ANALYSIS & OPINION

ERP competition heating up

6 February 2007



Sage, a provider of software business solutions, has acquired £650m of businesses recently, including prominent European companies such as Adonix and Elite, both of France, and Bauer of Germany.

According to a new report provided by IDC, this consolidation of the market is a trend typical for providers of ERP (enterprise resource planning) solutions, with many companies finally managing to compete with SAP, the biggest competitor, in certain sectors and countries.

For more than 20 years, SAP has been by far the biggest competitor, and it still has 44 per cent of the market share. 'It is the incumbent,’ Bo Lykkegaard, program manager for Western European enterprise applications at IDC, told scientific-computing.com. ‘Overall, in all 11 countries examined, SAP isthe leader, but some variations do occur, especially outside of German speaking countries.’

ERP started with the idea combing standalone applications, such as accounting software, with inventory management, to provide real-time integration and utilise the underlying data. ‘You don’t see much standalone accounting software anymore; it’s all evolved to ERP – even entry-level applications,’ said Lykkegaard.

To compete with SAP, companies like Sage are concentrating on specific market sectors. In Sage’s case, this is a concentration on providing services for small- to mid-sized businesses, which SAP does not cater for. Cynthia Alers, director of investor relations at Sage, told scientific-computing.com that the consolidation of the market is also partly due to customer demands: ‘The call for service support is growing. Companies need to be larger to be able to support the overheads.’

Sage’s strongest areas of specialisation are in health care, and payment processing and online banking - a sector that has an increasing need for such solutions.

As the study shows, Sage is by no means the only company to take this strategy. Oracle too is an ERP provider that has found greater success through lucrative acquisitions – most notably PeopleSoft, which has now given them an overall nine per cent share of the market.

In particular, Oracle is said to have increased its presence in the UK, Netherlands, France and Spain, with increasing support for the financial services and public sector. It has also taken a greater interest in human resources management software.

‘Before the acquisition, Oracle was at a cross-roads,’ said Lykkegaard of IDC. ‘It was losing market share to SAP and did not have the scale to justify the investment needed for a competitive offering. The acquisition represents a strategic focus on applications. It was a do or exit situation.’

In addition to acquisition, the study also suggested that services-oriented architecture (SOA) would prove to be increasingly popular over the next three years. It is thought this will blur the distinction between generic ERP applications and industry-specific solutions.

Because this would increase greater use of industry standards such as XML, it could ease the integration of such applications – solving what Lykkegaard describes as a ‘complexity crisis’ caused by the use of a number of different applications for different processes.

This would ultimately put a greater amount of information at the end-user’s fingertips. For example, when buying a car, a customer could find out the availability and price of different specifications instantaneously.

It may have taken more than 20 years, but is seems ERP applications are on the brink of finally realising their potential.

Related internet links

IDS
Sage
Oracle