Report: choice of ERP vendor irrelevant to success

A forthcoming study says ERP packages offer few advantages for companies looking to optimize their financial operations.

The Hackett Group, a business advisory firm specializing in benchmarking company performance and in offering best practices solutions, will publish a report next week entitled "Financial Application Choice Is Irrelevant In Achieving World-Class Performance."

In the report, The Hackett Group states that of the 150 major companies included in its analysis, the top 10 percent designated as world class were using six different ERP packages from enterprise vendors Baan, J. D. Edwards, Lawson, Oracle, PeopleSoft, and SAP.

"Ninety-six percent of companies that implement one of the top three ERP finance packages [Oracle, PeopleSoft, SAP] are not world class," said Greg Pleasants, senior business adviser for application ROI business advisory services.

"When we looked at the distribution of what ERP packages companies were using, there was little difference between world class companies and non-world class companies," Pleasants added.

Hackett used 150 companies from its customer database to analyze the results.

According to company spokesman Gary Baker, the fact that The Hackett Group sells best practice advice does not take away from the value of its findings.

"Virtually 80 percent of the Fortune 100 and 93 percent of the Dow Jones industrials turn to us for an evaluation of how to improve the quality of finance, IT, HR, and other back-office operations," said Baker.

The current research was designed for companies looking to improve the value of their ERP packages, said Baker. To that end, Hackett benchmarked hundreds of responses broken down by organizational, functional, and technical processes.

"We measure, for example, the percentage of electronic purchase orders versus the total number of purchase orders and ask how long it takes to close out the month and how many line items are budgeted," said Pleasants.

For its financial benchmarking, Pleasants ticked off a number of other metrics used by Hackett, including how many full-time equivalent employees support the finance function measured as a percent of revenue, how many journal entries have errors in them, what percentage of time a company uses spread sheets for budgeting, and if there are self-service applications in place for financial managers to run their own reports or is it under central control.  

The real differentiators, according to Pleasants, are best practices such as the use of "evaluated receipts in accounts payable." Also known as invoiceless payments, the use of pay upon receipt eliminates the manual intensive process of matching receipts to purchase orders after the fact.

Pleasants also suggests that corporate credit cards that have limitations as to what type of items can be purchased eliminates the pre-approval process and also reduces errors.

The report gives a number of "do's" and "don'ts" for CFOs looking to improve their financial processes. The action items on the plus side include ensuring that organizational structure can incorporate best practices, that an ERP solution fits within the current IT environment, and that if a best-of-breed approach is taken, a company must ensure that new components can be integrated into the current architecture.