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Sole-sourcing BI from Your ERP Vendor: IT Convenience or Strategic Business Decision?
Enterprise Resource Planning
is also known as :
Sole-sourcing Business Intelligence
ERP Vendors Datamonitor
Sole-sourcing BI from ERP Vendors
ERP Sole-sourcing Trends
Existing ERP System,
Incumbent ERP Vendor,
Enterprise Resource Planning Incumbent,
ERP Application Incumbents,
ERP Vendor Selection,
ERP Software Vendors,
ERP Vendor Evaluation,
Business Intelligence ERP,
Major ERP Vendors,
ERP Vendor Comparison,
Business Intelligence Vendor,
Leading ERP Vendors,
Incumbent ERP Vendor Promises.
Is sole-sourcing BI from ERP vendors
delivering on its promises?
In the last two years, the software industry has witnessed a consolidation in the
business intelligence (BI) market. In BI, enterprise technology conglomerates
identified a strategic growth market and a great opportunity to upsell to their
existing install base, primarily that of enterprise applications such as enterprise
resource planning (ERP). This consolidation has rendered sole-sourcing BI from
ERP vendors an alluring option for many organizations.
In order to explore the benefits and drawbacks of sole-sourcing BI from ERP
vendors Datamonitor has conducted a study of 100 enterprises from the US and
EU that have deployed BI and enterprise applications from the same vendor. The
survey aims to investigate whether or not customers are experiencing what solesourcing
promised to deliver.
Following a review of the survey results, Datamonitor makes the following
- Although business managers are involved in the selection process, BI vendor
selection is motivated by ease of procurement by the IT department
stakeholders rather than the needs of the business users.
- While sole-sourcing BI from ERP vendors promises tighter integration with
transactional applications and IT procurement simplicity, the benefits are not
- Sole-sourcing BI from ERP vendors still requires too much effort on the part of
IT to manage and operate a BI system while not empowering the business
users through self-service.
Consolidation has rendered BI/ERP solesourcing
an alluring option for customers
During the last several years, the pressure of commoditization and the desire of
the enterprise technology conglomerates to expand into new fast-growing growth
markets have led to BI market consolidation. Following a series of blockbuster
acquisitions in 2007 and 2008, procurement of both BI and enterprise application
systems from the same vendor is an option for many organizations looking to
Datamonitor surveyed 100 SAP customers to
understand the implications of sole-sourcing
The SAP customer base was selected as the
representative of the broader BI/ERP sole-sourcing
In order to explore the implications of sole-sourcing BI from ERP vendors on
organizations' ability to implement and support effective BI strategies, Datamonitor
conducted a study of 100 enterprises from the US and the EU that have solesourced
BI from an incumbent ERP vendor. To be precise, the survey includes 50
enterprises from the US and 50 from the EU that have deployed both SAP ERP and
SAP Business Information Warehouse (SAP BW).
Given that SAP commands the largest share of the enterprise applications market,
Datamonitor considers the SAP BW user base to be the most illustrative example of
BI/ERP sole-sourcing dynamics. Datamonitor believes that the sample is
representative of the trends and behaviors associated with sole-sourcing BI from
IT-driven sole-sourcing struggles to support
business users' needs, escalating the costs
The findings of the survey indicate a number of key trends within organizations
that decided to sole-source their BI application from their ERP vendor:
- Selection Process: Selection process and criteria heavily favored the needs of
the IT department and treated the business user requirements as a secondary
consideration. In most cases, the ERP vendor was the only solution actually
- Reliance on Spreadsheets and IT Department: Business users'
requirements are not being fully met by the BI and Performance Management
system. Therefore, business users still rely on spreadsheets to conduct a large
majority of their BI activities. Business user reliance on IT departments to
conduct day-to-day BI transactions is prevalent, and in some cases stifling,
within organizations that choose to sole-source BI from their ERP vendor.
- Hidden Costs: Although customers who purchased BI systems from their ERP
vendor expected it to be the most cost-effective option, the survey found that
significant incremental costs were incurred, primarily through increased
headcount in the IT department as well as through roll-out budget overruns
and project delay costs.
