In 2011, SaaS will Increase its Share in the ERP Market of an Estimated $47.7 Billion Dollars

Result of AMR Research Company’s study shows that globalization, mid-market growth along with other significant factors will fuel ERP’s software sector to reach $47.7 billion dollars by 2011. Compared with last year’s $28.8 billion dollar market cap, this exhibits an annual growth rate of nearly 11%.

According to AMR’s research, the revenues in ERP market are generated from the financial, order management, inventory control, purchasing and manufacturing areas. The VP of AMR, Jim Shepherd, points out that the core product is that the company tends to invest prior to other products, such as Customer Relationship Management (CRM) or Business Intelligence (BI).

"Generally speaking, it is the healthiest year for ERP and the application software market since the 1990s." as stated by Shepherd.

Traditionally, manufacturing has always occupied the largest share of ERP expenditure, but AMR predicts that retail, public sector, financial services, health care and communications will be the significant factors to drive growth for ERP in the upcoming period.

Shepherd said that within Western Europe and North America, the ERP market has been well established, with various mid-market companies swift step in globalization. In fact, he expected that globalization will become the dominant driving force of ERP’s market growth through conversion from decentralized focus to a more centralized plan together with increasing economic growth and commercial systems.

"Many companies are deciding whether they want to compete in a globalised market or tend to be globalised under the pressure from the customers, or need to distribute products all over the world," Shepherd said, "This means that they need to set up a new business process, even a completely new system, because the existing system design doesn’t adapt to the need of globalization business."

Shepherd also points out that in most parts of the world, the mid-market is the true market because large companies do not have a large presence in developing countries. So, if companies, such as Oracle and SAP, wanted to be listed in order to compete in China, India or other developing countries, they would have to help establishing the ERP market first by building a stable mid-market sector. SAP did so well at ALL-in-One and BusinessOne that people tended to focus on SAP’s mid-market profitability rather than in terms of growth in its customer base. They quickly established steady channel relationships. In the next five years, SAP’s main products in the mid-market will be in the Software as a Service (SaaS) and AIS sectors, expected to be on the market in 2008.

AIS’s promising prospects draw people exciting, but it is still too early to conclude whether its future is smooth or not, Shepherd said. He added, however, software as a Service (SaaS) would maintain its current market share and it would occupy a greater portion of the ERP market, by assumed 25%--35% by 2011.

"I expect that in two or three years, all suppliers will provide Software As A Service," he said, "I don’t think those companies which provide pre-fabricated software will cease to provide any more, but they will also provide on-demand software, and allow the customers to choose any software or to switch a model to another."

Another trend which users have taken interest is the gradual growth of service-oriented architecture (SOA) and its various benefits, as Shepherd points out.

He said," SAP is still in the interim transition to SOA. It will increase the user’s flexibility so that they may have more configuration options. Moreover, it will make the management of ERP system easier – especially in the escalation."