The global recession had a major impact on the ERP (enterprise resource planning) software market in 09, leading to flagging license sales and delayed projects.
But 2010 is shaping up to be a banner year in ERP, thanks to a number of lingering and emerging trends, as well as a pair of highly anticipated product launches. Here's a look at the highlights.
2010 will remain buyer's market
Forrester Research is predicting that ERP new license revenue will have fallen 24 percent in '09 as companies severely rein in implementation and expansion projects. While the firm expects ERP spending to rise slightly in '10, vendors will be fighting hard for every available dollar, and that should translate into cost savings for customers, analyst Paul Hamerman wrote in a Dec. 17 report.
Still, buyers should be aware of likely vendor tactics, such as a push to bundle more software than is actually needed, Hamerman said. In addition, "Vendors will chase smaller deals from existing customers via add-on products and business intelligence tools, recognizing that most customers are not yet ready to fund major enhancements or expansions," he wrote. "Customers can expect to hear from their ERP account representatives early and often."
Buyers should also brace themselves for further consolidation in ERP. Vendors will focus on buying companies that extend their vertical expertise, according to Hamerman.
Free and open-source ERP options proliferate
Going into 2010, companies have more options than ever for free and open-source ERP software. There are at least 10 open-source products in the market, with some more mature than others.Open-source ERP vendors typically provide a version at no cost, but charge for support and additional features, such as a manufacturing module. Proprietary ERP vendors aren't in immediate danger of shutting down due to competition from open-source alternatives. But some players in the latter camp are reporting serious growth, which may only accelerate in '10.
Microsoft bolsters its ERP strategy
While Microsoft still trails far behind ERP vendors like Oracle and SAP, it's nonetheless a significant player, particularly in the SMB space. This year, Microsoft made a series of moves meant to broaden its ERP portfolio's features and extend into more verticals.
While Redmond is still not talking about full-blown SaaS (software as a service) ERP, in the vein of NetSuite, it did announce a series of on-demand extensions, covering areas like e-commerce. The move was a reflection of its general "software-plus-services" strategy, which seeks to preserve revenue from traditional on-premises applications while adding features from the cloud.
Also this year, Microsoft purchased several pieces of technology that will extend its reach into verticals such as process manufacturing, services and retail.
Overall, "Microsoft is becoming more aggressive about its ambition to be the mid-market ERP leader by a clearer margin and is keen to attract new customers, whether migrating off older third-party apps or looking to move up from Intuit's QuickBooks," said 451 Group analyst China Martens.
Business ByDesign gets ready for its (belated) close-up
Business ByDesign, SAP's on-demand ERP application for midmarket companies, has had a bumpy history, and it's not even in wide release yet. The vendor initially expected to reach $1 billion in revenue and 10,000 customers in 2010, but in '08 moved to slow down the application's rollout in order to ensure it could make enough money at scale.
SAP first developed Business ByDesign with a single-tenant architecture, wherein each customer has a dedicated instance of the application. SAP realized it had to develop a multitenant option, where users share a single application instance, if Business ByDesign was going to be a money-maker. That work is now done and SAP has the cost-savings it needs, executive board member Jim Hagemann Snabe said in early December at an analyst event in Boston. SAP has indicated a full-blown launch will happen sometime next year.
It may take until 11, but Business ByDesign will emerge as a big success for SAP, said Jon Reed, an independent consultant and blogger who focuses on the company.
"They're not going to dominate that market like they did in the client-server ERP market," Reed said. "But are they going to go up against players like NetSuite or Workday and do really well? I think so."
Finally, Fusion Applications
The market has been waiting several years for Oracle to deliver on its Fusion Applications strategy, which will see the best attributes from its various acquired product lines combined into a next-generation suite.
Many observers expected Fusion to take center stage at Oracle's OpenWorld show in October, and they turned out to be correct. CEO Larry Ellison spent a good chunk of his keynote demonstrating Fusion Applications and describing the company's strategy. But he gave no firmer release date than "next year."
During a recent company earnings conference call, Ellison stressed that Oracle won't be pursuing a rip-and-replace strategy for Fusion, emphasizing that customers can buy them one piece at a time. This approach is pragmatic on a couple of levels, given that Oracle users may still be shaking off the effects of the recession, and that many are content with older platforms such as JD Edwards and PeopleSoft.