International ERP [620708]

International ERP
Markets || 2014 – 2015
Trends and Perspectives for the Next Years
Mada lina Luchian December 2017 || UAIC Information Systems & Business
Processes

Contents
Introduction ………………………….. ………………………….. ………………………….. ………………………….. ……………………….. 2
The ERP Market Space ………………………….. ………………………….. ………………………….. ………………………….. ……… 3
Markets Shares – Vendors (2014 – 2015) ………………………….. ………………………….. ………………………….. ….. 5
Market Shares – Sectors (2014 – 2015) ………………………….. ………………………….. ………………………….. ……… 6
ERP Vendors – Manufacturing and Distribution ………………………….. ………………………….. ………………. 7
ERP Vendors – Transport, Communication & Energy ………………………….. ………………………….. ……… 8
ERP Vendors – Service ………………………….. ………………………….. ………………………….. ………………………….. …. 8
ERP Vend ors – Retail Sector ………………………….. ………………………….. ………………………….. ……………………. 9
Current trends and innovations ………………………….. ………………………….. ………………………….. ………………….. 9
Moving into Cloud Computing ………………………….. ………………………….. ………………………….. …………………. 9
Market Projections ………………………….. ………………………….. ………………………….. ………………………….. ……… 12
Conclusion ………………………….. ………………………….. ………………………….. ………………………….. …………………………. 14
Bibliography ………………………….. ………………………….. ………………………….. ………………………….. ……………………… 15

Figure 1 Vendors ………………………….. ………………………….. ………………………….. ………………………….. ………………. 6
Figu re 2 Manufacturing and Distribution ………………………….. ………………………….. ………………………….. ….. 7
Figure 3 Transport, Communications & Energy ………………………….. ………………………….. …………………… 8
Figure 4 Service Industry ………………………….. ………………………….. ………………………….. ………………………….. …. 8
Figure 5 Retail ………………………….. ………………………….. ………………………….. ………………………….. ……………………. 9
Figure 6 Market Projections ………………………….. ………………………….. ………………………….. ………………………. 13

INTRODUCTION

Allied Market Reasearch released a report providing insights into the ERP market at a global
level, predicting that the international market is expected to reah $41.7 billion by 2020, with
growth stabilized at the 7.2% during 2014 – 2020.

The rise of cloud technology was also expected to lead to a shift in paradigm in the methods
of deployment. The expectation is that providers will move from on – premise to cloud
enabled ERP, reducin g in this way the investments necessary in alternative IT resources and
increasing flexibility.

The modules that enable ERP models range from fields such as finance, marketing, sales,
manufacturing and HR. The finance function is also reported to drive t he ERP software among
customers quire significantly, and is expected to contribute to large market share of the
revenue – 30%.

Another registered trend is the launching of ERP produ cts which can be easily acessed via
mobile devices. The effort is concent rated towards developing a system that can be easily
delivered from a third party platform. A shift is registered toward Software as a Service
(SaaS), with vendors such as Orale, SAP and Microsoft launching cloud based products.

Cloud based products are p referred due to the easy accessibility – information for critical
business decision an be acessed at any time and anywhere. The surge in cloud technology
would drive the adoption of cloud -enabled applications. By 2020, cloud -enabled ERP would
grow at a CAG R of 10% due to easy access and low cost factors.

THE ERP MARKET SPACE

The ERP market industry follows the trend of all IT related segments and is evolving rapidly.
There is a clear distinction between very large enterprises and small and medium siz ed
enterprises (SMEs). However, it is the SME sector that is seeing the most growth and
emergence of new players.

Depending on the clients that the services are provided to, ERP vendors are classified in
either Tier I, II or III. The size and complexity o f the client is closely related to the size and
complexity of the solution that is offered, and distinctions are very clear.

Tier I Tier II Tier III
– Tier I market client companies ; – Mid Size d Companies ; – Annual revenues: $10 – $50 mill
– Annual revenues : > $1 billion – Annual revenues: $50 mill – $1
billion ; – Single location installations, for a
single vertical;
– Multinational s: varied
geographic presence; – Cater to a single or multiple
locations of deployment ; – Simple to implement;
– High cost of ownership due to
complexity; – Considerably lower costs; less
support is required ; – Low cost of ownership > Easy to
manage and deploy
– High cost of implementation
and support; – Solutions are confined to
specific industry verticals; – High risk that the company could
soon outgrow the solution
– Mergers and consolidations
have shortened the list; – Increased competition; – Migration path should be
outlined when choosing Tier III
solution
– SAP + Oracle; – Comprises of ~20 well known
companies;

ERP software wa s originally designed for enormous enterprises which were losing money
and suffering from loss of productivity due to of large -scale disorga nization. The software
offered organizations a means to standardize their internal processes by connecting
informati on systems. Organizations of this size have already found success; the key is to
remain coordinated.

