Enterprise resource planning (ERP) is the comprehensive set of activities that help an organization manage its daily operations. ERP software helps this process by integrating business processes and the flow of information within an organization so decisions can be data-driven. Most ERP software typically consist of multiple enterprise software modules that that can be used together and fit to specific needs of the organization. These modules are designed in a way to work with other modules in the ERP software package and can be designed in way to be integrated with other software systems the organization uses. The most common ERP modules that business use are; accounting Systems, Human Resources, manufacturing, order processing, supply chain management, and project management. ERP systems started to grow in use in the 1990s and then really increased in the early 2000s as companies started looking for alternatives to their legacy systems. Now ERP systems are more popular than ever before and there are many options when it comes to companies that provide ERP software and services. The common characteristic of an ERP system are; that can be integrated with other software, operates in (or close to) real time, a common database that supports all the applications, and a consistent look and feel across modules. The ERP market is very competitive with many vendors that offer different products and support at different price points. The major vendors of ERP system for medium to large size organizations will be examined to better understand the ERP market. Also new trends and market opportunities in the ERP market will be examined.
The ERP market has seen an average of 10% growth every year since 2006 and like most other segments of the IT industry is always evolving rapidly. The ERP vendor market can be split into three distinct tiers. Tier I vendors are ones that sell extensively to companies that have annual revenues exceeding 1 billion dollars a year. SAP and Oracle are the only vendors that are in this tier. Tier II vendors sell ERP products for mid-sized companies that have revenues that range from 50 million to 1 billion dollars. The Tier II ERP market is very competitive with about 20 well-known companies that fight for market share. Tier III vendors target companies that have revenues of 10 million to 50 million dollars. Many Tier III ERP are single locations installations for a single vertical market so companies run a risk of outgrowing the Tier III ERP. It is important for companies to consider planned growth when purchasing an ERP system.
According to Clash of the Titians 2017 market report, the ERP vendors with the largest market share are SAP, Microsoft Dynamics, Oracle, and Infor. The ERP vendor market has many providers but the four companies above are by far the largest. These four companies combined hold over 60% of the entire ERP vendor market. SAP is the market leader at 19% market share and provides different ERP solutions for the different tiers; SAP business suite is its Tier 1 solution, and SAP business All- in -One and SAP One business are some of their products made for the other tiers. Oracle hold 13% of the market share. Oracle started as a relational database management system provider but moved into the ERP market mostly by acquisitions of software such as NetSuite, JD Edwards, and PeopleSoft. Oracle is SAP only competitor in the Tier III market and Oracle also has been focusing on moving to cloud ERP system in the recent years. Microsoft got into the ERP market in 2000 through acquisition of Great Plains which was designed into Microsoft Dynamics. Microsoft Dynamics has 16% of the market share. Microsoft has recently rebranded into Dynamics 365 which is cloud based. Infor holds 13% of the market. Infor is known for its products that help automate processes in the healthcare, manufacturing, fashion, wholesale distribution, hospitality, retail, and the public sector.
Future of ERP
The ERP vendor market is like most tech industries in the fact that they are always changing due to improving technology and different customer needs. One of the biggest changes in recent years to the ERP market is the use of cloud computing. As cloud based Software as a Service becomes more popular it is a highly possible that this will affect the initial investment necessary to implement an ERP. SaaS solutions have a lower cost for many companies due to their pay for what you use model. Beside SaaS solutions possibly replacing some ERP investment, the cloud is being integrated into ERP systems in order to meet customers growing need for cloud based data. Some companies have found it easier to add in cloud based point solutions for certain modules in the ERP rather than trying to make the core ERP systems integrated with the cloud. The cloud also is starting to allow for more information sources to be linked to the ERP and this could lead for more useful data that could be used for business analysis. This use of cloud based data will allow companies to perform predictive analytics more which could help companies have an edge on competitors. Another trend in ERP due to the use of the cloud is making the big ERP vendors to lower their price. The large vendors are doing this in order to compete with smaller cloud based vendors. The last trend in ERP system is a need for better security. Companies should be aware of these ERP trends in order to stay on top of the benefits an ERP can provide and make sure they keep their ERP systems protected from new security threats.