Following a hotly contested battle that reflected both vendors' determination to dominate the growing enterprise application mid-market, SAP AG has been selected over Oracle Corp. to provide ERP software to Southco Inc., a Concordville, PA, maker of hinges and fasteners. Contract value was not revealed.
Southco, which makes latches for automotive, high-tech, and other applications, selected the mySAP Business Suite over Oracle's E-Business Suite following a six-month evaluation process. Southco has launched a two-year project to implement the SAP ERP software across its 15 worldwide plants, beginning with a facility in Sweden. Southco also plans to implement SAP's CRM and data warehouse products following the ERP rollout.
The competition between Oracle and SAP for the deal was intense and generated a good deal of high-level attention and pre-sales resources from both vendors, said Lutz Richter, vice president and CFO at Southco. Both vendors sent waves of discrete manufacturing specialists to meet with Southco officials, Richter said. SAP Americas CEO and President Bill McDermott was assigned to head a steering committee overseeing SAP's handling of the Southco deal.
"The attention we got was equally strong from Oracle and SAP. We were amazed," Richter said. "They both made it clear that they were very serious about this account."
It's perhaps not that surprising that the Southco deal attracted such high-level attention and resources. Both Oracle and SAP have been targeting mid-market and even small customers as growth in the enterprise market has waned. Both have been expanding their reseller networks and beefing up their product offerings for mid-market companies. Oracle's acquisition of PeopleSoft and JD Edwards, for example, significantly boosted the company's mid-market presence.
Additionally, Southco is an unusually attractive mid-market customer. Through organic growth and acquisition, the company has doubled in size over the past four years and is currently growing at a double-digit rate. On top of that, the 2,900-person, 107-year-old, privately held company supports global operations and customers. Southco has four plants in China and three in Europe, operates in 65 countries, and manages 100,000 SKUs.
That global footprint was the principal reason Southco ended up concentrating its ERP search on Oracle and SAP.
"We needed someone capable of providing services globally and with a product that catered to local requirements," Richter said. "That separated the men from the boys. It eliminated everyone but SAP and Oracle."
In addition to the global reach it needed to support, Southco also wanted to license the enterprise software directly from the vendor, not from a reseller. "We were concerned that there might be a blame game if something went wrong," Richter said. That eliminated Microsoft, which, while focused on the mid-market, markets primarily through resellers.
Southco was looking for a new enterprise software product to replace a suite it had deployed in 1992. That product -- Symix, now owned by Infor Global Solutions -- while adequate for a small, mostly domestic manufacturer like Southco in the early 1990s, could not keep up with the company's growing needs. Southco's old ERP system, for example, didn't support EDI communications with automotive customers, nor did it include integrated analytics.
"A year ago we said that if we intend to double our size again, we need a state-of-the-art platform to help us grow," Richter noted.
Southco also wanted an ERP system that could support its lean manufacturing initiative with features like electronic kanban and inventory management.
After Southco narrowed its ERP evaluation to SAP and Oracle, the company assembled a cross-functional team from its global operations. The team evaluated both mySAP Business Suite and Oracle's E-Business Suite and made visits to SAP and Oracle customer sites in the U.S. and Asia.
When the team finally made its selection, the decision had less to do with functional differences between the two products and more to do with factors such as the availability of expertise, global support, and vendor strategy. Southco determined that mySAP expertise was more available than Oracle E-Business Suite acumen and that support -- especially in Asia -- would be stronger from SAP, Richter said.
Southco also had some concern about Oracle's product direction, specifically the company's Fusion project, which will merge the functionality of the company's various home-grown and acquired application suites -- including E-Business Suite and EnterpriseOne -- by 2008.
"We were a bit concerned about Fusion," Richter said. "We found it a bit nebulous, and we were concerned that we might have to go through another platform transition in three years because of Fusion."
In the end, however, the differences between SAP and Oracle were minor, he said. "Either package would have worked fine for us. It was really a game of inches."
Southco isn't the only mid-market manufacturer showing concern over Oracle's Fusion project, said Bob Anderson, vice president for small and mid-market applications at Gartner Inc. "Oracle's doing a better job of explaining [its] strategy. The [company] recently erased the issues around ongoing support of existing applications by extending support," Anderson said. "But they still need to rationalize Fusion."
Anderson said confusion remains over whether E-Business Suite or EnterpriseOne is Oracle's primary offering for mid-market companies. As a result, he said, SAP is currently leading the mid-market race. "There's no question SAP is gaining market share in the mid-market, both from a revenue standpoint and a product/solution standpoint," Anderson said.
Oracle officials, however, dispute the notion that the company's product positioning is hurting its status in the mid-market. Oracle is pushing EnterpriseOne to mid-market companies in the Asia/Pacific region and Europe where that brand has higher recognition, said Lenley Hensarling, vice president and general manager for EnterpriseOne at Oracle. In the U.S., meanwhile, Oracle is primarily pushing E-Business Suite to mid-market companies.
"We're not seeing much confusion on that positioning from customers," Hensarling said. "The only confusion may be among analysts."
Meanwhile, he said, Oracle is tuning its marketing message to more directly address mid-market companies and is emphasizing its Accelerators, a set of tools which it says helps mid-market manufacturers deploy E-Business Suite more rapidly.
An Oracle spokesman declined to comment on the specifics of the Southco deal. He claimed Oracle is gaining momentum with mid-market manufacturers because it "can deliver enterprise-level, standards-based applications at a lower cost" than SAP. As evidence, he pointed to recent deals with companies such as New Age Electronics, Model Apparel, York Water, Radio Systems Corp., and Dantzler, which evaluated SAP but invested in Oracle applications.