Best-of-breed approach drives ERP market

It reached $25.4 billion in 2005, according to the latest survey from industry analyst group AMR Research. During the course of the next five years, the market will continue to grow at an average of 10%, reaching $29 billion in 2006, AMR predicts.

The continued preference among business leaders for integrated information systems over a best-of-breed approach is chiefly responsible for this trend, says AMR. Management and IT organisations have determined that packaged ERP suites, featuring broader functionality and pre-built integration, prove to be a more effective way to satisfy the growing demands of an increasingly competitive business environment. In addition, concerns about enterprise wide visibility and controls are also driving ERP adoption, says AMR.

While some IT managers continue to advocate the best-of-breed philosophy, ERP vendors are now winning the debate, and are competing effectively with companies of all sizes, the report reveals. Top of the major ERP vendors is SAP, holding a sizable chunk of the market with a revenue share of 42%. In second place, with a significant gap, is Oracle, with 20% revenue share, followed by Sage Group with 6%.

Respective growth rates however, suggest Oracle could become a long-term contender for the top spot, having achieved a 110% growth rate in 2004-2005, compared to SAP’s 12%. This disparity is predicted to level out in 2005-2006 however, with SAP and Oracle claiming a future growth rate of 17% and 29% respectively. Microsoft, currently fourth among its peers in this space, is also predicted to gain, with a forecast growth rate of 18%.

The top end of the ERP market is now reasonably well-consolidated, with SAP and Oracle now representing 65% of new ERP license sales. Many of the smaller players have been rolled into ERP consolidators, such as Infor, while others such as IFS, though retaining their independence, have seen their growth rate slow.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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