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ROI ANALYSIS YOU CAN TRUSTTM

Comparing the Real ROIfrom Oracle and SAP

This document was developed by Nucleus Research at the request

of Oracle to help its salespeople and customers understand and

compare in context the results of two Nucleus Research Real ROI

reports: #D23 The Real ROI from SAP, and #E36 The Real ROI

from Oracle E-Business Suite.

THE NUCLEUS REPORTSNucleus analysts independently conducted reference checks of 22

Oracle E-Business Suite customers and 21 SAP customers. The

customers were identified from the customer case studies and success

stories on each companys Web site.

WHOS NUCLEUS?

Nucleus Research is an independent IT analyst firm established in 2000

to help companies evaluate the return on investment from technology

projects. Nucleus has published thousands of independent ROI case

studies and helped hundreds of companies evaluate their own business

cases for ERP and CRM deployments. Nucleus is the only IT analyst

firm registered with NASBA, the National Association of State Boards of

Accountancy, for its unbiased and credible IT ROI methodology.

WHO PAID FOR THESE REPORTS?

The original reports were developed completely independently by

Nucleus for its user subscription service. Oracle learned about the

reports after they were published and acquired reprint rights from

Nucleus.

ROI AND PAYBACK

65 percent of Oracle E-Business Suite customers achieved a positive

return on investment after an average deployment time of 3.1 years.

Nucleus estimated that more than 90 percent of Oracle applications

customers could expect a positive ROI within 5 years.

43 percent of SAP customers had achieved a positive return on

investment after an average deployment time of 2.8 years. Nucleus

was not able to estimate an expected payback period for SAP because

many companies had no clear expectations of when they would achieve

a positive ROI and the expected payback period could not be project

based on current realization of benefits.

2005 Nucleus Research, Inc.

Reproduction in whole or in part without

written permission is prohibited. Nucleus

Research is the leader in the return on

investment analysis of technology. Please

visit www.NucleusResearch.com.

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Whats ROI?

Return on investment is calculated by dividing the average annual net

benefits over a 3 year period by the initial costs:

(Y1+Y2+Y3)/3

initial cost

Benefits include both direct cost savings and productivity and other

indirect benefits; costs include software, hardware, personnel,

consulting, and training.

DEPLOYMENT SIZE

The range of deployment size for Oracle was from 20 users to 3400

users; for SAP, the range was from 2 to 5000.

Deployment Expectations

64 percent of Oracle deployments were completed on time versus 71

percent of SAP deployments.

55 percent of Oracle deployments were completed on budget versus 52

percent of SAP deployments.

BENEFITS

Respondents indicated that

48 percent of Oracle customers increased user productivity.

39 percent of Oracle customers improved financial management.

26 percent of Oracle customers reduced IT costs.

SAP customers received benefits from increased productivity, improved

operations management, and improved information organization and

access; however, the majority of companies found those returns were

not significant enough to deliver a positive ROI. The benefit totals broke

down as follows:

50 percent of SAP customers increased user productivity.

35 percent of SAP customers improved information organization

and access.

30 percent of SAP customers improved operations management.

COST COMPARISONS

Initial costs Oracle average Oracle median SAP average SAP med

Software 1,729,688 550,000 1,853,333 1,000

Consulting 2,301,429 787,500 3,637,039 850

Hardware 284,500 62,500 882,000 345

Personnel 675,000 750,000 2,480,000 806

Training 263,088 57,072 1,271,550 137

Total 5,253,705 2,207,072 10,123,922 3,139,

Ongoing costs Oracle average Oracle median SAP average SAP med

Softwaremaintenance

591,924 330,000 1,016,616 637

Personnel 1,590,000 900,000 3,360,000 1,4403-year TCO 7,435,629 3,437,072 14,500,538 5,216,

KEY POINTS

Costs

Oracles average costs were 48 percent lower than SAPs.

Oracles median costs were 29 percent lower than SAPs.

Oracles average 3-year TCO was 48% lower than SAPs.

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Oracles median 3-year TCO was 34 percent lower than SAPs.

PERSONNEL REQUIREMENTS

It takes fewer internal personnel to deploy Oracle: an average of

81 man-months of internal personnel were needed for Oracle,

compared to an average of372 for SAP.

It takes less training to deploy Oracle: an average of27 hours

of training for Oracle, compared to an average of49 hours forSAP.

IS ORACLE MORE EXPENSIVE PER USER FOR SOFTWARE AND

CONSULTING?

No. Because the average Oracle deployment studied was smaller than

the average SAP deployment studied, customers didnt get as much of a

volume discount on software and the consulting costs are fixed, not

variable.

ROI CHALLENGES

SAP customers faced three key challenges:

Lack of breadth and repeatability. Companies werent able to

deploy to as many users as they had hoped, or impact enoughprocesses positively on a frequent basis, to achieve enough

benefits for a positive ROI.

High personnel costs.

Excessive customization. Extensive customization slowed

deployment and increased consulting costs.

Oracle customers faced the following key challenges:

Need for more thorough vetting of outside consultants. More

rigorous investigation of all members of the consulting team

would have lessened delays companies experienced in

completing the deployment of Oracle applications.

Buying ahead of business need. Some companies had

applications sitting on the shelf as they were waiting for internal

resources to deploy it.

Staying off the bleeding edge. Many companies could have

achieved a greater ROI if they had not deployed the .0 releases

of Oracle applications.

CONCLUSION

SAP projects are larger in scale and scope and thus take a

longer time to reach positive ROI than Oracle.

More Oracle customers than SAP customers achieve a positive

ROI. Ninety percent of Oracle customers can expect a positive

ROI in fewer than 5 years.

SAP customers often face customization and integration

challenges that slow deployments and increase consulting and

personnel costs.

Oracle has a lower overall TCO than SAP.

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