Companies Sitting on the ERP Fence

Ann All
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If I had to list the top lessons I've learned while covering enterprise technology the past half-dozen years, one about technology vendors might head my list. Like a Donald Trump publicity stunt, disconnects between technology vendors and their customers aren't just common; they're expected.


There certainly seems to be a disconnect in what ERP software providers are selling and what their customers want to buy.


About two months ago, I interviewed two consultants who told me IT organizations were ready to spend on ERP again. Deloitte Consulting's Bill Allison predicted an increase in investment, telling me an improving economy had IT organizations thinking about growing revenue, not just cutting costs. For many of them, that would translate to upgrades of their ERP systems. Some Deloitte clients were looking beyond plain vanilla functionality and adding features such as mobility to their initial project scopes, he said.


And research from the Hackett Group found moving to common ERP platforms was a priority for 78 percent of IT organizations, a 36 percent increase from 2010. Rich Pople, the Hackett Group's Global IT Advisory practice leader, told me the desire to move to a common ERP platform was due to the increasing need to support global business models.


Of course I know both Deloitte and the Hackett Group make money, in part, by advising companies on their enterprise IT strategies, including ERP. And as a journalist, I realize sometimes you need to take things with not just a grain of salt but an entire shaker.


Still, ERP was listed as one of three top technologies being implemented by respondents to a recent CIO Magazine poll. Forty-five percent of respondents mentioned ERP, up from 39 percent in 2010. Several of the CIOs I'd interviewed in the past 6 months mentioned they were in the midst of ERP upgrades. I'd gotten the impression that many companies had delayed ERP upgrades for so long, they now had to take some action.


A recent Forrester Research survey, however, found nearly three-quarters of IT decision-makers plan to stick with their current ERP applications. While Forrester predicts the ERP market will grow from $45.5 billion this year to $50.3 billion in 2015, it believes license sales will fall and vendors will make more profit on maintenance fees. Writing for ZDNet, Dennis Howlett says this spells trouble for big ERP vendors like Oracle and SAP:

... In soundings I've taken among investment and trade analysts, I get the strong sense customers are thoroughly tired of being tethered to a vendor model that leads to less rather than more innovation. Not only does it constrain IT's ability to contribute to growth it effectively marginalizes IT's ability to be anything more than a plumbing group. ...

Forrester also thinks a growing portion of the market will go toward software-as-a-service ERP applications. While SaaS now accounts for just $1 billion of total ERP revenue, Forrester forecasts annual growth of 21 percent through 2015, when it will command a still-small 4 percent of the market.


Howlett finds the current ERP landscape "a depressing picture" and sees little reason to hope it'll change much by 2015, the time frame in Forrester's report, given the relative inertia of the market. He writes:

... I see little appetite from SAP/Oracle/Microsoft in changing their models. Even a combined NetSuite/Workday/Plex/Salesforce.com simply don't command enough market mind share to (currently) take their place. Will those tiny players I reference above emerge in Forrester's timeframe? Unlikely.

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Feb 28, 2013 7:14 AM Swash Convergnce Swash Convergnce  says:
Hello, Thanks for great info about Companies Sitting on the ERP Fence. Swash Convergence provides ERP Software Solution in the Global market on affordable price. Reply

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