The ERP Market 2001 And Beyond
Part 3: Rating The Vendors
P.J. Jakovljevic - October 9, 2001
Enterprise resource planning (ERP) integrated software solutions have become synonymous with competitiveness, particularly throughout the 1990's. ERP systems replace "islands of information" with a single, packaged software solution that integrates all traditional enterprise management functions (transactions) like financials, human resources/payroll, and manufacturing & logistics (See Essential ERP - Its Functional Scope for more details). We also believe that having an ERP system is a prerequisite in most business environments to fully take advantage of the latest business information processing trends, such as collaborative e-Business and customer relationship management (CRM).
For a list of the major ERP vendors and their market share, see Figure 1.
This is Part Three of a five-part article. This part briefly discusses some of the major ERP vendors. Part One contains an overview of the ERP market and how ERP is expanding to included SCM, CRM, and e-procurement. Part Two covered the vendors' reaction to market changes. Part Four will contain market predictions. Part Five will contain recommendations for the vendors and users. Part Five will contain links to the preceding parts.
We generally believe that, in the long run, market winners will be those vendors with an established large customer base and with huge financial and human resources that would make them more responsive to any future challenges such as sudden market trends and/or technology paradigm shifts. Rated according to this metric, the current market leaders, SAP, Oracle, and PeopleSoft, would be seen as long-term market winners. Because of their broad integrated functionality, risk-averse customers, and the existence of niche SCM, CRM, and e-Business providers, the major vendors will continue to intrude on the space of their smaller brethren. 2001 should be marked as a year of redemption and vindication of ERP giants like SAP and PeopleSoft.
- SAP remains the undisputed market leader with estimated market share of 32%. After faltering in its initial effort to adapt to new Internet paradigm and a sloppy marketing message, SAP has recently radically reformed its corporate philosophy, it has reorganized itself into more manageable entities, and has clarified its product positioning, all of these resulting in recent upbeat results and a recovery with a vengeance.
Strengths: Commanding market position, Brand recognition and mind share, Very sound corporate viability, Product functional breadth and depth, Strong product architecture and technology, Potential attractiveness of the mySAP.com platform for its existing large R/3 customer base, Partnerships and service & support infrastructure.
Challenges: Lengthy and costly implementations in the past, Product cost and complexity perception, Tardy and/or confusing initial e-commerce vision articulation, Relatively new leadership of SAP America, Sales force orientation, Product migration strategy.
For more details, see SAP - A Humble Giant From The Reality Land? and SAP - A Leader Under Reconstruction.
- Oracle remains fortified as second largest ERP vendor after swiftly embracing the Internet architecture during 1999. However, the company seems to be somewhat running out of steam recently owing to the economic slowdown and competitors' catch up efforts.
Strengths: Corporate viability, Brand recognition and mind share, Product horizontal functionality breadth and scalability, Technology infrastructure ownership, Strong international professional services, Early adoption of Internet architecture.
Challenges: Product immaturity, Uneven functional depth and vertical focus, Divided management attention on a wide range of initiatives, Confinement to Oracle database, Uncertain market acceptance of Oracle's 'One-Stop Shop' mantra, Product upgrade strategy, Fierce competition on many fronts.
For more details, see Oracle Claims The Worst Is Over And Turns To KISS For A Boost and Oracle Applications - An Internet-Reinvented Feisty Challenger.
- PeopleSoft has safely entrenched itself as third largest ERP vendor, after biting the bullet and delivering an Internet-based broad product portfolio in a painstaking manner, while incessantly increasing revenues and profits.
Strengths: HRMS/Payroll software leadership, Corporate viability, Advanced product architecture and technology, Compelling user interface, Development tools (product flexibility), Product horizontal breadth, Leadership in certain non-manufacturing industries.
Challenges: Product immaturity, Integration Work-In-Progress of recently acquired products, Cutthroat competition, Low mind share in manufacturing sector, Insignificant number of full ERP reference sites, Dubious early adoption of pure Internet architecture, Low brand awareness outside the North American market, Product update strategy, Sales and consulting force orientation.
For more details, see PeopleSoft: Giving Fervent Hope To The Market And Jitters To The Competition and PeopleSoft - Catching Its Second Wind From The Internet.
While there are a number of successful smaller vendors with interesting product offerings and solid results in 2000/2001 (e.g. Intentia, Navision, Sage, MAPICS, AremisSoft, ROI Systems, Lilly Software, Pronto, to name but a few), we will limit the list of market challengers to the five vendors described below. They are either already ranked high on the ERP ladder or have exhibited steady growth and expansion in recent years. In addition, they possess attractive product portfolios and innovative technology foundations.
- J.D. Edwards remains the fourth largest ERP vendor owing to GEAC's recent troubles and downfall. While J.D. Edwards still has to conduct a thorough soul-searching, in order to boost its revenue growth and avert further declined license revenue, it is still in a position to give almost everybody run for its money.
