While there’s no question that enterprise resource planning (ERP) software vendors like SAP, Oracle, Baan, JD Edwards and PeopleSoft have benefited greatly from the Year 2000 and Euro software bugs that are still plaguing most of the back office servers in the world, there has been spirited debate as to whether or not the ERP software market will dry up once the Y2K crisis is over. AMR Research, the best known ERP market research firm, has been thinking about this for some time and thinks it has the answer to this question. According to the Enterprise Resource Planning Software Report, 1997-2002, which AMR released yesterday, the ERP software market will continue to grow at the same healthy rate that it has enjoyed for the past few years. AMR is predicting that the ERP market will grow at a compound annual growth rate of 37% between 1997 and 2002, reaching an astounding $52bn in 2002. That’s three-and-a-half times as big as the expected ERP market for 1998, which AMR predicts will hit $14.8bn for 1998. AMR expects that SAP will remain the market leader during 1998, with $4.7bn in sales, followed by Oracle’s applications division with $1.9bn. Contrary to popular belief and notwithstanding pronouncements by PeopleSoft, that company will remain the number three vendor at $1.4bn in ERP sales. Baan and JD Edwards are neck-and-neck, with $992m and $990m in sales, and the remaining hundreds of vendors in the market will rake in about $4.8bn. It is unclear if these market shares will hold in 2002, but with SAP growing at 60% compared to the 90%-100% growth per year of its competitors, SAP’s share should drop from 32% to 25%. However, if companies start moving away from lover-tier vendors (as has happened in the PC market), SAP and its big ERP competitors could hold their relative market positions compared to each other, but take market share away from those vendors who currently comprise a third of the ERP market. No matter what happens, AMR is certain that ERP vendors are already over the Y2K hump. Given the time it takes to select and implement these major systems, companies have already passed the Y2K deadline, says Tony Friscia, president of AMR Research. We believe that most Global 1000 firms are well-advanced in their ERP deployments and will now seek to extend ERP and related applications throughout their supply chains. Moving into the supply chain, forming a kind of computerized keiretsu tightly linking companies and their suppliers and distributors, will drive ERP sales over the next three and a half years. So will sales of licenses into the existing third party ERP software customer base. AMR says that ERP vendors usually have between 10% and 20% of the total employees at a company using their software, and AMR expects that number to jump up to 40% to 60% by 2002 as companies computerize other parts of their businesses beyond their core manufacturing and distribution operations. AMR also expects a big boost as ERP software suites are adopted outside the manufacturing sectors of the economy into retail, utilities, healthcare, education and government sectors.
