From a series of articles on the leaders in the business applications software field originally published in Computer Business Review, a sister publication.
Since the early 1990s, the catch phrase in the business applications market has been big is best. Customers, eager to tie together business processes in a bid to increase operational efficiency, have been busy implementing enterprise-wide, integrated business application suites, spending millions of dollars at a time with an elite band of application providers. Market analysts variously sized the integrated business applications market at between $5.7bn and $9bn last year, with a growth rate of 40%. Much of that money, however, is going to a concentrated group of companies. In 1996, the top five vendors in the business applications sector generated combined revenue (including associated services) of $5.3bn and enjoyed an average growth rate of 58%, while the top 20 accounted for close on $8bn in turnover, up 34% on average. These figures indicate that the balance of power is becoming increasingly centered on the leading group.
Haves and have-nots
SAP, for example, the market leader with revenues of $2.4bn, accounted for more than 30% of the total turnover earned by the top 20, and is more than twice the size of its nearest competitor. The market is splitting into haves and have-nots says Bruce Richardson, vice president of research at Advanced Manufacturing in Boston. However, according to Bobby Cameron, an analyst with Forrester Research, there are opportunities for many suppliers, outside the leading elite, to prosper. A survey of Fortune 1000 users carried out by Forrester found that less than a quarter of companies intend to get all their business software from a single supplier, and that most will consider smaller, ‘best of breed’ suppliers. In addition, according to Morgan Stanley, about 60% of big companies (those with turnover in excess of $500m) have already installed a packaged business applications suite and the market is starting to become saturated. Over the next few years, it says, the majority of the growth will come from the midrange sector – companies with turnover between $50m and $500m – where requirements and supplier preferences are very different. While the leaders today are unlikely to disappear, there is still an opportunity for fleet- footed specialist vendors to prosper.