ERP Software Industry Trends, Competition in the ERP software

Competition in the ERP software industry is very strong, with over 500 software producers fighting for their market share. Producers can be divided into two groups: (1) companies that offer an integrated suite of applications and (2) those that make innovative niche products and solutions for supply change management, customer relationship management, advanced demand planning software (APS) and e-business applications. The major players in the first group are SAP AG, Oracle, PeopleSoft and J.D. Edwards, while the second group consists of several leaders like Siebel Systems and Ariba. Table 1 provides a breakdown by company of license revenue, market share and estimated growth. By 2001, SAP reported that it alone accounted for more than 36,000 software installations in 15,000 companies across 120 countries. While businesses such as Cisco Systems, Eastman Kodak, and Tektronix have gained the expected benefits of ERP systems, many companies like Hershey, Nike and Whirlpool have experienced difficulties. For example, FoxMeyer Drug, a $5 billion pharmaceutical wholesaler, recently filed for bankruptcy. FoxMeyer argued that major problems were generated by a failed ERP system, which created excess shipments resulting from incorrect orders. Dell Computer spent tens of millions of dollars on an ERP system that was too monolithic and too rigid for their changing global operations. A study conducted by the Boston Consulting Group showed that only one out of three ERP applications could be classified as successful. A recent study indicates that the ERP failure rate may be even greater than 50 percent: 40 percent of all ERP installations achieve only partial implementation and 20 percent of attempted ERP adoptions are scrapped as total failures. Between 60 and 90 percent of ERP implementations do not achieve the return on investment identified in the project approval phase. Despite the problems identified in ERP applications, the number of companies opting for ERP systems will grow continuously heading in 3 directions: (1) the ERP vendors will integrate their solutions supporting ebusiness and workflow management; (2) the ERP applications will be upgraded to target additional functional niches (CRM, SCM, APS); and (3) the ERP solutions will be simplified to target hundreds and thousands of midsize and small companies.