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Enterprise resource planning (ERP) is a software that allows an organization to use a system of integrated applications to manage the business and automate many back office functions related to technology, services and human resources. ERP software integrates all facets of an operation, including product planning, development, manufacturing, sales and marketing.
ERP software is considered an enterprise application as it is designed to be used by larger businesses and often requires dedicated teams to customize and analyze the data and to handle upgrades and deployment. In contrast, Small business ERP applications are lightweight business management software solutions, customized for the business industry you work in.
The worldwide ERP software market grew 3.8% from $24.4B in 2012 to $25.4B in 2013
SAP retained their market leadership position in 2013, selling $6.1B in ERP software up from $6B in 2012. Oracle is second with $3.117B in sales in 2013, down .2% from 2012’s sales of $3.124B. Sage is third with $1.5B in sales in 2013, Infor is fourth with $1.5B in sales, and Microsoft is fifth with $1.169B in sales in 2013. The following graphic shows worldwide ERP software market share for 2013. Please click on the graphic to expand for easier reading. (source: Gartner)
Global ERP Software Market is Expected to Reach $ 41.69 Billion by 2020
On-premise ERP software would continue to have a larger market share occupying around 57% of market in 2020. However, cloud-based ERP would witness higher growth, at a CAGR of 10% during 2014-2020
Adoption of ERP software would increase rapidly in Aerospace and Defense vertical, growing at a CAGR of 8.86% during 2014-2020
Asia-Pacific would prove to be one of the most lucrative markets, in terms of growth. It is anticipated to reach $ 9.77 billion by the year 2020
Another interesting development in the ERP space is the advent of cloud computing solutions. A number of users is using cloud based ERP solutions. These solutions typically provide a lower cost of ownership – initial startup costs can be lower by as much as 30% to 50% as compared to an ERP solution hosted within your own premises. This becomes even more relevant for companies with a large geographical expanse. Typically, the first movers to the cloud were the relatively smaller companies and mid-range companies were the next to consider a move to the clouds. Large companies were the most conservative in this regard. Since ERP implementations can be very complex, smaller companies are able to experiment more easily with cloud solutions. The very large companies have all made very significant investments in their existing ERP systems and hence may not be so keen to change. Nevertheless, it is clear that the Software as a Service (SaaS) model will influence the ERP industry considerably in the future. Generally, SaaS is associated with lower costs due to following a rental model for using software and due to a ‘pay as you go’ approach. (source: CompareBusinessProducts.com)
But, some organizations are doubling-down on their 10 to 20 year-old investments in Traditional ERP, such as Oracle’s PeopleSoft or EBS platforms. And, there are still several installations of GEAC ERP – a 35+ year-old mainframe technology – in some of the largest institutions. Why? Take a look at some reasons (source: IBM Oracle consulting services):
Going Vertical: Traditional ERP enables companies to mine more deeply into their current platforms
Security: Many firms balk at the idea of moving ERP Financial information to the Cloud due to security concerns
Risk: Concerns range from the security of financial information on shared platforms to operational risk, which requires training, conversion and potentially new job roles when transitioning to a different platform
ERP software will no longer be limited to ERP. Salesforce used to simply be a CRM vendor – albeit a very strong competitor in that space. With its increasing ecosystem of apps and bolt-ons designed to address the things the software can’t do on it’s own, it is becoming clear that Salesforce and other non-ERP vendors are disrupting ERP software as we once knew it. Now, rather than simply considering the traditional ERP vendors, organizations can look to standalone CRM, financial and inventory management systems and still have options to extend those solutions into more traditional ERP territory.
Enterprise software is growing 6.4% YoY and SaaS 22% YoY. ERP is included in the top 20 software products in terms of market share and will play a significant role in the growth of the software industry until 2020.