Forrester: Economy Still Hampering ERP Upgrades

ERP (enterprise resource planning) software investments aren't on this year's agenda for three-quarters of IT decision-makers who responded to a recent Forrester Research study, indicating that the global economic downturn's effects are still lingering.

ERP (enterprise resource planning) software investments aren't on this year's agenda for three-quarters of IT decision-makers who responded to a recent Forrester Research study, indicating that the global economic downturn's effects are still lingering.

Forrester also found that "nearly two-thirds of companies believe their current ERP status quo is good enough for the next few years," analysts Paul Hamerman and China Martens wrote in a new report.

"After all, their apps have seen them through the last few years of economic hard times, so there may be life in them yet," the analysts said. "They may also want to wait out some of the current flux around newer ERP apps to see where the market settles once each vendor's Version 2 debuts."

Still, the overall market for ERP should grow from US$45.5 billion this year to $50.3 billion in 2015, according to the report.

The nature of how vendors make that money will change, however. License sales will drop by 2015, while the take from annual maintenance fees will rise, according to the report. Maintenance dollars already accounted for 51 percent of the market in 2010, Forrester said.

But subscription-based SaaS (software as a service) ERP, which now accounts for just $1 billion of total ERP revenue, will grow 21 percent each year through 2015, doubling to 4 percent, according to the report.

ERP vendors will "have to field alternative deployment models or get left in the dust of the cloud," the report states. "Ultimately, cloud-based extensibility, hosting, and managed upgrades will lead to a variety of hybrid deployment models that will provide most of the benefits of SaaS while handling the breadth and diversity that ERP customers require."

Major vendors SAP and Oracle have already taken steps in this direction. SAP is rolling out a series of on-demand extensions to its core Business Suite, while Oracle has stressed that its upcoming Fusion Applications can be adopted in a highly modular fashion, with the option of SaaS deployment.

Forrester surveyed 2,403 IT decision-makers in the U.S., Canada, France, Germany and the U.K., from companies of all sizes.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is Chris_Kanaracus@idg.com

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