Sees 'Huge Surge' in ERP Spending, Most Likely at Microsoft
By Alex Woodie
The glory days of ERP spending may not be just a fond pre-Y2K memory
in your brain, but could return to claim its rightful place in the
sun, suggests a recent report by the enterprise software experts
at AMR Research.
a November report, the Boston analysts group found that 71 percent
of the companies it surveyed expected their ERP budget to grow in
2006, with the average increase "an astounding 14 percent."
What's more, Microsoft topped the list of ERP vendors companies
are considering doing business with. There were some surprising
findings to come out of "The Enterprise Resource Planning Spending
Report, 2005-2006," which reflects interviews that the research
group conducted with 271 midsize and large companies about what
they spent on ERP in 2005, and what their ERP spending plans looked
like for 2006.
one, nearly 30 percent of the companies surveyed were still doing
initial ERP implementations, which pretty much flattens the widely
held belief that, as an ERP vendor, there are no "green fields"
left, and that you have to replace a competitor's ERP system to
close a deal.
another interesting tidbit: ERP spending, as a fraction of total
application spending, increased from 27 percent in 2003 to 35 percent
in 2005. As the economy improved over the last few years, companies
obviously ramped up their ERP spending. ERP isn't dead at all. In
fact, it has a lot of life left in it, despite the bad times for
ERP that AMR Research forecasted last year. "It is clear from
the survey that ERP spending is growing rapidly across all market
segments among large and small organizations," the research
organization says in its assessment.
while ERP spending is going up, companies aren't necessarily spending
their money wisely, according to the analysis. This is reflected
in the group's finding that 46 percent of licensed ERP seats are
currently unused. At the same time, the group found that only 15
percent of total employees are licensed to use their company's ERP
system. "Most employees will eventually need access to the
central business system in order to do their jobs, which suggests
that many organizations are still early in their ERP rollouts and
have a great deal of license, services, and infrastructure spending
ahead of them," AMR Research says in its report.
AMR Research asked its subjects which ERP vendors they were evaluating,
most of the usual suspects were accounted for. However, there was
one big surprise at the top of the list: Microsoft, whose Microsoft
Business Solutions division owned just 3 percent of the worldwide
ERP market in 2004, with $775 million in revenues, just barely nipped
ERP juggernaut Oracle at the finish line to claim the top spot,
with a 58 percent "mindshare" rating.
no fluke, says Jim Shepherd, research director at AMR and co-author
of the recent report. "When we asked participants which vendors
would be considered in 2006 for their ERP purchases, Microsoft Business
Solutions led the pack," Shepherd says. "Our research
indicates that there will be a huge surge in ERP spending in 2006.
With companies of all sizes growing their ERP budgets, this is bound
to be a banner year for top vendors in this space."
Microsoft--having already beaten Oracle, and ever mindful of an
opportunity to grab some headlines--kicked a little sand in the
face of its primary ERP software partner for Fortune 100-style rollouts.
"This AMR Research report validates what we're hearing from
our customers, that businesses prefer integrated and adaptable solutions
over higher-priced products from companies such as SAP," says
James Utzschneider, general manager of product marketing for MBS.
out the top 10 on AMR's "mindshare" list were SAP, with
a 49 percent rating, SSA Global, with a 32 percent rating, Infor
with a 25 percent rating, Geac with a 24 percent rating, Lawson
with a 22 percent rating, Intentia with a 21 percent rating, IFS
with a 19 percent rating, and QAD, with a 17 percent rating.
mindshare figures are constantly in flux, as Infor is currently
in the process of buying Geac, and Lawson and Intentia are currently
merging. There will undoubtedly be more M&A activity. Interestingly,
Sage Group didn't even make the list of the top 12 ERP vendors by
$1.2 billion in revenue in 2004, the English company was one of
the top five ERP software vendors by revenue. It claimed a 6 percent
share of the global ERP market, AMR said last year.