4, 2007

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TFH Volume: 16 Issue: 34

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    Table of Contents

    • Zend Preps System i Sessions for October ZendCon 2 Event
    • IBM Licenses Tech from Siemens for Unified Communications
    • IBM’s Toronto Labs Turns 40, DataMirror Shareholders OK IBM Deal
    • IDC Gives 2006 Report Cards for Data Warehousing Vendors
    • Aberdeen Ranks the TCO of Mid-Market ERP Software
    • Zend Preps System i Sessions for October ZendCon 2 Event
    • COMMON Poll: DB2/400 Support for Domino 8 Matters
    • Mad Dog 21/21: Leverage
    • Aldon Works on Acquisitions to Build Out Biz
    • Consumers Create a Feedback Loop into IT

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