Selection process heavily favored IT criteria
The principal motive behind the decision to sole-source
BI is the ease of procurement to the IT department
Almost three quarters (73%) of the SAP BW customers surveyed indicated that
price, contract flexibility and integration with ERP were the principal motivations
behind the decision to sole-source BI from their incumbent enterprise application
vendor. By contrast, factors important to business users, like information delivery
capabilities, alignment with the commonly-used business tools or business users'
demand for a particular application, account for just over a quarter of responses.
The importance of the procurement factors is further highlighted by the closer
scrutiny of the primary drivers behind the decision to sole-source BI from ERP
vendor. Figure 1 demonstrates that sole-sourcing is motivated mostly by:
- promise of closer integration with the existing enterprise application landscape;
- favorable pricing options and strategic links to the ERP vendors.
Precisely half of the organizations surveyed cited integration with the existing ERP
system as the primary reason behind the decision to sole-source BI from ERP
vendor. Favorable pricing options and strategic supplier status account for a
further 20% and 10%, respectively.
Business-driven selection factors, on the other hand, are clearly deemed to be of
secondary importance. In only 16% of enterprises, end-user considerations (such
as alignment with business user tools, users' preferred choice or self-service
capabilities) were the primary motive to sole-source BI from their ERP vendor.
The findings of the survey indicate that the requirements and preferences of
business users are typically ignored in the BI solution selection process, even
though the success of a BI initiative hinges on meeting everyday needs of these
constituents. In many cases, the brunt of dysfunctional BI systems will be borne by
the IT departments. After all, IT staff will be required to manipulate the BI system
on the behalf of the user, at a considerable cost to their time and potentially
damaging implications of unfulfilled business user requirements.
An ERP vendor's BI solution is often the default choice
of IT departments
The Datamonitor survey also revealed the following insights:
- In almost half of the cases surveyed, only an incumbent ERP vendor was
invited to submit a request for information (RFI) or a request for proposal
- Further 11% of respondents would invite two to four vendors, including an ERP
vendor, to submit the tender documentation but would only conduct detailed
technical evaluation or proof of concept exercises with the ERP incumbent.
- In over 50% of all competitive situations, the ERP incumbent is the only
seriously evaluated option. In contrast, only 16% of the respondents would
invite five or more vendors to tender, including the ERP incumbent.
There are several trends behind the reliance on an ERP incumbent. For example:
vendor consolidation is shrinking the pool of viable BI solutions; the selection
process inevitably focuses on a smaller number of alternatives; the promise of
closer integration with the existing enterprise application is alluring; and IT
departments often wield considerable influence within SAP accounts.
Nevertheless, the fact that in over half of the cases surveyed only ERP application
incumbents were seriously considered raises the issue of whether sole-sourcing BI
from ERP vendors is primarily a procurement convenience.
IT-driven sourcing creates challenges fulfilling
business users' needs
Supporting business users' BI requirements has proven
Many of the organizations included in the survey reported that they are content
with their sole-sourced BI system's capability (in this case SAP BW) to support
their business users' BI requirements. However, the survey also revealed that
support for business users is far from perfect.
The respondents frequently cited complaints regarding the information delivery and
business user support of their sole-sourced BI system. The most common
complaint is the need for better self-service support and the flexibility of the
information delivery modules.
"Our business users are finding the tool difficult to use without additional
assistance." - Project manager at a US manufacturer.
"SAP BW has been perceived as too transactional and not flexible enough." -
Global head of IT with a large energy/ utilities organization in Norway.
"The intelligence is there, but the presentation, information and the layout issues
are yet to meet users' expectation. The information is correct, but the
presentation needs to be improved." - Head of IT at a large IT services
organization in the Netherlands.
"The system needs lot of improvement because it is IT centric. Our users do not
have the ability to do ad-hoc reports, therefore it needs IT involvement." -
Director of technology at a US retailer.
Business users remain dependent on their IT
departments for reporting and information delivery
According to the results of the study, 42% of enterprises believe that
improvements are necessary if their sole-sourced BI system is to meet the
information needs of their business users. As some of the quotes from the survey
indicate, far too few business users of BI systems sole-sourced from ERP vendors
are entirely self-sufficient in terms of information delivery.
