Erp Sandip V1
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ERP market facts The global ERP software market grew 7.9% in 2006, leading to a market value of approximately $17.5 billion in license and maintenance revenue. ERP vendor revenue across all segments is expected to grow from $28.8B in 2006 to $47.7B by 2011. Core ERP license revenue grew to $9.2B in 2006, an 18% increase over 2005. While the ERP market has grown in revenue, consolidation continues to change the industry. In 1999, the top five vendors (J.D. Edwards, Baan, Oracle, PeopleSoft, and SAP) in the ERP market accounted for 59% of the industry’s revenue. AMR Research expects the top five vendors in 2005 (SAP, Oracle, Sage Group, Microsoft, and SSA Global) to account for 72% of ERP vendors’ total revenue. The report revealed several trends that affected the ERP market in 2004, including: •
The ERP market is entering another major technology transition phase. Service Oriented Architectures (SOA) may have the same disruptive effect that other technologies have had on the market, such as the emergence of client-server systems had in the 1990’s.
•
The pace of acquisitions shows no sign of slowing down. Oracle’s purchase of Retek and vendors like Sage Group, SSA Global, Infor Global Solutions, and Epicor have all been very active in the M&A space and have grown more rapidly than the overall ERP market.
•
The midrange ($50M - $1B in annual revenue) and SMB (less than $50M in annual revenue) markets continue to be a major focus area for many of the ERP vendors. Midrange solutions and channels are critically important for penetrating China, India, Eastern Europe, and Latin America.
•
ERP buyers have moved away from large, upfront purchases. Now most tend to license user seats and functional ERP modules incrementally as they deploy a product. Along with widespread discounting, this has led to smaller average deal sizes.
1. India ERP market • •
The Indian ERP market is expected to grow at a CAGR of 25.2% over the next five years. According to the study, the market was $83 million in 2004, and is forecasted to be over $250 million in 2009. The majority of Indian manufacturing companies are small by global standards, requiring easy-to-use ERP solutions to meet their specific process requirements, including localization needs to address the continually evolving tax and statutory requirements.
2. Singapore ERP market •
The enterprise resource planning (ERP) software market in Singapore is on a comeback trail as small- and medium-sized businesses (SMBs) step up deployment of mid-market ERP (MERP) solutions, specifically designed to suit their functional requirements. The market has returned to growth mode after a brief lull caused by the demand saturation for traditional ERP software among large organizations.
3. Dubai ERP market •
•
Market value increased from $134 million in 2003 to $155 million by end 2004. The study forecast a compound average growth rate of 14 percent in the next five years, which will see the region's ERP market touching the $300 million mark by end 2009. The largest spender on ERP in the GCC, Saudi Arabia, is responsible for almost 60 percent of the market, followed by the UAE and Kuwait.
ERP Market - Customer Segments The ERP software market falls into three primary segments by customer size: large companies, the midmarket, and small businesses.
Market segment
ERP Market Segments By Customer Size Size range Solution characteristics Representative vendors
(annual revenues) Large companies $1 billion plus
Global functionality, high network and transaction scalability, sophisticated reporting and analysis
SAP, PeopleSoft, Oracle
Upper midmarket $250 million to $1 Multinational functionality, Microsoft, Lawson, SSA billion but less scalability. Often sold Global, Geac, SAP, through channels rather than PeopleSoft Oracle direct to customer Lower midmarket
$50 million to $250 Multinational functionality Microsoft, Epicor, Exacta, million but significantly less Sage, NetSuite, SPA scalability. Often solf through BusinessOne channels rather than direct to customer.
Smaller business Under $50 million Single location, country Sage, Intuit, ACCPAC, specific, PC- or LAN-based. NetSuite Standardized packages with lower cost and complexity.
The Midmarket is the Battleground SAP has been ramping up distribution of its lower midmarket product Business One as well as refining its All-in-One offering for the upper midmarket. Big vendors are struggling to keep low TCO (Total cost of ownership). Also a highly leveraged, indirect channel is needed to reach the tens of thousands of midsize companies. Microsoft Business Solutions has built a vast indirect partner channel that has proven successful in this market.
SMBs' Rising Backbone: The Global ERP Market ERP traditionally has been sold to large organizations. That market is essentially totally penetrated. To continue to be competitive you focus on the install base. They're selling more to existing accounts. Sixty to 65 percent of SAP's revenue comes from existing accounts. What's preventing SMBs from investing in ERP is the cost, paired with the risks involved because the decision will affect their entire business, unlike enterprise companies that can try it out in a particular division or region. Software-as-a-service is a way to manage that. Every vendor needs to have a strategy around software-as-a-service, on-demand.
Challenges to ERP: 1. Service oriented architecture: SOA may not overcome ERP with one big swoop, but
through a dribbling of features toward the service layer, forestalling or reducing upgrades. And, indeed, much of this work may go to lower-cost offshore development firms and
integrators. Ultimately, Richardson argues, it’s the integrators who will benefit from the componentization and service-enabling of ERP. 2. Open source: There are other forces at work disrupting the ERP market as we now it. The
growing volume of open source offerings in this space, such as Apache OFBiz, SugarCRM, Tiny ERP, and Compiere. 3. SaaS: Then there are the software-as-a-service offerings, from Salesforce.com for the CRM
aspect to Plexus. (Oracle and SAP are already active in the hosted/SaaS space as well.) The Microsoft mass-market mid-market commodization threat also looms, via Dynamics GP/AX.
