-- The enterprise resource planning software market is not artificially stimulated by the demand for year 2000 fixes, but driven by the adoption of integrated business applications by a growing number of different industries, market researcher AMR Research said last week.
Enterprise resource planning (ERP) software suites are integrated sets of business applications that allow companies to manage almost all aspects of operations including manufacturing, human resources, finance and logistics.
In the report, AMR predicts that the global ERP market will grow at a compound annual rate of 37 per cent over the next five years. This year total ERP vendor revenue is expected to reach $US14.8 billion and top $US52 billion by 2002.
Growth of the market is driven by three main factors: additional functionality in the packages, the spread of their use to more industries, and selling more user licences to existing customers.
ERP vendors such as Baan, J.D. Edwards, Oracle, PeopleSoft and SAP AG are continuing to expand the reach of their offerings by adding supply chain management, sales force automation and customer support capabilities to their core systems, AMR said in its "Enterprise Resource Planning Software Report, 1997-2002."
At the same time use of ERP systems, which originated in the manufacturing industries, is spreading to nearly every type of industry including retail, utilities, the public sector and health care organisations. In these sectors most companies will purchase new ERP systems over the next five years, often for the first time, AMR said.
Aware of the trend, ERP vendors are now offering an increasing number of vertical industry solutions in order to expand their reach to new sectors. SAP, for example, so far has identified at least 15 industries for which the company is, or will, produce industry specific systems based on its R/3 ERP system.
In addition, to sustain their growth, ERP vendors will try to sell more licences into their installed base, since the percentage of penetration -- meaning the percentage of total employees currently using the ERP system -- at individual companies ranges only from 10 per cent to 20 per cent. That figure is expected to grow to 40 per cent to 60 per cent within the next five years, AMR said.