Essential ERP – Current Market Trends – Part I
P.J. Jakovljevic - May 2, 2000

Introduction

A typical ERP system today offers broad functional coverage; vertical industry extensions; a robust technical architecture; training, documentation, implementation and process design tools; product enhancements; global support and an extensive list of software, services, and technology partners. While it is not a system-in-a-box yet, the gap between its desired and actual features is becoming smaller every day.The worsening plight of most ERP vendors, caused by the market slowdown, which started in the fourth quarter of 1998, continued in full force throughout 1999. Particularly affected was license revenue, which declined more than 10% in 1999 compared to 1998. The market was dramatically less profitable than in 1998 (down 27.3%), measured in the total raw $ net income (Source TEC). We believe that the continued ERP market slowdown in 1999 was in part attributable to the following factors: The historical growth in sales of ERP applications has come from large, Fortune 1000 multinational corporations. This market has been highly penetrated (over 60%), and new, large-scale back-office implementations in the F1000 customer base have all but stalled.The relatively untapped Small-to-Medium Enterprises (SME) market has been cautious about starting new projects due to the bad publicity caused by a large number of unsuccessful ERP implementations in the past. This fear has been additionally aggravated by the need to integrate disparate systems, given that currently no single vendor can offer a complete end-to-end solution (from supplier to end customer).The technology paradigm shift from Client/Server to the Internet created uncertainty about investing in traditional Client/Server technologies, which are still prevalent among leading ERP players.Consequently, we believe that the following trends in the ERP market are the direct consequence of vendors' attempts to 1) resolve current ERP functional and/or technological deficiencies, and/or 2) expand software sales both within their existing and potential customer bases, particularly in the lower-end of the market.About This Note: This Technology Note covering the current marketing trends for ERP is presented in two parts.The ERP Market Trends covered in this note are: ERP Functional Scope ExpansionSharper Vertical Focus Flexibility Enabled by Adaptable Architecture The ERP MarketTrends that will be covered in Part II of this note are:Web- and E-commerce Enablement of ERP SystemsIntensified Market Merger & Acquisition ActivityAdvent of Application Hosting Services.1) ERP Functional Scope Expansion..