Strengths: Mid-market brand recognition and leadership, Flexible product architecture and cross-platform migration strategy, Embedded EAI collaboration strategy, Strong SCP, SCE, and ERP integration, Well-developed affiliate channel.
Challenges: Poor financial performance, Dubious and risky EAI strategy, Bland marketing efforts in the past, Low mind share in the high end of the market, OneWorld's initial product quality issues, Protracted lack of native CRM and e-Business products and dismally performing partnering agreements, Integration of recently acquired YouCentric CRM product.
For more details, see J.D. Edwards' QUEST To End Its String Of Pyrrhic Victories and J.D. Edwards - A Collaboration Thought Leader Or A Disguised ERP Follower?.
- Baan seems to have reversed its descent of 1999/2000 on the ERP ladder and is currently in a tight fight for the Fifth largest ERP vendor position owing to GEAC's beleaguered situation. Although Baan returned to profitability much before the expected time, its revenues are still far below the 1998 level, and the company has yet to regain confidence and exercise sufficient damage control.
Strengths: Discrete manufacturing and project industries functionality, DEM SE concept of rapid implementation and easy reconfiguration, Strong product technology and scalability, Large core-ERP user base and a potential for offering extended-ERP modules, Potential 'Sensor-to-Boardroom' product breadth.
Challenges: Tainted competitive position, Product immaturity, Customer base and affiliate channel retention, Regaining confidence in the US market, Integration of former Marcam Solutions products.
For more details, see Baan Achieves A Speedy Recovery Despite The Tough Times and Baan - What Will The Future In Invensys' Stable Bring?
- Microsoft Great Plains has entered the Top 10 ERP chart owing to a slew of acquisitions prior to being acquired by Microsoft itself. With large resources, brand recognition and a large partner channel, it remains the rival to beat in the SME market segment.
Strengths: SME focus and brand recognition; Extensive indirect channel; Large and loyal customer base; Prudent product alliances and/or acquisitions in the past; Strong parent corporate viability and brand, Product horizontal breadth for certain service industries.
Challenges: Multiple overlapping product lines strategy, Outstanding products integration issues, International expansion, Insufficient vertical focus, Basic manufacturing functionality, Confinement to Microsoft technology, Still evolving .NET application server platform, Blending of disparate corporate cultures and sales channels.
For more details, see Great Plains' Latest Product Offering - Ready to Stampede the SME Market? and Great Plains: Strong Channel and Microsoft focus for Dynamic(s) Growth.
- Lawson Software is entrenched in the ninth largest ERP vendor position owing to its continued revenue growth in 2000, reaching $313 million in revenues. The company is still the largest privately held ERP vendor, although it has recently engaged in the IPO process.
Strengths: Innovative product technology (early Web-addressability, interconnectivity, and very intuitive user interface), Tight vertical focus and leadership in selected non-manufacturing industries, Solid track record and viability, Heavy R&D investment, Cross-platform and open-database product, High customer satisfaction and retention.
Challenges: Low brand awareness outside of the North American market, Non-support for manufacturing applications, Lack of strategic partnerships in the past, Integration of Account4 product, Dubious IPO outcome.
For more details, see Lawson Asserts Itself, Draws A Bead On Bigger Players and Lawson Software: Self-Evidently Thriving on Innovations.
- Industrial & Financial Systems, IFS would have long occupied the tenth largest ERP vendor position if it had not been for unfavorable currency exchange rates between $ and SEK. However, the company has long been non-profitable, due to a number of recent acquisitions, product development and worldwide expansion costs.
Strengths: Advanced product technology (component-based and interconnectivity), Broad product portfolio beyond core ERP, Strong MRO origins, Tight vertical focus in complex manufacturing and asset intensive industries, Still one of the fastest-growing ERP vendors, Reputation for astute product demonstrations.
Challenges: Protracted losing streak, Low brand awareness outside of the European market, Scalability and performance issues in the high end of the market, Prolonged confinement to Oracle database.
For more details, see IFS Aspires To Capture North American Market Against The Low Tide and Industrial & Financial Systems, IFS AB: Thriving on Product Flexibility and Incremental Deployability.
During the last few years, a number of vendors, primarily the smaller ones, have failed to develop or integrate the required functionality extensions and product architecture and have, as a result, disappeared as independent entities, while others are languishing amid lower revenues. We predict that more than 50% of Tier 2 & Tier 3 ERP vendors will not survive until 2004 (65% probability). About half of these will transform into system integrators, while either relegating their product to a niche 'bolt-on'or legacy status. The remaining half will be acquired, and those will be vendors with poor financial performance and undervalued market capitalization but with a large customer base and a deep focus and expertise in a specific industry. To single out only a few of these as market losers would only do them a disservice in terms of additional bad publicity and, for that reason, we refrain for explicitly identifying any vendor in this category.
This concludes Part Three of a five-part article on the ERP Market 2001 and Beyond. Part One contained a market overview. Part Two covered how vendors are reacting to market changes. Part Three analyzed the major vendors in terms of Market Leaders/Winners, Challenger, and Losers. Part Four will contain Market Predictions.