ERP Market Shake-Up: What It Means to Your Company

ERP vendors continue to merge and be acquired at a steady pace in 2011. Here are some tips on how you can protect your company's interests as the marketplace continues to shift, from analyst Albert Pang.

It's been another busy and intriguing year so far for mergers and acquisitions in the ERP marketplace. Two growing vendors, Epicor and Activant, were purchased in April by a private equity fund that's merging them, while Infor acquired Lawson in March for about $1.8 billion.

Meanwhile, Constellation Software announced in April that it hired several advisers to review future strategic options, including a possible sale of the company, according to Reuters.

So what impact could these recent moves have on busy CIOs and IT managers who are just trying to keep corporate ERP systems running inside their companies?

While they may not affect your company's ERP vendors today, you should keep a close eye on these moves, because they could have a significant effect in the future, says ERP analyst Albert Pang, principal of Apps Run The World Research.

In an April blog post titled " The Next Great Top 10 ERP Vendor Lineup," Pang wrote that the Epicor/Activant and Lawson moves, along with the questions raised by Constellation could at some point even "upend" the global software marketplace. His research at the time found that market leader SAP had 19 percent of the $33.6 billion worldwide ERP market, while Oracle held about 11 percent. Sage, Infor / Lawson and Microsoft are tied at four percent each, rounding out the top 5 ERP vendors by market share.

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The ongoing market shake-up, though, is what will continue to impact ERP users, Pang says. "It's premature to think that Oracle and SAP are going to be able to sustain their existing lead in the ERP market over time because so many things could happen."

How could such events shake up the space in the future? "Microsoft could end up buying some of these companies in order to breathe some new life into their own offerings," he says. "And Infor is being very aggressive in terms of their management and strategy. Others, too, are waiting in wings now, including Constellation, Sage and Epicor/Activant."

All of this means that enterprises that are using, evaluating, replacing or updating their ERP systems really have to keep their options open as they follow the market changes that could affect their future plans, Pang says.

To protect your ERP strategy and best leave your company's options open, Pang recommends taking several steps today:

*Keep your eyes on alternative vendors in case your existing vendor is acquired and you are concerned about the status of the products you're using. "And not just any alternate, but an alternate that is going to be viable for the long run," he says.

*Develop a list of three such vendors that will be able to meet the varying needs of your company, at a headquarters level and at the levels of local operations and subsidiaries, he says. Not all ERP companies can meet every business need so be sure you are selecting potential vendors that can fulfill 99 percent of your requirements. "If you are going to spin the dice on an ERP vendor, you have to ask if they can support your existing and future requirements throughout the product cycle, Pang says. "If the answer is no, then you have to find an alternative."

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