The ERP marketplace is more volatile right now than it has been in a long time. Several long-cherished shibboleths are being widely challenged, new technologies are altering the playing field and customer attitudes about ERP are in flux. Here’s a look at a few of the market trends that are sure to affect your attitudes about ERP and, in most cases, exert downward pressure on the cost of EROP.

ERP market

Market trends that will affect the cost of ERP for your company

End of the open pocketbook. For the past decade or longer, companies simply accepted ERP as a necessary cost of doing business, and they paid dearly to implement it and live with it. CIO’s can no longer justify the kind of open pocketbook ERP projects they once did. Too many ERP projects failed to deliver the benefits planned for them and even those initially deemed successful over the years became part of the problem rather than the solution they once were. As corporations become more global and more operationally entangled with partners and suppliers, the necessity of extending one giant, monolithic ERP to integrate all operations has begun to be seen as overkill. All this is putting pressure on ERP vendors to justify their prices and could result in a dramatic restructuring of ERP TCO.

Smaller companies represent growth opportunities. Large corporations pretty much all have ERP systems and, for reasons mentioned above, may not be in any hurry to replace them. Small and medium size businesses have become the growth category for ERP vendors, as they are becoming for the economy as a whole. Small and medium businesses, many of which are growing rapidly, are attracted to ERP’s ability to automate their processes and enable them to do more with less. However, they are tough customers and demand pricing scaled to their size and financial resources.

“Update, don’t replace” mentality. Many companies of all sizes are showing greater interest in squeezing more benefits out of their current ERP systems rather than dipping into the capital piggybank to replace them. CIOs are revisiting portions of the ERP system that may have under delivered or have started to become outmoded and are investing internal resources and external consultant costs in optimizing them.

Software as a Service marches on. You know this isn’t a fringe marketplace when both SAP and Microsoft are marching boldly into cloud computing. SAP Business ByDemand now competes directly against its traditional software. The continued strength in the SaaS model may be one reason corporations are taking a wait and see approach to replacing their current ERP systems and showing reluctance to continue to embrace the “ERP at all costs” approach of yesteryear.

Emergence of open-source ERP. As if SaaS wasn’t enough of a threat to traditional ERP, now open source ERP is taking a bite out of the market. Open source allows companies to acquire the ERP system and all the modules they need at low cost, then customize the software to meet their unique needs. While this may never be a large percentage of the market, it is another factor putting downward pressure on prices; it can be hard to compete with “free.”

The Federal Factor. New government regulations and compliance requirements have pushed many companies back into the ERP marketplace to get functionality to help automate compliance and reporting requirements. On the other hand, the push to drastically reduce federal deficits is sure to result in a smaller government, meaning one of the biggest IT customers of all may been on the sidelines for years to come.

Written by :

Don Cooper