How secure are SAP, Oracle and PeopleSoft’s bread-and-butter installed-base dollars? According to ERP BrandMonitor survey results, vendors have a weak hold on their customers’ hearts, minds and wallets.
ERP BrandMonitor is a quarterly decision instrument offered collaboratively by the Monitor Group, a leading strategy consulting firm, and the Yankee Group, a leading technology market research firm. The partnership combines Monitor’s branding and marketing consulting experience with the Yankee Group’s technology industry expertise. The ERP BrandMonitor tested the power of ERP providers’ corporate image among 350 business decision-makers. The results were surprising.
Despite the importance of repeat business, vendor affiliation is weak. No single ERP company stood out as a brand of choice. The share of respondents inclined to recommend a particular supplier was starkly lower than scores for similarly complex business products. It’s typical in a healthy business category to see about 50 percent of decision-makers recommending a market-leading brand. The highest recommended rating in the ERP category was 32 percent.
Competitive distinctions, which should be loud and obvious, were muted, if they existed at all (see Exhibit 1). With the exception of a few poor performers with distressed brands, vendors lack potent corporate characteristics or unique brand traits. This lack of distinction creates an opportunity for an existing or new player to push the category in a fresh direction and break away from the nondescript pack. For example, respondents rated an outside-the-category brand, IBM, more favorably on desired attributes than well-known category players such as Oracle and SAP.
The survey also illustrates a disconnect between buyer requirements and vendor performance. Decision makers want an enterprise software partner that “knows my business”, “provides good service”, and “offers a flexible and practical solution”, yet few vendors deliver these qualities. ERP players are associated with attributes like “technology leadership” and “innovation”, two characteristics with limited purchasing influence. Vendors promote speeds, feeds, and technology prowess, but these traits are not seen as meaningful or relevant to the basic challenges ERP customers face in today’s demanding business environment.
ERP vendors thrive on maintenance revenue and installed-base sales. As the market consolidates and competing products mature, repeat-customer revenue becomes even more important. Yet ERP brand loyalty and distinctive corporate characteristics, qualities that mature industries use to lock in customers, are weak.
Vendors have become overly dependant on ERP switching cost to ensure installed-base business. Even with high switching costs, a subtle market shift can wreck havoc in an industry dependent on repeat business for growth. As client-server computing taught Digital and as integrated web applications will teach ERP vendors, switching costs don’t guarantee growth.
Developing a distinctive corporate image and targeting products, sales people, and marketing materials at the attributes buyers value is a healthier way to drive growth. ERP vendors can also take advantage of weakness in the competitions’ corporate image to win business. Additionally, gaining insight into the good, bad, and ugly perceptions a $2 billion high-tech manufacturer has of SAP or Oracle (with the high degree of statistical probability that BrandMonitor® delivers) can drive a very effective sales tactics.
Vendors like SAP, Oracle, PeopleSoft, and Microsoft had a terrific run in the public markets in the 1990s. Between January and November of 2003, these ERP leaders under-performed the NASDAQ (see exhibit 2). The NASDAQ increased by 41 percent while the ERP BrandMonitor™ Composite increase by only 20 percent. Vendors need to invest to improve their images if they plan to recapture the growth and glory experienced in the 1990s.