Salesforce as a ERP player? Salesforce has released AppExchange OEM Edition. Salesforce will be the platform allowing developers to develop and bolt on specialized on demand services; these services will be separate from Salesforce CRM service. What is interesting is by using Salesforce small development companies can write extremely specific functionality for micro markets e.g. an on demand eBay management module. Salesforce users have delivered "over 43,000 custom objects and custom applications". More than salesforce.com could ever deliver on its own.
References: http://www.exforsys.com/tutorials/oracle-apps/erp-overview.html www.cio.com www.salesforce.com
The ERP market is entering another major technology transition phase. Service Oriented Architectures (SOA) may have the same disruptive effect that other technologies have had on the market, such as the emergence of client-server systems had in the 1990’s.
•
The pace of acquisitions shows no sign of slowing down. Oracle’s purchase of Retek and vendors like Sage Group, SSA Global, Infor Global Solutions, and Epicor have all been very active in the M&A space and have grown more rapidly than the overall ERP market.
•
The midrange ($50M - $1B in annual revenue) and SMB (less than $50M in annual revenue) markets continue to be a major focus area for many of the ERP vendors. Midrange solutions and channels are critically important for penetrating China, India, Eastern Europe, and Latin America.
•
ERP buyers have moved away from large, upfront purchases. Now most tend to license user seats and functional ERP modules incrementally as they deploy a product. Along with widespread discounting, this has led to smaller average deal sizes.
1. India ERP market • •
The Indian ERP market is expected to grow at a CAGR of 25.2% over the next five years. According to the study, the market was $83 million in 2004, and is forecasted to be over $250 million in 2009. The majority of Indian manufacturing companies are small by global standards, requiring easy-to-use ERP solutions to meet their specific process requirements, including localization needs to address the continually evolving tax and statutory requirements.
2. Singapore ERP market •
The enterprise resource planning (ERP) software market in Singapore is on a comeback trail as small- and medium-sized businesses (SMBs) step up deployment of mid-market ERP (MERP) solutions, specifically designed to suit their functional requirements. The market has returned to growth mode after a brief lull caused by the demand saturation for traditional ERP software among large organizations.
3. Dubai ERP market •
•
Market value increased from $134 million in 2003 to $155 million by end 2004. The study forecast a compound average growth rate of 14 percent in the next five years, which will see the region's ERP market touching the $300 million mark by end 2009. The largest spender on ERP in the GCC, Saudi Arabia, is responsible for almost 60 percent of the market, followed by the UAE and Kuwait.
ERP Market - Customer Segments The ERP software market falls into three primary segments by customer size: large companies, the midmarket, and small businesses.
Market segment
ERP Market Segments By Customer Size Size range Solution characteristics Representative vendors
(annual revenues) Large companies $1 billion plus
Global functionality, high network and transaction scalability, sophisticated reporting and analysis
SAP, PeopleSoft, Oracle
Upper midmarket $250 million to $1 Multinational functionality, Microsoft, Lawson, SSA billion but less scalability. Often sold Global, Geac, SAP, through channels rather than PeopleSoft Oracle direct to customer Lower midmarket
$50 million to $250 Multinational functionality Microsoft, Epicor, Exacta, million but significantly less Sage, NetSuite, SPA scalability. Often solf through BusinessOne channels rather than direct to customer.
Smaller business Under $50 million Single location, country Sage, Intuit, ACCPAC, specific, PC- or LAN-based. NetSuite Standardized packages with lower cost and complexity.
The Midmarket is the Battleground SAP has been ramping up distribution of its lower midmarket product Business One as well as refining its All-in-One offering for the upper midmarket. Big vendors are struggling to keep low TCO (Total cost of ownership). Also a highly leveraged, indirect channel is needed to reach the tens of thousands of midsize companies. Microsoft Business Solutions has built a vast indirect partner channel that has proven successful in this market.
SMBs' Rising Backbone: The Global ERP Market ERP traditionally has been sold to large organizations. That market is essentially totally penetrated. To continue to be competitive you focus on the install base. They're selling more to existing accounts. Sixty to 65 percent of SAP's revenue comes from existing accounts. What's preventing SMBs from investing in ERP is the cost, paired with the risks involved because the decision will affect their entire business, unlike enterprise companies that can try it out in a particular division or region. Software-as-a-service is a way to manage that. Every vendor needs to have a strategy around software-as-a-service, on-demand.
Challenges to ERP: 1. Service oriented architecture: SOA may not overcome ERP with one big swoop, but
through a dribbling of features toward the service layer, forestalling or reducing upgrades. And, indeed, much of this work may go to lower-cost offshore development firms and
integrators. Ultimately, Richardson argues, it’s the integrators who will benefit from the componentization and service-enabling of ERP. 2. Open source: There are other forces at work disrupting the ERP market as we now it. The
growing volume of open source offerings in this space, such as Apache OFBiz, SugarCRM, Tiny ERP, and Compiere. 3. SaaS: Then there are the software-as-a-service offerings, from Salesforce.com for the CRM
aspect to Plexus. (Oracle and SAP are already active in the hosted/SaaS space as well.) The Microsoft mass-market mid-market commodization threat also looms, via Dynamics GP/AX.
Salesforce as a ERP player? Salesforce has released AppExchange OEM Edition. Salesforce will be the platform allowing developers to develop and bolt on specialized on demand services; these services will be separate from Salesforce CRM service. What is interesting is by using Salesforce small development companies can write extremely specific functionality for micro markets e.g. an on demand eBay management module. Salesforce users have delivered "over 43,000 custom objects and custom applications". More than salesforce.com could ever deliver on its own.
References: http://www.exforsys.com/tutorials/oracle-apps/erp-overview.html www.cio.com www.salesforce.com
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