AMR Research Says ERP Software Sales to Hit $29 Billion This Year

Jim Shepherd, the senior vice president of research at AMR Research, released the firm’s latest analysis of the past ERP software market and its prognostications for the future of that market, and the good news is this: ERP software sales are still growing.

In fact, according to AMR, companies consumed $25.4 billion worldwide on ERP software, support, and services in 2005, and if AMR’s projections are correct, then they will spend $29 billion in 2006. That’s an increase of 14 percent, which is a pretty healthy growth rate. Moreover, Sheppard is predicting that over the next five years, the ERP software market will grow by an average of 10 percent per year. (Obviously, there will be some ups and downs in there.)

The ERP software market came into being in the early 1990s when companies realized they had to integrate the databases and applications that drove their back offices, their manufacturing floors, and their distribution operations. ERP software expanded beyond manufacturers into healthcare, financial services, and other businesses because the same kinds of problems–assembling a product, delivering it, and charging for it–span all industries.

Just like companies need to consolidate their business operations into one place, the biggest ERP software vendors have been on a buying binge, and after all of the acquisitions, the installed bases of ERP software are increasingly controlled by a handful of players. Shepherd reckons that 66 percent of new ERP license sales in 2006 will done by SAP and Oracle. SAP will have 43 percent, with Oracle getting 23 percent. The next biggest player will be Sage Group, with 5 percent, followed by Microsoft with 4 percent and Infor (which now owns SSA Global) getting 3 percent. That is an astounding amount of consolidation.