While less than a quarter of the organizations claim that their business users selfservice
their information delivery needs, 75% depend on IT. To be more precise:
- One third of organizations surveyed claim that they depend entirely on IT to
create the BI content and reports.
- Almost half (42%) rely on the combination of IT-built reports and
supplementary spreadsheets as the de-facto ad-hoc query and reporting tool.
Business users are still overly reliant on spreadsheets
as primary BI tool
Another leading indicator of the effectiveness of a BI solution in meeting the needs
of business users is the degree of reliance on spreadsheets (primarily MS Excel) for
information delivery, ad-hoc analysis of BI content or performance management
tasks such as planning. Modest reliance on auxiliary systems, such as
spreadsheets, indicates a pervasive deployment of BI system and its involvement
in the everyday routine of the business users - the goal of all BI initiatives.
The survey of the organizations that have sole-sourced BI from their ERP vendor
- 82% of the organizations surveyed state that their business users are heavily
or moderately reliant on spreadsheets in order to consume BI content
effectively, almost half of which indicated that their business users are heavily
reliant on spreadsheets to consume data from the BI system.
- Only 18% believed that their users are modestly reliant on spreadsheets for
report creation and analysis.
The pitfalls of using MS Excel (or any other spreadsheet tool) as a reporting and
ad-hoc data analysis tool have been well documented, but are often ignored by IT
decision makers. There is no point denying the importance of spreadsheets or their
role in the future of information management and delivery. At the same time,
however, it is worth repeating that spreadsheets are not suitable for a vast range
of tasks, particularly those that require a broader audience of users or
collaborators and repeated engagement.
While the familiar interface makes spreadsheets ideal exploratory environments,
the lack of data integrity enforcement and error checking, combined with awkward
updating and synchronization, mean that reliance on spreadsheets indicates failure
of the BI system to engage business users.
While the proliferation of spreadsheets may appear to be perfect solution for
information delivery, it undermines the very reason to invest in the BI systems in
the first place. In the long run, reliance on spreadsheets creates a significant drain
on resources as they lack audit controls; expose the organization to risk due to the
absence of a unified view on the data; and adds to the user support and
maintenance burden. While Datamonitor has no doubts that spreadsheets will
remain a crucial part of information workers' arsenal, it is clear that MS Excel, or
another spreadsheet application, is not and cannot be a surrogate for self-service
Poor self-service information delivery pushes business users to demand
A lack of self-service information delivery is further underlined by the fact that in
only 26% of the organizations surveyed a new report can be generated within a
day. In 82% of the cases, the reports are created within a week. This means that
in almost one in five organizations it takes over a week to create or alter a report.
Given the pressure for just-in-time, informed decision-making exacted by the
contemporary business environment, this implies that in a majority of the
enterprises that have sole-sourced BI from ERP vendor, reports and other BI
content could well be obsolete by the time they are delivered to the business
While such a situation is clearly untenable, it goes a long way in explaining the
popularity of spreadsheets. Datamonitor believes that in the vast majority of cases,
unstructured data extracts used for further analysis and formatting in spreadsheets
are forced upon business users because BI systems sole-sourced from ERP vendors
are not able to respond to rapidly-changing information delivery requirements in a
Hidden Costs of BI/ERP sole-source
Like much of the IT projects, sole-sourced BI
deployments tend to be behind schedule and over
Unfortunately, it is not uncommon for an IT project to be over budget. In the
Datamonitor's survey, 46% of the BI deployments sole-sourced from ERP vendors
were over the budget or did not even have an anticipated budget at the time of
purchase. Although half of those budget overruns are exceeding the total
anticipated cost of project by less than 10%, significant budget overruns are not
entirely unheard of.
Compared to budget overruns, delays in roll-out timeframes are even more
common. In fact, the majority of the BI deployments sole-sourced from ERP
vendors, or 56% to be exact, are delivered late. Perhaps more alarmingly,
precisely half of all delayed BI projects sole-sourced from ERP vendors were
running at least several months behind the originally anticipated schedule.
IT projects behind time and over budget are all too common. However, one of the
central tenants behind sole-sourcing BI from ERP vendors is accelerated time to
value based on the tighter integration between BI and the transactional
applications. In that respect, one would expect performance metrics to be better
than they currently are.
