Financial Times

AMR Sees 'Huge Surge' in ERP Spending, Most Likely at Microsoft
By Alex Woodie
The glory days of ERP spending may not be just a fond pre-Y2K memory in your brain, but could return to claim its rightful place in the sun, suggests a recent report by the enterprise software experts at AMR Research.

In a November report, the Boston analysts group found that 71 percent of the companies it surveyed expected their ERP budget to grow in 2006, with the average increase "an astounding 14 percent." What's more, Microsoft topped the list of ERP vendors companies are considering doing business with. There were some surprising findings to come out of "The Enterprise Resource Planning Spending Report, 2005-2006," which reflects interviews that the research group conducted with 271 midsize and large companies about what they spent on ERP in 2005, and what their ERP spending plans looked like for 2006.

For one, nearly 30 percent of the companies surveyed were still doing initial ERP implementations, which pretty much flattens the widely held belief that, as an ERP vendor, there are no "green fields" left, and that you have to replace a competitor's ERP system to close a deal.

Here's another interesting tidbit: ERP spending, as a fraction of total application spending, increased from 27 percent in 2003 to 35 percent in 2005. As the economy improved over the last few years, companies obviously ramped up their ERP spending. ERP isn't dead at all. In fact, it has a lot of life left in it, despite the bad times for ERP that AMR Research forecasted last year. "It is clear from the survey that ERP spending is growing rapidly across all market segments among large and small organizations," the research organization says in its assessment.

But while ERP spending is going up, companies aren't necessarily spending their money wisely, according to the analysis. This is reflected in the group's finding that 46 percent of licensed ERP seats are currently unused. At the same time, the group found that only 15 percent of total employees are licensed to use their company's ERP system. "Most employees will eventually need access to the central business system in order to do their jobs, which suggests that many organizations are still early in their ERP rollouts and have a great deal of license, services, and infrastructure spending ahead of them," AMR Research says in its report.

When AMR Research asked its subjects which ERP vendors they were evaluating, most of the usual suspects were accounted for. However, there was one big surprise at the top of the list: Microsoft, whose Microsoft Business Solutions division owned just 3 percent of the worldwide ERP market in 2004, with $775 million in revenues, just barely nipped ERP juggernaut Oracle at the finish line to claim the top spot, with a 58 percent "mindshare" rating.

It's no fluke, says Jim Shepherd, research director at AMR and co-author of the recent report. "When we asked participants which vendors would be considered in 2006 for their ERP purchases, Microsoft Business Solutions led the pack," Shepherd says. "Our research indicates that there will be a huge surge in ERP spending in 2006. With companies of all sizes growing their ERP budgets, this is bound to be a banner year for top vendors in this space."
Microsoft--having already beaten Oracle, and ever mindful of an opportunity to grab some headlines--kicked a little sand in the face of its primary ERP software partner for Fortune 100-style rollouts. "This AMR Research report validates what we're hearing from our customers, that businesses prefer integrated and adaptable solutions over higher-priced products from companies such as SAP," says James Utzschneider, general manager of product marketing for MBS.

Rounding out the top 10 on AMR's "mindshare" list were SAP, with a 49 percent rating, SSA Global, with a 32 percent rating, Infor with a 25 percent rating, Geac with a 24 percent rating, Lawson with a 22 percent rating, Intentia with a 21 percent rating, IFS with a 19 percent rating, and QAD, with a 17 percent rating.

These mindshare figures are constantly in flux, as Infor is currently in the process of buying Geac, and Lawson and Intentia are currently merging. There will undoubtedly be more M&A activity. Interestingly, Sage Group didn't even make the list of the top 12 ERP vendors by mindshare.

With $1.2 billion in revenue in 2004, the English company was one of the top five ERP software vendors by revenue. It claimed a 6 percent share of the global ERP market, AMR said last year.

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