AMR Research Bullish on ERP Software Market

Published: July 25, 2007

by Alex Woodie

Worldwide ERP software sales grew by 14 percent in 2006 to $28.8 billion, according to a recent report from IT analyst firm AMR Research. While 2006 was "spectacular," according to AMR, the good times should continue to roll for the next five years, with an average annual growth rate of 11 percent, a percentage point more than the group predicted nine months ago.

At least once a year, and sometimes more, AMR publishes a report analyzing the past, the present, and the future of the market for ERP and related software, and ranking the top enterprise software vendors by revenues. Because ERP and related products are at the core of most organizations' IT investments, the relative health of the ERP market can function as a barometer for the overall business IT market.

Since early last year, AMR was forecasting 2006 to be another banner year for ERP software sales, and in fact the Boston-area company accurately predicted the percentage growth for the year: 14. That comes on the back of growth rates of 7 percent for 2005 and 14 percent for 2004.

As expected, SAP and Oracle continue to dominate the ERP segment, and these companies own a combined 62 percent of the market with about $16.8 billion in revenues. In third place on the list is Infor with about $2.1 billion in revenues. After last year's acquisition of SSA Global, Infor now owns most of the ERP products designed for the OS/400-i5/OS server.

Like its colleagues on the list, Sage Group, at number four, continued to grab market share through acquisitions. The company, which is strong in the market for Windows-based ERP for small and mid size businesses (SMBs), grew revenues by 27 percent to $1.8 billion. Microsoft also had a good year in 2006, with 18 percent revenue growth, to $996 million. Lawson Software, which completed its acquisition of rival Intentia last year to form the midrange's other dominant i5/OS ERP software vendor, came in at the number six spot with revenues of $560 million.

More good news came in the form of ERP software license revenue growth, which was a very healthy 18 percent for the year. Maintenance fee spending was a bit less--15 percent--perhaps reflecting the slowdown in license growth during the 2004 to 2005 timeframe.

But what's perhaps most interesting is the big uptick in "nontraditional" software pricing and delivery, i.e. software as a service (SaaS), hosting, and subscription models. In 2005, these alternate delivery models accounted for just $76 million. Last year, that number jumped more than 400 percent to $387 million. This trend will continue, the analyst group predicted. "We expect most of the ERP vendors will begin offering on-demand in addition to on-premises options in the near future," AMR says.

Things will be smooth sailing, with an 11 percent compound annual growth rate (CAGR) through 2011. "We don't anticipate any drastic changes to the dynamics of this market over the next five years, although we do expect to see revenue growth come from ERP extension segments such as CRM, HCM, and SCM. We also anticipate that several ERP vendors will increase revenue from manufacturing operations."

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