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Study Counters SAP Claim about Client Profits

Does using workforce management software from SAP help or hurt profits? That question has been put into relief by a recent study concluding that SAP customers are 20 percent less profitable than their industry peers.

May 12, 2006
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Does using workforce management software from SAP help or hurt profits? That question has been put into relief by a recent study concluding that SAP customers are 20 percent less profitable than their industry peers.

The report, published in March by analysis firm Nucleus Research, doesn’t address the profitability of customers specifically using SAP’s human resource software. But the study hints at possible problems for those clients. Nucleus found that customers of SAP’s enterprise resource planning software—a product family that includes human capital management—were 32 percent less profitable than their peers.

SAP, though, blasts the report as "junk science" based on faulty methods.

Jason Averbook, CEO of consulting firm Knowledge Infusion, also is skeptical of the Nucleus report. He says the study fails to include some major customers of SAP human capital management software, including Coca-Cola, Home Depot and the Body Shop. "The customers that we work with that run SAP are some of the best companies in the world," says Averbook, whose firm focuses on HR technology and business strategy.

In the past, SAP human resources software lagged behind PeopleSoft’s in terms of functionality, Averbook says. "Most people in the industry would say SAP caught up to PeopleSoft two years ago," he says. Oracle acquired PeopleSoft last year.

According to research firm Gartner, SAP was tops in new-license revenue for human capital management software in 2004, the latest year for which data is available.

Nucleus Research CEO Ian Campbell says his firm’s report was an attempt to verify an SAP ad launched last year. SAP claims companies running its software are 32 percent more profitable than companies that don’t. Nucleus looked at all the publicly traded SAP customers listed on the software company’s Web site, checked a measure of profitability at those 81 firms called "return on equity" and compared that with the return on equity at companies in the same industry. It then contrasted the average of the return on equity of the SAP customers with the average return of the various industry groupings.

Campbell also says SAP won’t let Nucleus or other researchers see the data behind its ad.

Bill Wohl, SAP vice president of communications, says SAP won’t give its study data to Nucleus because it involves a confidential customer list. He said SAP’s claim was based on a review of nearly 600 SAP customers and more than 3,300 companies in total.

Wohl also criticizes Nucleus’ methods. Among the problems, he says, is a relatively small sample size.

The dust-up over dueling studies may obscure a bigger issue—whether HR software itself can boost profits. Of greater importance than whether a business uses Oracle, SAP or other workforce management software is how much the firm seeks to squeeze strategic information out of the system, says Nov Omana, founder of consulting firm Collective HR Solutions.

"If truly the organization sees human resources strategically, and has a culture and philosophy that really do support that idea, then it doesn’t matter what system you’re using," he says.

Ed Frauenheim

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