ERP Software Market Intelligence

Industry Outlook & Drivers

Global ERP Software Market Outlook

• The global ERP market was valued at $31.9 billion in 2016. The market is forecasted to grow at a CAGR of 7–7.3 percent to reach $42 billion by 2020
• APAC and Latin America are expected to be the growth driving markets in the future. Supply is more consolidated, with the top four suppliers holding over 60 percent of market share globally

ERP Supply Trends and Insights

Global/Regional Supplier

• Global suppliers are developing user-friendly interfaces and functionalities, moving away from the existing high degree of complexity in software

• Upward trend, portraying increase in cloud deployment of ERP over on-premise solution, owing to cost savings and ease of access to applications through cloud and mobile devices
• ERP vendors are investing heavily in increasing business intelligence, big data and analytics capabilities, where ERPs will not only be used for data reporting, but also enable the customers in robust and intelligent decision-making
• Enabling flexibility in deployment options. Hybrid cloud model in which an organization combines on-premise applications with cloud applications in its broader ERP package
• Global suppliers are enhancing their service capabilities inorganically through M&A in order to secure ERP contracts from large buyers

Tier-II/Local Supplier

• Vendors are highly fragmented in the mid-market segment

• Tier-II market players follow a vertical strategy, in which they limit their expertise to focus only on a few specific industries.
• Increased trend towards globalization, where suppliers are building a greater amount of international presence, either directly or through channel partners
• The mid-market segment has seen growth in increasing the number of SaaS ERP, due to reduced implementation and operational costs
• Open-source ERP vendors are evolving with a focus to reduce TCO and also enable customization without access to source code Engagement Trends

Engagement Trends

Most adopted model (globally): Multi-vendor engagement is being practiced to achieve spend visibility, cost savings and risk minimization.
Contract length: 1.5 – 3 years

• Preferred Phase (Support and Maintenance)
• Pricing strategy (Fixed pricing)
• Preferred Phase (Implementation)
• Benefit (High knowledge retention)
• Pricing strategy (Time and Material)
• Benefit (Achieve greater spend visibility)

Sources: Beroe analysis, Primary Expert 1, techtarget.com, cio.com

Global ERP Market Analysis

• ERP penetration for large organizations is medium outside Europe and North America
• SMBs in APAC and Latin America are witnessing increasing adoption due to the efforts of large global buyers to consolidate the supply base

Global ERP Drivers and Constraints Drivers Constraints

Hybrid ERP

• A hybrid ERP system is a perfect combination of in-house ERP supplemented by cloud-based ERP application. It is becoming popular among organizations who want to improve ERP functionality but do not want to change or add the in-house legacy system

• Hybrid ERP allows organizations to have a smaller section of functionalities of on-premise solutions, such as financial and manufacturing, and the rest of the applications on the cloud. Gartner predicts that at least one-third of service-centric organizations will move the bulk of their ERP applications to the cloud

SaaS adoption in ERP

• SaaS-based ERP solutions are gaining popularity in the mid-market segment, where it proves to be cost effective in terms of implementation, reduced operational cost, increased business agility and the ease of start-up and maintenance

• Revenues, generated out of selling traditional ERP systems, have been declining since 2013 to a level which has already been surpassed by the total revenue from cloud-based SaaS solutions. It is predicted that traditional ERP vendors' SaaS revenue will soon surpass their revenue from the legacy ERP sales

IoT and ERP

• It has been estimated that by 2018, over 30 percent of data will be machine-generated, with 15–35 billion devices fueling this growth

• The ERP system will be integrated with the real-time unstructured data (produced from machines) to the structured data from business operations. The legacy ERP, compounded with its business intelligence skills, will be empowered with real-time data through IoT, in order for the organizations to make actionable decision
• Lack of feature and function fits between the customers and ERP providers is the predominant constraint faced by ERP buyers .In several cases, customers do not find the ERP packages that will solve their business requirements
• Availability of alternatives for increasing the level of systems integration
• High switching cost and process integration involved, making it tough for the organizations to switch suppliers
• Enterprises that follow decentralized decision-making find it difficult to implement, as ERP systems are not easy to change once they are configured and installed
• Lower ROI and high ERP failure rates
• Large enterprises' resistance to OCM

Market Share of Key Global Suppliers

• SAP, as the pioneer in the ERP software industry, is estimated to be leading in terms of global supplier market share with 25 percent, followed by Oracle and Infor, each with 17 percent, respectively
• Tier-III and Tier-II solutions, comprised of regional and country-level suppliers, hold 22 percent and 9 percent, respectively