As the enterprise resource planning (ERP) market in Europe matures, it is relying on the midmarket to maintain positive growth rates, according to the latest IDC analysis. Growth is also driven by end-user demand for pre-integrated application suites and by the fact that the ERP umbrella steadily covers more application areas. In 2002, the Western European ERP market reached 6,500 million. This is equivalent to about a third of the total enterprise applications market (back office, engineering, and CRM applications) in Western Europe.
Among the key trends that IDC sees in the ERP market are broader functional coverage of ERP suites into areas such as PSA and PLM, deeper, industry-specific offerings, continued consolidation with more M&A activity to come, midmarket as growth driver, software as a service leading to new license models and composite, multivendor applications.
“Moderate growth will continue, but in the long run IDC expects new integration technologies and licensing models to inhibit growth significantly. The ERP value proposition evolves around pre-integration of components, but in the future, Web Services and other emerging standards will allow customers to mix and match between application components from different vendors,” said Bo Lykkegaard, senior research analyst with IDC’s European Software group. “New subscription-type licensing models will hamper growth, since revenue recognition is spread out over several years instead of being recognised up front.”
Lykkegaard continued, “A saturated high-end segment of the market has caused lower growth rates and a wave of consolidation moves currently seen among the larger ERP players. The reduced growth rates of the market have also led vendors to specialize in specific industries and offer vertically differentiated solutions. This trend accelerated in 2002, with the leading ERP vendors extending the number of their industry-specific solutions.”