Although many of the biggest companies making enterprise resource planning (ERP) applications, such as PeopleSoft, Baan and SAP AG, have seen their stock prices slide in the last few months, the current worldwide economic turmoil and the year 2000 problem will probably only put a minor dent in the market for ERP, according to a report released late last month by AMR Research.
Over the past two months, AMR analysts polled 12 out of the 20 largest ERP companies publicly traded on US markets on their current and future markets.
The report's main finding was that the "Asian flu" and other economic problems will only have "limited short-term impact", unless they touch off a global recession.
On the other hand, ERP vendors in the short term can expect at best mixed results, AMR concluded. On average, there will be "solid growth" in every area, including manufacturing, supply-chain automation, financials, human resources, mobile sales, and customer service, but it won't benefit all vendors.
"The primary difference between this year and 1997 is that the growth is not being shared equally by all vendors. The market has selected a handful of favourites who will continue to grow at a very fast overall rate. The majority of vendors, however, will not grow at the industry average," said Bruce Richardson, vice president of research strategy at Boston-based AMR.
In the past, investment in IT has not gone up and down with the economy, Richardson said. In fact, industrial companies have taken advantage of slow markets to prepare for the next upturn, and that's what AMR sees its client companies doing now, he added.
But now, they are more careful about investing in ERP technology, taking tougher looks at the candidates and taking longer to buy or upgrade, Richardson said. So, in contrast to the last several boom years, when vendors could hardly keep up with demand, the tighter market will favour ERP vendors with more focused market strategies, better sales, and stronger products, he added.
This opinion was echoed by other analysts. Craig McDonald, senior vice president at World Research Advisory, an economic analyst firm, said that he expects the ERP market to see only minor dips through the end of the century.
About 60 per cent of overall ERP business will come from existing customers expanding and upgrading their applications, while about 40 per cent will be new business, McDonald said.