Budgets will grow by 12.3 percent next year, thanks to factors like healthy IT spending, enhanced functionality, and continued interest from SMBs and midmarket companies.
Posted Nov 2, 2006
U.S. companies will up ERP budgets by 12.3 percent in 2007, according to the "Enterprise Resource Planning Spending Report, 2006-2007," unveiled by AMR Research this week. The report is based on findings from 175 interviews with IT decision makers (predominately manufacturers) in U.S. based companies with more than 1,000 employees, according to the report. While ERP funding is expected to maintain its run of solid uptake, 2007's forecasted budget increase is slightly lower than 2006's expected budget growth of 14.6 percent.
Even so, Eric Klein, AMR research analyst and report coauthor, says that for the past few years the ERP space has been healthy. As for what's fueling growth in ERP budgets, he attributes it to several factors, including enhanced product functionality and solid interest from SMBs and midmarket companies. "IT spending as a whole is healthy right now," he says. "When IT spending is healthy you're going to see applications growth up and down the IT stack." He adds, "The two areas where we're seeing real movement and growth are manufacturing and supply chain and in those two areas specifically, ERP vendors are broadening their functionality there."
Purchasing (61 percent), inventory management (60 percent), order management (57 percent), financial management (53 percent), and human resources (46 percent) are the top five functional areas that are currently covered by survey respondents' ERP software. In the next 12 months, however, BI/analytics (25 percent), financial management (21 percent), and order management, manufacturing, and CRM from an ERP vendor (each with 20 percent) are the top five new functional areas that respondents contend will be covered by ERP software. It should be noted, however, that the remaining functional categories were each separated by no more than two percentage points from the next closest functional area. Companies designated BI/analytics as their most strategically important 2007 ERP software investment and the ERP software investment where they'll spend the most in 2007 (15 percent, 20 percent), followed by manufacturing (14 percent, 10 percent), and customer management (13 percent, 9 percent).
Globalization (15 percent) and lean manufacturing (14 percent) are the two most important business issues survey respondents intend to address with their largest ERP investments, just slightly edging past business intelligence and visibility and control, both with 13 percent. Companies tagged e-business as the next most important business issue they plan on addressing by leveraging ERP (10 percent), followed by consolidation (8 percent), supplier collaboration (7 percent), and shared services, outsourcing, new customer requirements, and regulatory compliance, each with 5 percent.
The report also examines companies' ERP vendors of choice. Unsurprisingly SAP and Oracle top the list. Fifty-three percent of respondents are using SAP and in the next 12 months 55 percent will be considering them, while 51 percent are currently running Oracle (including PeopleSoft and Siebel Systems) ERP offerings and 43 percent are considering them. Other vendors included in the report are (first number represents percentage currently using and the second is the percent that are considering the vendor):
Lawson Software (including Intentia): 11 percent, 10 percent
Microsoft Dynamics: 11 percent, 17 percent
Infor (including Geac and SSA Global): 10 percent, 17 percent
QAD: 7 percent, 6 percent
IFS: 5 percent, 7 percent
Epicor: 3 percent, 5 percent
Other vendor: 3 percent, 5 percent
Activant Solutions: 2 percent, 3 percent
Sage Group: 2 percent, 6 percent
While just 17 percent of respondents noted that they currently use a best-of-breed vendor, "best-of-breed vendors definitely still serve a purpose and they make sense for a certain type of company," Klein says. "It's not just SMB, it is enterprise in some cases. There are very specific needs that some companies have that aren't met by their ERP vendor, so the best-of-breed player will remain. The question is, will there be more acquisitions and consolidation in this space and that's something we always watch as well."
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