Products at the enterprise level also help manage assets outside the organization, such as
relationships with third parties, or even secondary ERPs deploy ed at a regional level. More
recently, the software has evolved from a recording system for transactional data to a true

data management platform. This means analytics and workflow management features are
becoming more common.

Due to the exclusivity of Ti er I vendors, the midmarket is where most of the current
innovation tak es place. Cloud -based Software -as-a-Service applications, for example, have
gained more traction with midmarket organizations. The decreased cost of these platforms
has actually lead to Tier II vendors gaining market share ground on Tier I vendors over the
past several years.

Data visualization, data analytics, and process management are even more important for Tier
II buyers. Manufacturing organizations make up a significant portion of this market, as well
as a number of other niche verticals. Tier II vendors also offer industry -targeted modules and
best practices similar to their larger Tier I competitors

Small business are often left out of the cconversation when it comes to implemen ting ERP
solutions, since the nature of solution is that it is aimed at enterprise scales. However, in this
era of ubiquitous data, small businesses often need a centralized view of their information,
particularly for financials, human capital, and custome r transactions.

Since small businesses are by definition less complex than their larger competitors, the
solutions targeted toward them offer less encompassing platforms.
While this may mean reduced functionality, it leaves room for improvements in other areas,
such as user experience, mobile access, and more.

The ERP market can be broken down by several factors. First of all, ERP solutions are
categorized by vendor, by sector and by geographical areas.

ERP solutions are such a specialized field and the necessity of domain expertise is so critical
that solutions and their providers can be easily broken down by sector. Each sector has its
own top 10 list. Of course, many of the players are common to all domains – SAP, Oracle and
Microsoft being the mai n examples. But variations tend to creep into the Tier II and Tier III
end of the market.

Panorama Consulting Solutions, an independent and vendor neutral ERP consulting firm,
developed an annual report – Clash of the Titans – to compare the biggest enterprises in the
industry: SAP, Oracle, Microsoft Dynamics or Infor ERP solutions. The study spans the period
June 2014 – October 2015, and includes findings on several factors, such as market shares,
implementation durations an d payback periods. It also further delves into selection trends
and business benefits realization.

MARKETS SHARES – VENDOR S (2014 – 2015)

In the Ist Tier of the market the battle for dominanc e is ever growing as SAP, Oracle, Microsoft
Dynamics and I nfor each seek to increase their global user base. Each of these four vendors
are quick to adapt to the ever -changing needs of their clients, anticipating and capitalizing on
economic trends and developing offerings for verticals outside of their original target
markets.

The top ten market players have not changed much since 2013, with SAP, Oracle, and
Microsoft Dynamics 365 leading the pack with a combined share of over 40 percent in 2016,
according to Panorama Consulting.

Market Share statistics are bas ed on the frequency each vendor was elected by organizations
represented by the report provider – Panorama Consulting Solutions. The data show that SAP
holds 26 -percent of total market share, Oracle holds 16 -percent, Infor holds 16 -percent and
Microsoft Dy namics holds 9 -percent. Tier II solutions represent 12 – percent of the market,
while Tier III and others represent 26 -percent of the total marke t.

MARKET SHARES – SECTORS (2014 – 2015)

Unifying data in one platform aid enterprises in reaching a “single version of the truth,” which
just means that numbers provided in company reports can be trusted regardless of what
department they come from. Enterprise resource planning software is licensed in modular
form, which allows customers to choose fun ctionality based on the needs of their
organization. Implementation can be a long process, sometimes taking multiple years.

Organizations usually implement these systems for several reasons:
• Integration of financial information
• Integration of customer order information
• Standardization of manufacturing processes
• Reduction of inventory and reduced overhead costs
• Standardization of Human Resources information

A study performed in order to compare the top 10 ERP vendors has classified vendor market
shares after the following sectors:

Figure 1 Vendors

• Manufacturing & distribution industry
• Transport, communication & energy
• Service sector
• Retail sector

The top player in every segment on the industry are shown in graphs below along with the
orresponding market shares. Often time, SAP, Oracle and Microsoft are ever present in every
sector.However, thelower ranks can become extremely fragmented, being difficult to identify
the top 10, and classifying them as others.

