by Debbie Wilson | March 23, 2020 | Comments Off on “The 2020 ERP Software Market: Rocky times ahead, but hopefully a temporary setback” by Chris Pang
Spring is in the air in the northern hemisphere, and for the first few months of the year we’ve been working on updating our annual ERP market share assessment. This is one of the most read and leveraged pieces of research we produce each year, so as you can imagine we get a lot of questions on it normally anyway. But as the past few weeks has shown that 2020 is NOT going to be a normal in many aspects. So I thought I’d share some of the common questions we’re getting from the IT press and the industry…
What’s the assessment on the ERP market last year and your expectations for this year?
Most ERP vendors were tracking very positively through 2019, so the good news is our forecast of a ~$38 billion software market is likely to be pretty close (this represents a 6% year over year growth). If we look at the top 10 vendors, almost all posted decent recent results. So I think we’re unlikely to see much movement from a market share perspective except where pure cloud companies are up against vendors with heavier balance license and maintenance revenue business. In which case there are likely to be some leapfrogging.
Overall it’s a good result for a mature market where many vendors are in the process of moving to the cloud. Don’t forget 2019 wasn’t without macro challenges either e.g. UK Brexit challenges, slowing growth in BRIC countries, and rising geo-political trade barriers all exerting some downward pressure.
Now turning to 2020. It’s likely we will talk about the previous couple of years with nostalgic fondness because the ERP market will be impacted. End user organizations are understandably more cautious with ERP investments, and some organizations are in survival mode. Fortunately the ERP market is heavily weighted towards recurring revenue streams (either cloud subscriptions or software maintenance). So while the ERP market will be negatively affected in the short term it will hopefully rebound again in the mid-term.
Should end users hold off on upcoming ERP initiatives?
This is very dependent on the organization’s situation. But our research has shown that investing in innovation and agility during troubled times can be the key to survival and critical in the speed at which organizations can come out the other side in better shape than ever before. From a negotiation perspective with vendors, the ball is definitely in the buyer’s court. But a word of caution, while it’s tempting to press home the advantage, be sensible about it. Overly aggressive pricing demands may mean cutting services, project scope and the vendor’s R&D investment plans which ultimately impacts and limits your success.
So look out for our finalized assessment for 2019, and our expectations for 2020 shortly after. It’s going to be an evolving situation so we’ll be updating our outlook as the year progresses on a regular basis. In meantime time, stay safe!
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