Small ERP vendors gain market share
Smaller enterprise resource planning (ERP) vendors are gaining market share over their more established counterparts.
This is according to Eric Kimberling, president of Panorama Consulting Solutions, an ERP consultancy firm.
Kimberling notes that though much scepticism and uncertainty has clouded the ERP industry for the past several years, smaller vendors, or Tier III ERP vendors, have defied the odds and are making significant inroads in the market.
According to Gartner research last year, SAP ranks as the number one ERP vendor with a 25.5% share of the worldwide market, based on revenue for 2011.
Research carried out by ITWeb in partnership with EOH last year also discovered that SAP is the most prominent ERP system within many organisations in SA, as chosen by 34.04% of respondents. Oracle came next, at 21.99%, followed by Microsoft Dynamics (14.89%) and Syspro (3.55%), among others.
On the other hand, a recent report by Panorama Consulting notes that although SAP still leads the global ERP market, its share has dropped to 22%. SAP is followed by Oracle with 15%; Microsoft Dynamics with 10%; Tier II vendors with 16%; and Tier III vendors and others with 37%.
Kimberling points out that pure software as a service (SaaS) and cloud ERP solutions are driving the highest rates of growth in the market among Tier III vendors, while traditional Tier I vendors, such as SAP, Oracle and Microsoft Dynamics, are investing increasing R&D dollars into their cloud software offerings.
"Panorama's 2012 ERP Report reveals that the market share of cloud and SaaS ERP systems grew from 6% in 2011 to 18% last year, which quantifies some of the momentum in the Tier II and Tier III ERP space," says Kimberling.
However, he notes that while this growth of smaller ERP vendors is well documented and at times overly hyped, not nearly as much time is spent analysing what is driving this industry trend.
He also points out that Tier III vendors are gaining ground because ERP vendors simply can't be everything to everyone.
"Even SAP and Oracle - the two largest ERP vendors in terms of market share - can't provide the best human capital management, customer relationship management, business intelligence, manufacturing and planning software for every company in every industry, so there is a constant opportunity for smaller, more nimble competitors to fill the void with more focused solutions," he explains.
He also notes that more companies are looking for ways to spoon-feed their ERP software purchases and implementations to their organisations.
"This incremental approach can be conducive to best-of-breed solutions rather than full-blown and tightly integrated ERP systems that don't work as well in bits and pieces."
Kimberling also believes that, along with potentially lower implementation costs and less disruptive impacts on the business, these solutions also come with lower risk. Thus, he says, more focused niche solutions can be more conducive to incremental implementations and can be easier to swallow without impacting the entire organisation, which can mitigate the potential risk of larger ERP software deployments.
"CFOs, CIOs and COOs seem to be particularly risk-averse at this moment in time, so the relatively low-risk appeal of Tier II and Tier III ERP systems can appeal to this mindset."
Nonetheless, he points out that best-of-breed Tier II and Tier III ERP systems have disadvantages as well.
"Data siloes, complex integration and system architecture, and the costs of managing multiple systems are all potential downsides that may eventually drive some of these same customers back to single-system ERP solutions."
In either case, he concludes, these smaller, niche solutions provide a viable alternative for many educated organisations that have the insight to consider their full portfolio of options.