July 1997, Volume 3, No. 7 ERP Leads Enterprise Applications Market

The industrial enterprise applications market will see a 28% jump in revenue this year, according to a report by Advanced Manufacturing Research (Boston, Mass.), a market research firm. Led by SAP, Oracle, Parametric Technology and J.D. Edwards, the market is expected to expand from $13.8 billion in 1996 to $17.7 billion by year end. Not surprisingly, these companies also lead the market in revenue share. The enterprise applications expansion is being driven by a wide range of manufacturers' requirements and spending plans, according to AMR. While Fortune 500 companies are taking an increasingly global approach to business and investing heavily in integrated client/server-based enterprise-wide applications, smaller manufacturers are looking for PC-based off-the-shelf software packages to track orders, materials purchases and production schedules. More than 125 vendors are vying to meet the demands of this growing market. This year has already seen an incredible growth for smaller companies like SCT-ADAGE with growth of 250%, CADIS at 120% and ProMIRA at 80%. "As the market continues to grow, we're seeing many important new players," observed Gisela Wilson, AMR's director of primary research. "But for now, the market is still dominated by the powerhouses with the largest market shares and higher-than-market growth rates." This group is led by SAP (34%), Oracle (35%), Parametric Technology (40%), and J.D. Edwards (40%). Most of the industrial enterprise applications market revenue is generated by application software license sales, with enterprise resource planning (ERP) software leading at 35% market share. ERP is followed by mechanical CAD/CAE/CAM at 34% and plant operations at 13%. ERP is expected to strengthen its hold on the market and will likely increase its market share from 35% to nearly 46% by the year 2001. "Much of ERP's market growth is driven by an increasingly global business focus," Wilson said. "Manufacturers are scrambling to replace MRPII systems with software that will ease the integration of business processes and support multi-national and multi-site business environments. This is especially important for companies hoping to seize market opportunities in emerging manufacturing regions such as Asia/Pacific and Latin/South America." AMR's report predicts that advanced planning and scheduling (APS) will be the fastest growing segment in the next five years. Fueled by enormous improvements in computer processing power and software design, APS vendors are providing manufacturers with solutions that shrink product lead times and enable mass customization. Currently holding a 1.7% share of the market, APS applications will represent 4% of the market by the year 2001. Historically, the enterprise applications market has been supported by Fortune 500 companies with incomes from $250 million to more than $1 billion. Today, these companies represent 65% of software revenues. Vendors are realizing, however, that there is a largely untapped market of mid-sized companies with incomes between $50 million and $250 million. This segment currently holds 21% market share, but based on the number of companies in this range, there is huge potential for growth. Over the next five years, AMR expects to see mid-range companies expand their market share considerably as vendors increasingly focus on this new frontier. The customer base for the industrial enterprise applications market is also shifting in terms of geography. For example, while North America and Europe still hold the largest market shares (48% and 33%, respectively), Asia/Pacific, Latin/South America and Africa are expected to be the new lands of opportunity. Driven by the current wave of manufacturing outsourcing from both American and European corporations, steady growth is expected in these areas over the next several years. Vendors are also altering their approach to vertical market sales. According to AMR, ERP vendors in particular are beginning to reach out to customers by opening industry expertise centers for their most promising vertical markets. Vendors across the market are also forming an increasing number of partnerships with industry-specific point tool vendors to develop product features that satisfy the industry-specific needs of their customers.

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