ERP: Still Mission Critical, But...

Declining IT budgets prompting top solution providers to find new ways to demonstrate systems' value, survey finds

Stamford, CT — April 25, 2003 — Enterprise resource planning (ERP) solutions still are considered core information technology investments that provide organizations with a suite of critical enterprise business applications, but shrinking IT budgets are pressuring top ERP vendors to find new ways of demonstrating the value of their systems, according to a new study.

Technology consultancy META Group conducted the study of the so-called "Tier 1 ERP market" for its METAspectrum series of reports, which seeks to give IT professionals information they need to evaluate how well various providers of specific technology solutions can meet a given enterprise's business requirements.

META defined ERP as a suite of enterprise business applications that includes financial and human resources applications and at least one of the following: manufacturing, supply chain and customer relationship management. The consultancy asserted that ERP solutions should satisfy at least 75 percent of the overall business application requirements of a given company.

The ERP market hit $15 billion globally in 2002, according to META, and is set to grow by 12 to 15 percent annually. META also found that just five vendors — JD Edwards, Lawson Software, Oracle, PeopleSoft and SAP — account for 80 percent of the investment in the Tier 1 ERP market.

In its study, META found that reduced spending among Global 2000 companies is prompting these Tier 1 ERP vendors to explore other revenue streams. New focus has been put on selling additional functionality into existing customers, developing more vertical extensions and further penetrating the small and medium business market.

"The most important measurement of performance for an ERP vendor is technology and functionality, because these attributes represent the heart of a product offering," said Ron Hanscome, senior program director with META Group's enterprise application strategies service. "However, in the next one to two years, importance will shift toward customer delivery as well as the vendor's dedication to demonstrating implementation value."

Based on its study, META concluded that SAP, Oracle and PeopleSoft are considered the Tier 1 ERP leaders. The consultancy added that while the Tier 1 challengers are stable, financially successful firms with a long track record, they lack breadth across numerous industry verticals and have limited geographic coverage.

In addition, META noted that several ERP firms that serve the mid-market may at times compete with leaders and challengers.

ERP Survey: iSource Business magazine invites you to participate in our survey of the ERP industry. The results of this five-minute survey will help us identify the priorities, strategies and challenges you will be facing in the year ahead, and will assist us in focusing on those issues most important to you. Ten survey respondents will receive a free iSource Business briefcase for participating. Access the survey at All individual responses to the survey will be kept strictly confidential.

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