ERP Vendors – Manufacturing and Distribution

SAP, Oracle and Microsoft dominate the market as they hold together 55% of the market
share. Considerable market share is also held by Tier II vendors, such as Epicor, IFS and
Lawson. The lower end of the market is very fragmented with 26% going to a large number
of vendors each of whom has less than 1% market share.

Figure 2 Manufacturing and Distribution

0% 5% 10% 15% 20% 25% 30%SAPOracleMicrosoftInforEpicorIFSLawsonConsona CorpActivantQADOthers

ERP Vendors – Transport, Communication & Energy

As well as in the pr evious classifiations, the top 3 remain unchanged. Hwever their market
share totals 73%, an increase of almost 20% from the previous sector. The remaining
vendors share 11% amongst themselves, and the remianing portion is assigned to the others
group.

Figure 3 Transport, Communications & Energy

ERP Vendors – Service
Remianing unchanged is the trend of the 3 top players dominating the industry. However, the
opposite end of the market is muh more fragmented , the instanes where only 1% of the
market is assigned occurring for 7 companies, a higher portion being assigned to the Other
category of the market :

0%5%10%15%20%25%30%35%40%
SAP Oracle Microsoft Infor Epicor IFS QAD Adonix Sage Visibility
0%5%10%15%20%25%30%35%
1
SAP Oracle Microsoft Infor Epicor Lawson Netsuite Other
Figure 4 Service Industry

ERP Vendors – Retail Sector
Finally, in the retail sector the dominance lorded by SAP, Oracle a nd Microsoft continues.
Microsoft improves its position in this sector, coming out even with Oracle. In Tier III service
providers, we find new entrants in the list with small vendors taking up nearly 11% of the
market space.

Figure 5 Retail

CURRENT TRENDS AND IN NOVATIONS
Innovation drives market growth overall adoption, and competition among ERP software
companies at any level. Hybrid cloud models and mo bile capabilities reflect the general
software trends towards usability, portability, and enhanced security.

Moving into Cloud Computing

Cloud based ERP solutions are beccoming a choices for an increasingly high number of users.
This is mostly owed to th e typically lower cost of ownership – initial startup costs can be lower
by as much as 30% to 50%, a vital difference by ccomparison to an ERP architectural frame
hosted within your own premises. The relevance of this fact increases with the exapnse of the
comany’s geographical expanse. Those who adhered first to cloud were relatively smaller
companies and mid -range companies were the next to consider a move to the clouds.
0% 5% 10% 15% 20% 25% 30% 35%1
Other Exact SAGE QAD Consona Corp Lawson Infor Microsoft Oracle SAP

Due to the fact that small companies and mid range ones chose to make the move to cloud –
based solutions , the shift is largely responsible for much of the current growth in the market.
The large Tier 1 ERP companies have cloud offerings of their own, but they can’t always
compete with the agility of smaller vendors like Workday. Conseque ntly, a two -tiered
approach is emerging in many large and even midmarket organizations.

Another trend is related to mobile access. Taking into acount the ever increasing presence of
mobile devices in the professional environment, the request for mobile a ccess is becoming
more common – if not expeted in many transactional scenarios . This enables more informed
decisions to be made at every level, as m obile solutions help distribute data more quickly
through enterprises of varying degrees in size.

The rapid diffusion of Cloud Computing influences the way enterprise software is developed,
distributed, and implemented. This move from on-premise to Clou d-based technology does
not imply that ativities, roles and actors related to the IT business environment will fade out
of existence. Instead, the activities suffer changes such as no longer occurring at the client's
location but with another actor. The customer can see this change as transferring the level of
complexity entirely from their own environment onto th at of the lient or the partner. One the
omplexity of the infrastructure at the client’s base location is lowered, standardization of the
software sets in. As such, the role of the consulting partner suffers changes from an IT –
intensive role to a more busi ness process management role. This role is espeially underlined
when public loud environments are involved.

It is true that public cloud computing follows much of the same best ppractices standardized
processes, and limited customization opportunities. T he vendor's focus on standardized
solutions has advocates and opponents. Nevertheless, both advocates and opponents agree
that standardized solutions rather fulfil SMEs requirements; whereas, the best practice
approaches are not sufficient for big companie s.

Mostly owed to security, data migration, customization and mobile application, the tehnial
consulting role will never be have its importancce greatly reduced even in the scenarion
described above. It is exoeted however that as soon as the standradizati on process sets in,

customization will become marginal. With Cloud Computing IT security demands more
attention and educational work at the clients place.

