ERP Market Saw Modest Realignment

In 2002 market that was not as bad as it could have been, SAP picked up share, Gartner reports

Stamford, CT — June 18, 2003 — To no one's surprise, the market for enterprise resource planning systems ticked downward last year, but the drop was not as serious as it could have been, and German ERP giant SAP actually saw a bump up in market share despite the downturn, according to a new report from IT consultancy Gartner.

As enterprises became much more conservative in spending their information technology dollars in 2002, worldwide ERP new license software revenue suffered a 9 percent decline last year, Gartner reported in its research alert, "Despite Worldwide ERP Market Decline, SAP Retains Leadership in 2002."

All segments of the ERP software market experienced a decline in revenue in 2002. The financial management software market continued to lead all subsegments of the ERP market, but its revenue declined 8 percent in 2002. Manufacturing and human capital management (HCM) experienced the largest decline, with 12 percent and 10 percent declines, respectively, in revenue in 2002.

In dollar figures, worldwide ERP new license software revenue totaled $5 billion, down from $5.5 billion in 2001. But while it would be difficult to characterize 2002 as a successful year for software providers, Gartner analysts said ERP application providers were able to reign in what could have been a potentially disastrous year.

"A shift in buyer behavior, due in part to users' past experiences of software failing to meet expectations, has created a more cautious buyer that seeks smaller, less-expensive pieces of software to quickly drive positive bottom-line results," said Chad Eschinger, principal analyst for Gartner's worldwide software applications research group. "Yet the market performed better, given the current state of world economies, merger and acquisition activity, and the change in buyer behavior. The increased strength of the euro also aided in bolstering what could have been a more serious decline."

Moreover, the research consultancy showed that SAP managed to scrape out a larger share of the market in 2002 than in the previous year. According to Gartner, SAP extended its lead in the worldwide ERP software market, with its new license revenue accounting for 25.1 percent of the market.

Meanwhile, Oracle and PeopleSoft experienced a decline in market share in 2002 (to 7.0 and 6.5 percent market share, respectively), while SAGE and Microsoft Business Solutions experienced a slight increase in overall market share (to 5.4 and 4.9 percent, respectively). (See table below.)

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Top 5 Worldwide ERP Software Providers, by New License Revenue: Market Share Estimates for 2002

................................2002..........................2001
Company..........Market.Share.(%).....Market.Share.(%)

SAP AG....................25.1.........................24.7
Oracle........................7.0.............................7.9
PeopleSoft.................6.5.............................7.6
SAGE........................5.4.............................4.6
Microsoft Business
Solutions...................4.9.............................4.6
Others......................51.1...........................50.3
Total......................100.0..........................100.0

Source: Gartner Dataquest (June 2003)

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For a take on where the enterprise applications markets seems headed this year, see the June 12, 2003, iSourceonline article "Enterprise Apps Set for 'Modest' Growth."
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