However the most startling hidden costs incurred by BI/ERP sole-sourcing
customers is the amount of investment in specialized IT resources needed just to
maintain the system and service the BI content needs of the business users. Due
to the lack of alignment with business user needs and lack of user centricity of the
system, customers who sole-source BI from their ERP provider have to invest
significantly in IT staff in order to maintain and make it work for users.
Datamonitor's survey demonstrates the following:
- Only 14% of the organizations surveyed are keeping constant the number of
full time employees (FTE) dedicated to maintaining and running their solesourced
- Two thirds (66%) of organizations are doubling or tripling the number of FTEs
dedicated to maintenance of sole-sourced BI systems.
- Under a quarter of all respondents are expanding their BI maintenance teams
Of course, a certain degree of maintenance capability augmentation is to be
expected, as just over a half of the enterprises included in the survey have
expanded their internal BI user base since the initial deployment. However, it is
clear that the rate of the addition of the maintenance staff exceeds the average
rate of internal expansion of the BI user base. In fact, the resource creep
associated with the BI systems sole-sourced from ERP vendors would well be even
more marked if the hidden cost of delegating the responsibility for report creation
and ad-hoc analysis through business users' reliance on spreadsheets is taken into
Clearly, the pattern of spiraling IT maintenance resources required to run BI
systems sole-sourced from ERP vendors is fuelled by far too great involvement of
IT, either direct or indirect, in information analysis and delivery process.
Datamonitor believes that the situation is particularly untenable if it is considered
that sole-sourcing promised tighter integration between BI and transactional
systems. Based on the evidence collected in this survey, such benefits are not
being readily realized.
It could well be argued that the project delivery track record of BI systems solesourced
from ERP vendors is certainly in line with expectations with the current
industry practices, even though sole-sourcing promised faster time to value
through rapid integration with transactional systems as well as a more favorable
Nevertheless, the proliferation of the costly staff dedicated to maintenance of BI
systems due to inadequate information delivery capabilities certainly means that
the total cost of ownership of the BI systems sole-sourced from ERP vendors would
be much higher than anticipated. Put simply, any potential savings in costs of
licenses could well be offset by increases in the far more costly associated
Based on research conducted on 100 enterprises that have decided to procure BI
systems from the incumbent enterprise application vendor, in this case SAP BW, it
can be concluded that sole-sourcing BI from ERP vendors could be hindering the
potential impact of BI. More pertinently, several of the core value propositions of
BI systems sole-sourced from ERP vendors are not manifested universally.
Although business managers are involved in the selection process, BI sole-sourcing
from ERP vendors is motivated by:
- ease of procurement from the incumbent enterprise application vendor;
- tighter integration with transactional applications.
While sole-sourcing BI from an incumbent ERP vendor promises tighter integration
and IT convenience:
- accelerated time-to-value is not apparent, projects are still delayed and over
- IT is excessively involved in running the BI system, particularly in reporting
and information delivery;
- reliance on spreadsheets as a substitute for business user self-service goes
against BI principles;
- spiraling needs for dedicated IT maintenance staff increases total cost of
- Reconsider procurement practices in order to find the best way to cater to the
needs of business users in the BI selection and adoption process. After all, it is
the participatory and pervasive adoption of BI by the business users that
ensures the success of a BI initiative.
- Evaluate whether the benefits of simplified procurement and tighter links with
enterprise applications are as compelling as they may appear at first, given the
- the lack of business user participation in BI, and the misalignment with
- additional workload and headcount costs to IT departments created due to
lack of self-service facilities and complexity of usage;
- productivity issues due to lack of intuitive user experience of tools for the
- increasing software maintenance fees and other costs associated with
- the risk of inaccurate information in the decision-making process due to a
lack of single version of truth caused by the continued prevalence of
- Consider the opportunities to devolve responsibility of serving business users
through self-service reporting facilities in order to optimize your IT
- Conduct thorough evaluations of a broad range of vendors, including the
enterprise application-independent BI vendors, in order to ensure that the
solution meets the needs of business users and is designed for self-service.
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