Emerging sectors that are estimated to add value tthrough services provided are f inancial
consulting , environmental consultation, license management, and service aggregation. In the
selling process, of particularly high importance is the financial advice surrounding CapEx and
OpEx , so that the customer can receive aid in the economic evaluation process. Another
discouragement to potential customers who just neter a contract is the lak of transaparenccy
of licenes . This also includes the monitoring of SLA critical indicators and can be handled
through a Service Aggregator.

In this way a vendor can evolv e into a service provider for Infrastructure Provider, Platform
Provider, Application Provider, and License Provider (for partner managed Cloud).
Nevertheless, as the business model of the vendor changes, also the revenue streams for
partners change from a short -term revenue stream into a long -term revenue stream.

The shift also changes project management concepts to a quicker and agile approach that
better fits the rapid implementation process of Cloud -based enterprise software. The
technological platform , which is provided by the vendor, offers the opportunity for the
external developers, partners, and customers to develop applications that extend the core
functionality of the enterprise software. Through market platforms, external developers and
partners can offer and distribute their value -added solutions more easily.

As the IT infrastructure becomes less relevant for Cloud consumers, they can concentrate on
their core business, but need to consider applying best practices processes when receiving
public Cloud services. Furthermore, the Cloud consumers can take advantage of the rapid
deployment of services by trying out new innovative Cloudbased technology.

Market Projections

In 2015, the top 10 ERP software vendors accounted for nearly 28% of the global
ERP applications market which grew 1% to approach nearly $82.1 billion in license,
maintenance and subscription revenues. The ERP applications market includes both ERP
Financial Management & ERP Services and Operations applications.

The major forces driving the cloud ERP market include, an increasing need for operational
efficiency, increasing awareness & adoption across SMEs and large enterprises working
across various industry verticals, and implementation of cloud i nfrastructure & enterprise
mobile applications.

Finance is expected to play a key role in the loud ERP market. This segment is projected to
grow at the highest CAGR during the forecast period, as deployment of such ERP applications
in organizations will continue to grow. An ERP system is largely used for efficient
management of financial functions such as financial consolidation, cash management along
with activities related to management of fixed assets, payables and reciveable along with
maintenace of general ledgers for the enterprise.

The operations ERP function segment is expected to have the largest market share and
dominate the cloud ERP market from 2016 to 2021, due to growing demand for such
solutions across manufacturing and related industry ve rticals.

The cloud Enterprise Resource Planning (ERP) market size is estimated to grow from USD
18.52 Billion in 2016 to USD 29.84 Billion by 2021, at an estimated Compoun d Annual Growth
Rate (CAGR) of ~6 .0%. The base year considered is 2015 and the marke t size estimated is
from 2016 to 2021.

Figure 6 Market Projections

CONCLUSION
The market is dominated by SAP, Oracle and Microsoft in that order and together they
command a 55% market share. ERP software comprises of several ERP modules such as
finance, sales, marketing, HR, etc. Integration of business functions is effectively done through
implementation of ERP software. Thus, it enables smooth and efficient functioning of
businesses. These benefits lead to a large adoption of ERP software among customers. Among
the various functions, finance function wo uld drive the ERP software market significantly by
the year 2020, and would contribute to near about 30% of the overall market revenue.

Emergence of cloud technology in the market would lead to a paradigm shift in the
deployment methods from on -premise to cloud -enabled ERP. Cloud ERP software
considerably reduces the investments required in alternative IT resources and offers greater
flexibility. Thus, customers are shifting from on -premise to cloud ERP. Feature of accessing
ERP from mobile devices would g ain a surge in terms of adoption .

Global ERP vendors in the market like Oracle, SAP and Microsoft are launching ERP products,
which can be easily accessed via mobile devices like smartphones and tablets. These players
are putting efforts to develop ERP sy stem that could be easily delivered from third -party
vendor's platform. The market is increasingly witnessing a shift towards Software as a
Service (SaaS) model.

BIBLIOGRAPHY
Compare Business Products, 2016, Top 10 Enterprise Resoure Planning (ER P) Vendors
Nieuwenhuis, L. J.M., Ehrenhard, M. L., Prause, L., 2017, The shift to Cloud Computing: The
impact of disruptive technology on the enterprise software business ecosystem . Technological
Forecasting & Social Change
Allied Market Research, 2015, Global ERP Software Market – Size, Industry Analysis, Trends,
Opportunities, Growth and Forecast, 2013 -2020
Technology Advice, Enterprise Resource Planning Software Buyer’s Guide
Markets & Markets, 2016, Organization Size, Vertical, and Region – Global Fore cast to 2021