Fueled by globalization, midmarket growth and other factors, the market for ERP software will reach $47.7 billion...
By submitting your email address, you agree to receive emails regarding relevant topic offers from TechTarget and its partners. You can withdraw your consent at any time. Contact TechTarget at 275 Grove Street, Newton, MA.
by 2011, according to AMR Research Inc. That's up from $28.8 billion last year -- a compound annual growth rate of almost 11%.
In 2006, "core" ERP license revenue grew 18% to $9.2 billion. For AMR's purposes, core ERP license revenue includes finance, order management, inventory control, purchasing and manufacturing functionality. Core ERP products are what companies tend to implement first, before extending to other products like CRM or business intelligence (BI), according to Jim Shepherd, a vice president at Boston-based AMR.
"Overall, this is the healthiest the ERP and enterprise applications market has been since the 1990s," Shepherd said.
Manufacturing traditionally makes up the largest share of ERP spending, but AMR expects retail, the public sector, financial services, healthcare and telecom to be strong drivers of this round of growth.
In established ERP markets -- Western Europe and North America -- many midmarket companies are going global, Shepherd said. In fact, he expects globalization -- along with a generally strong economy and a shift from distributed to centralized systems in businesses -- to be a major driver of ERP market growth.
"Many companies are deciding they want to compete in the global market, or are being forced by their customers to go global, or need to source their products globally," he said. "That means new business processes or entire new systems, because their current systems weren't designed to deal with global business issues."
Shepherd also pointed out that in most other parts of the world, the midmarket is the only market, as there aren't as many very large businesses in developing countries. So, if companies like Oracle or SAP are going to compete in China, India or other emerging markets, they will have to serve them largely with midmarket offerings.
"SAP has been doing very well with All-in-One and Business One," Shepherd said. "People forget how big a piece of SAP's business midmarket is from the customer base perspective. They have very quickly built a stable of channel partners."
Of course, one of SAP's major midmarket products in the next five years is likely to be its SaaS offering, A1S, due out in 2008.
Although previews of A1S look impressive, it is too early to tell how it will fare, Shepherd said. SaaS is here to stay, however, and could make up 25-30% of the overall ERP market by 2011, he added.
"My expectation is within two to three years all of the vendors will offer a Software as a Service option," he said. "I don't think any companies providing on-premise software will stop offering that option, but they will all offer on-demand as well, and allow customers to buy either and move from one model to the other."
As for other trends for users to watch for, Shepherd pointed to the benefits of service-oriented architecture (SOA) coming to fruition.
"SAP is still in the middle of its transition to SOA," he said. "That's going to add flexibility for users; they'll have more deployment options, and it should be easier to manage ERP systems -- especially upgrades."
Dig Deeper on SAP trends, strategy and ERP market share