ERP license revenue in decline

The ongoing economic downturn has impacted the ERP application market. According to Gartner, the revenue generated from new licenses worldwide totalled US$5 billion in 2002, a 9% decline in on the 2001 figure of 2001.

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By  Matthew Southwell Published  July 29, 2003

The ongoing economic downturn has impacted the enterprise resource planning [ERP] application market. According to Gartner Dataquest, the revenue generated from new ERP software licenses worldwide totalled US$5 billion in 2002, a 9% decline in on the 2001 figure of 2001.

SAP extended its lead in the worldwide ERP software market, with its new license revenue accounting for 25.1% of the market. Oracle and PeopleSoft experienced a decline in market share in 2002, while Sage and Microsoft Business Solutions experienced a slight increase.

According to Gartner, the market’s downturn is due to more than just tighter IT budgets and past disappointments also had a large role to play.

“A shift in buyer behaviour, due in part to users’ past experiences of software failing to meet expectations, has created a more cautious buyer that seeks smaller, less expensive pieces of software to quickly drive positive bottom line results,” says Chad Eschinger, principal analyst for Gartner’s worldwide software applications research group.

Recent research from Meta Group backs up Gartner’s beliefs regarding failed projects, as the analyst house’s managing director for Asia Pacific, Paul Ventura, reports that one in four ERP implementations fail due to poor planning and an unwillingness to modify existing business practices.

“The problem that most companies are facing, and the reason why most ERP implementations fail, is that they have incorrect assumptions about what the applications will do for the company,” says Ventura.

“They think that something like a tier one solution will take away the pain of legacy applications and give them a centralised and integrated reporting structure that is hooked into all parts of their business. However, companies underestimate the business process change required. Automating an inefficient process does not automatically make it an efficient process,” he explains.

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