ERP Forecast – Top Trends in ERP for 2010 Part II

Top Trends in ERP for 2010 - Part II

Continuation from Top Trends in ERP for 2010 Part I.

5. New enterprise resource functionality: energy utilization

New enterprise resource functions going forward will require increased energy utilization. That is there will be an even greater emphasis on ERP energy/carbon management systems. I agree.In a recent Forrester survey 1 69% of the companies surveyed felt that the need to implement green (energy-saving) software tools to cut operations costs was an important initiative. This sentiment can only increase given the President’s new energy agenda and ARRA funding for Green IT initiatives. This trend should increase exponentially given the monies available for these types of programs and the desire to take advantage of these public monies.

6. 3rd party support vs. maintenance contract renewals

Third Party Support vs. Software maintenance contract renewals. Many customers will choose to discontinue vendor sponsored maintenance plans in the upcoming year. The maintenance renewal rate will decrease 1-3% and third party support will increase 5% or more in 2010. I agree with this. Most customers have contempt for the software support process and view the entire process as a necessary evil. Consequently, as long as viable third party options are available I can see more customers choosing third party support as a more practical option than vendor sponsored programs.

7. New-growth markets

New Growth Markets: Verticals. Forrester anticipates that of the seven major verticals the largest amount of ERP growth will occur in the Manufacturing sector even though the manufacturing industry is the third ranked industry in regards to overall ERP implementations.

In regards to current ERP implementations the industries are ranked in this order based on the percentage of ERP installed in that sector: 1. Utilities & Telecom; 2. Retail/Wholesale; 3. Manufacturing; 4. Financial Services; 5. Business Services & Construction; 6. Media, Entertainment & Leisure; 7. Public Sector & Healthcare.

The aforementioned list does not surprise me. What does surprise me is that moving forward the manufacturing sector – by percentage – is currently expanding their ERP systems and/or planning to expand their ERP systems within the next 12 months more so than any other vertical. The Manufacturing vertical was first, the Media, Entertainment & Leisure vertical was second, and the Retail/wholesale vertical was third. This ranking is surprising given that these industries have been hit the hardest by the recession so it only seems logical that they would be the least likely to expand their ERP footprint. The data, however, suggests otherwise. Apparently, during this recessionary period businesses are looking to consolidate and control costs through technology. This expansion probably doesn’t include a lot of new licenses but it is more about implementing and configuring what these firms have already purchased. That is, they are finally making use of the shelf ware that has accumulated over the years. This theorem coincides with the projected increase in spending on IT Services and support relative to the decreased spending on net new licensees over the next 3-5 years.

The complete rankings of the verticals in regards to expected ERP implementations is listed below: 1. Manufacturing; 2. Media, Entertainment & Leisure; 3. Retail/Wholesale; 4. Public Sector & Healthcare; 5. Utilities & Telecom; 6. Business Services & Construction; and 7. Financial Services.

New Growth Markets: Regions. The region that is expected to have the greatest growth in ERP is Germany and the US is second. The complete list is as follows: 1. Germany, 2. US, 3. Canada, 4. France, and 5. The UK. I’m a little shocked by the German ranking. I would have thought that the US would have been number 1 but overall I agree with these rankings given the overall strength of each region’s economy.

New Growth Markets: Company Size. Not surprisingly, anticipated ERP growth is directly related to company size. Those companies with 20,000 customers or more have the highest percentage of companies/organizations looking to implement ERP. This isn’t unexpected. What is surprising, however, is that these firms are in the process of expanding now – in 2010 – and very few of them are planning to expand/implement ERP in the next 12 months.

I believe that this is due to consolidation. That is, as many industries contract and firms are purchased or sold, the acquiring firm needs to integrate multiple systems into one unified platform. And this consolidation of business units is what is spurning this growth in ERP amongst these larger companies.

1 Source: Enterprises and SMB Software Survey; North America And Europe, Q4 2008