Erickson Retirement Communities knew its financial systems needed an overhaul. So the Baltimore-based company, which operates 10 retirement centers on the East Coast, bought a suite of enterprise resource planning (ERP) software from J.D. Edwards & Co., a large software company in Denver.
Erickson spent about $3 million on the new ERP system, plus several hundred thousand dollars more in consulting and training fees. Expectations were high: Erickson's top management anticipated the end-to-end suite would be the last piece of major software they would ever need, and they expected the tools to provide trending and analytical data to aid in forecasting and planning.
Erickson's information technology staff spent two years working on the ERP implementation, getting the system up and running, overhauling processes, converting data into new formats, setting up users, battening down security, and training its workers. The J.D. Edwards suite provided a robust operational backbone that enabled Erickson to centralize key back-office operations, including accounting and payroll.
When it came to extrapolating specific data for use in analyzing trends, however, the system failed to produce. Erickson executives grew frustrated by being unable to pull out key information with just a few mouse clicks. The company was faced with a choice of either producing the reports manually or paying J.D. Edwards more consulting fees and being enslaved to its timetable. "It started to look hopeless for awhile," recalls Rob Cox, the project manager for Erickson's ERP implementation. "We went live, we're basically within budget, and now I'm facing the prospect of spending another half million dollars just to get reports out of this thing? We decided we were throwing good money after bad."
Things got really scary when Erickson asked the vendor to customize interfaces for a specialty billing system. The cost to customize its unique application programming interface
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s (APIs) was prohibitive. To compensate, Erickson added third-party software from Sunnyvale, Calif.-based Hyperion Solutions Corp. to help with querying, analysis and report writing. Hyperion's special applications have lifted a significant burden from the large ERP system, Cox said.
Erickson is not alone in its frustrations about the limits of large ERP suites, analysts say. Tools from huge vendors enable enterprises to consolidate many day-to-day functions but often lack the deep domain experience required for core business functions. That's why a growing number of companies are combining ERP software suites with best-of-breed applications geared for business-specific functions.
"The last three years, there's been a huge shift by the big application vendors to support a heterogeneous environment for their customers. They want to make their installed base as happy as possible -- that means helping them out with big problems. One problem all enterprises have, big or small, is [software] integration," says Joshua Greenbaum, principal analyst with Enterprise Applications Consulting, in Daly City, Calif.
User angst is further fueled by the ongoing shakeup in the market, most notably Redwood Shores, Calif.-based Oracle Corp.'s attempts to acquire PeopleSoft Inc., Pleasanton, Calif. The outcome of the hostile takeover bid will depend on how PeopleSoft shareholders vote. Oracle recently boosted its offer from $16 a share to $19.50 a share.
Oracle announced its intention to acquire PeopleSoft just days after PeopleSoft reached an agreement with J.D. Edwards to acquire that company. PeopleSoft's acquisition of J.D. Edwards has already been finalized.
Against the backdrop of the market shakeout, some enterprises openly wonder whether large application vendors may be losing their relevance, giving way to best-of-breed software vendors. Enterprises have concerns about who's watching out for them, says Tom Furphy, chief executive officer of Notiva Corp., a San Mateo, Calif., software company.
"Customers clearly recognize that, while an ERP partner provides key backbone technology, they can't be all things to all people, [able to] offer the depth of functionality and business-process knowledge that's required to solve all of their problems. Companies also don't want to support the cumbersome legacy systems or manual processes that they've relied on in the past," Furphy said.
Still, experts say Oracle and PeopleSoft needn't worry: They'll continue to have plenty of customers. Likewise, enterprises shouldn't be too alarmed over the upheavals in the applications market, says Scott Tiazkun, an analyst with Framingham, Mass.-based International Data Corp. "Maybe J.D. Edwards and PeopleSoft users have more worries because of the uncertainty but, overall, users should be happy about this," Tiazkun says. "It signals a commoditization of enterprise software."
Nor should they be concerned about dwindling choices, especially since Microsoft Corp. has plunged into the enterprise software market with offerings for project management, professional services automation and other basic business functions. "It means there are fewer vendors to choose from, but it brings enterprise software more within reach of smaller businesses," Tiazkun says.
David Taylor, chief research officer at TheInfoPro Inc., in New York City, says enterprises need to balance the cost of rewriting custom code with the expense of purchasing new ERP modules. This is especially true for enterprises that run a patchwork quilt of custom applications stitched together by services. "The more vendors you add to your system, the harder it is to find programmers who know the different applications," Taylor says.
There is no good answer to the question of whether a large vendor is a better or worse option, Greenbaum says. "There's [many] different factors that go into that question, and none of them are cookie-cutter answers. It needs to be done on a company-by-company basis."
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Debating ERP and best-of-breed
