Top Ten ERP Software Predictions for 2010

A new decade is upon us and the ERP software industry looks quite different than it did at the start of the decade.  Ten years ago, the enterprise software space was booming, IT budgets were flush, and companies were replacing accounting systems left and right in preparation for Y2K.

In contrast, the decade closes with depressed IT spending levels, revenue contraction among many ERP vendors, and uncertainty about the future.  However, there are several things to be optimistic about.  Below is our ten predictions for the enterprise software space in 2010.

ERP Software Predictions for 2010

  1. Diligent focus on ERP software benefits realization and ROI. Long gone are the days of spending like it’s 1999 and hoping for the best.   CIOs and COOs will continue to face pressure to prove that every dime of investment in ERP systems is justified and generates a solid return on investment.  Look for more deliberate spending, more phased rollouts, buying licenses only as they’re needed, and hesitancy to invest in more expensive advanced enterprise software modules.
  2. SMBs to get back into the ERP software market. The bright spot in any recovering economy is usually small business (SMBs).  As the economy emerges from the recession, SMBs will look for small business software to automate their operations and scale for growth.  In addition, large software vendors such as SAP and Oracle will continue to focus on the SMB market to reinvigorate their revenue growth in software license sales.
  3. Increased adoption of Software as a Service (SaaS) at SMBs. While SMBs may lead the charge in their small business software investments, it may be difficult for them to make the necessary investments.  Given that tight credit markets will likely continue into the new decade, many SMBs will look to SaaS ERP software to help them minimize up front capital IT costs.
  4. Lots of ERP SaaS talk, but not as much action at large organizations. Larger companies, on the other hand, are likely to consider SaaS options, but are much less likely than their SMB counterparts to commit to these deployment models.  As software vendors expand hybrid solutions combining the benefits of SaaS with the flexibility of traditional ERP (e.g. Oracle’s On Demand and SAP’s Business By Design offerings), larger organizations will continue opting for non-SaaS options that more commonly reduce cost and risk while maximizing business benefits in the long-term.  They will, however, be more inclined to leverage SaaS for some niche functions, such as Document Management Systems (DMS), Human Resource Management Software (HRM/HCM), Product Lifecycle Management (PLM), and Customer Relationship Management (CRM).
  5. Increasing focus on organizational change management and ERP benefits realization. As demonstrated by the exponential growth in Panorama’s organizational change management practice, companies are directing much of their ERP software investments to areas that ensure they implement effectively and get more out of their existing enterprise investments.  The need to more effectively manage organizational and business risk will likely result in a continuation of this trend in 2010.
  6. With ERP software, it’s still a buyers’ market. Even in the most optimistic scenario, overall 2010 enterprise software spending will not return to pre-recession levels.  This means ERP software buyers will remain in the driver’s seat, which will be reflected in aggressive software pricing and shared benefits implementation models, such as that introduced by Epicor late this year.
  7. Enterprise software risk management. As CIOs and executive teams remain on the hot seat to prove the value of their investments, risk management will be the name of the game.  Look for more ERP implementations to leverage organizational change management and independent oversight of software vendors to help mitigate business risk.
  8. ERP software vendor consolidation. Vendor competition was fierce before the recession and is even more so now.  Dozens of smaller vendors are starved for cash and unable to fuel R&D and other product innovations without infusions of capital.  Add the fact that larger vendors have cash and some have grown successfully via acquisition to date (e.g. Oracle and Infor), and continued vendor consolidation looks inevitable.
  9. Focus on integration rather than major ERP package enhancements. Given corporate aversion to risk, companies are going to be less likely to bet on entirely new products or risky upgrades.  As a result, vendors are more likely to invest in incremental product enhancements and tighter integration between modules rather than revolutionary changes to their software.
  10. Niches, low-hanging fruit, and business value. Look for companies to be very deliberate about how they invest in enterprise software, the risk they’re willing to take, and how they manage implementations.  If executives aren’t convinced that their enterprise software investments will deliver measurable business value, they won’t invest in it.  Areas that deliver immediate value are priorities for the coming year.

We are optimistic about the coming year and can’t help but wonder if the economic recession exactly what the enterprise software market needed.  ERP failures, cost overruns, difficult software vendors, and lack of business benefits had become too frequent, but these lean times will not allow for these trends to continue.

So what does this mean to clients and other companies considering ERP software investments in the coming year?  The companies that choose the right software for their organizations, best manage business and organizational risk, implement effectively, and position themselves for benefits realization will be better positioned headed into the recovery.  This will require companies to more effectively assess vendor viability during their ERP selection processes and leverage ERP software implementation best practices more than they have in the past.

Here’s to a prosperous and successful 2010!

About Eric Kimberling

After 15 years of ERP consulting at large firms including PricewaterhouseCoopers and SchlumbergerSema, Eric realized the need for an independent consulting firm that really understands ERP. He began his career as an ERP organizational change management consultant and eventually broadened his background to include implementation project management and software selection. Eric’s background includes extensive ERP software selection, ERP organizational change and ERP implementation project management experience. Throughout his career, Eric has helped dozens of high-profile and global companies with their ERP selections and implementations, including Kodak, Samsonite, Coors, Duke Energy and Lucent Technologies. In addition to his extensive ERP experience, Eric has also helped clients with business process reengineering, merger and acquisition integration, strategic planning and Six Sigma initiatives. Eric holds an MBA from Daniels College of Business at the University of Denver.

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6 Comments

  1. “Sorry, given the current economical context, excepting the eventual acquisition moves and few sporadic attempts to change something in ERP vendors’ strategy I don’t feel anything big coming for the next year. Most probably ERP vendors like any other companies will be more focused on cutting down losses, reducing the headcount, introducing one or two features in their products, maybe putting on hold some of the projects they are working on unless immediate profit is expected, the shift changing from “thinking big” to “focused thinking”, keeping the flag up.”

    More on this in my blog.

  2. I agree with point 4 to a 100%. Not enough is being done by major ERP providers in the SaaS segment. We need more providers to introduce products like Ramco OnDemand etc.. And for what its worth, put in a week’s free trial to those with inhibitions

  3. I agree of most of your opinions. They do make a lot of sense. It’s also true that vendors are consolidating. Different ERP software developers have different views in this matter. Some opt for better integration capabilities while others focus on enhancements. However, as a personal opinion, I believe ERP SaaS would greatly benefit the SMBs in the near future.

  4. I Don’t entirely agree, I think that as budgets get tighter and exec’s have to justify their spending, one of the cuts that can increase the bottom line will be the IT departments. I think SaaS will look more and more economical to companies, big and small. Thanks for the info, we will just have to wait and see.

  5. Surge,

    Thank you for your comment. I can tell you that I’m definitely in the minority of industry people who think that SaaS is a bit over-rated and over-hyped, so you’re not alone in your views. I think it will continue to be adopted more and more over time, but it’s not ever going to provide the nirvana of low cost, no risk, easy implementations that many play it out to be. But you’re right – the next two to three years will tell us a lot about where SaaS is headed.

  6. Great insights, but I have a minor quip. Your points 1 and 10 seem to be related (ROI and measurable benefits), and ditto for 5 and 7 (Risk and change management). Apologies if I misunderstood.

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