The ERP Marketplace 2010
The ERP Marketplace 2010
The ERP Marketplace 2010
The last great boom for ERP was at the end of the 1990s, as large numbers of organisations around the world replaced their legacy applications in response to the potential doomsday scenario that was looming as a result of the Y2K bug. There were literally dozens of ERP vendors in the market, most of which prospered and grew at an impressive rate in a buoyant market.
Since those heady days, the ERP vendor landscape has changed dramatically. Today, as shown below, six vendors account for almost two thirds of global ERP sales and SAP and Oracle alone own 50% of the global market by revenue. Two of the top six vendors, Infor and Microsoft, did not have an ERP presence at all at the start of the last decade.
Fig 1: Percentage of Global ERP Revenue by Vendor (2008)
This has come about largely as a result of significant rationalisation as vendors sought to ward off static or declining revenues by acquiring other ERP products that provided access to new markets in different business sectors, geographies or client market segments.
While the rationalisation process has reduced the number of ERP vendors, it has not done much to reduce the number of ERP products since the majority of the products gained by acquisition are still being sold by their new owners. The range of products tends to reflect the nature of competition in the ERP market.
Typically, ERP products compete either horizontally by market segment or vertically by industry segment. SAP and Oracle dominate the ERP market in large organisations. Occasionally, Infor, Lawson or Microsoft will win projects in this segment, particularly if the customer is close to the lower boundary, but for really large organisations the choice almost always comes down to either SAP or Oracle.
At the small enterprise end of the market, Sage, Microsoft, SAP, Infor and to a lesser extent Lawson, compete with a number of smaller vendors of ERP systems, as well as a myriad of accounting packages and Best-of-Breed systems that offer elements of ERP functionality. It is noteworthy that of the top six vendors, only SAP and Sage have specific ERP products designed for the small enterprise market the other vendors compete in this segment with products that they also use for the mid-market.
The mid-market segment is the only one in which all of the top six vendors compete, along with a range of vendors of other ERP products. Many of these products have been designed specifically for particular industry segments e.g. process manufacturing, project-oriented services, pharmaceutical distribution, etc. In order to compete successfully against these, the leading ERP vendors have had to add sector-specific focus to their product offerings. This has been approached in a number of ways:
Development by the ERP vendor of industry-specific, pre-configured templates using a standard ERP product (e.g. Oracle's Business Accelerators or SAP's Best Practice Templates). The templates are fully supported by the ERP vendor and are intended to provide a lower cost implementation by removing the need to configure the system from scratch.
Addition of new vertical-specific functionality to a standard ERP product by a value-added reseller (VAR) (e.g. VAR-modified versions of the different Microsoft Dynamics or Sage products). The enhanced versions of the product are primarily supported by the VAR rather than the ERP vendor.
Acquisition of ERP products that have been designed specifically for industry verticals (e.g. Microsoft's acquisition of the Fullscope Process Manufacturing solution for AX, Infor's acquisition of SX.e for Distribution or Lawson's of M3 for Manufacturing). Once the product has been acquired, the buyer provides product support.
One important point to make about the competitive landscape for ERP products is that the neat delineations suggested by the market segments and verticals just described do not always translate into a logical choice of ERP product. For example, most ERP vendors will be able to point to customers outside of their primary target market segment who are successfully using one of their products. Sometimes, organisations will choose a generic ERP product rather than one tailored for their industry vertical, often because of concerns about the longevity of the tailored product or of the organisation that supports it.
Finally, many larger organisations do not choose a single ERP product. The hub-spoke model is becoming more common, where a single ERP product (usually SAP or Oracle) is used to drive group financials and the larger divisions, with a mid-market or even small enterprise ERP system deployed in some of the smaller parts of the organisation.
This is an extract from a much more detailed article, which is available for download free of charge from www.bsmconsulting.co.uk/publications.
BSM is an independent ERP consulting organisation and works with organisations worldwide to provide client-side services across all stages of the ERP life cycle.
For further information on ERP, please contact Sean Jackson on Tel: + 353 (0) 91 746900 or by e-mail info@bsm.ie
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