Enterprise Resource Planning (ERP) is a software system used for establishing a set of processes to be followed in a business organization. ERPs take care of a variety of operations and processes in an organization. Modern ERP systems are also capable of automating the processes on their won. ERP can enable employees to take care of the majority of mundane work on their own which would take time otherwise.
The primary function of an ERP system is to integrate processes across different channels and departments in a business organization. It creates and maintains a shared database that can be utilized for streamlining operations.
ERP offers synchronized reporting and automation which in-turn initiates minimal human intervention.
Global ERP Software Market Size:
Modern ERP software act as the fundamental platform for establishing automation in an organization. Modern ERP software is capable of doing more than that. From information and report generation to maintaining database security, ERP are capable of almost everything. This is the reason ERP software have become a hot topic among business organization regardless of their size and scale. Each organization wishes to establish an automated ERP system for streamlining processes and increasing the productivity of their employees. The systems have grown to b so popular that these are considered as an individual industry.
The modern global ERP software market share is huge and it is also growing at a rapid pace. The global ERP market is growing at a Compound Annual Growth Rate (CAGR) of 7-7.3 percent and it is likely to attain a global value of $42 billion by 2020 as well. On the other hand, the global Cloud RP market is growing at a CAGR of 10 percent and it is expected to attain a value of approximately $27 billion by 2020.
Global ERP Market Trends:
The ERP market already has good penetration in the developed regions such as Japan, Europe, and North America, and these are considered highly mature markets as well. Nonetheless, developing regions and emerging economies such as APAC and LATAM are growing in terms of the adoption of both in-House ERP software and Cloud ERP and these regions are likely to lead the market in the next 5-7 years. Small and micro businesses in these countries are adopting more and more ERP software through global buyers which will also consolidate the market and supply. Some of the top ERP suppliers include SAP, ORACLE, Microsoft Dynamics, INFOR, SAGE and EPICOR. The top 4 suppliers are already dominating the market with approximately 60 percent market share and SAP is one of them as it is also the highest market share holder brand.
SAP is considered a pioneer in the ERP software industry and it holds approximately 25 percent global market share whereas ORACLE and INFOR individually hold 17 percent global market share. Talking about the industry-wide adoption of the ERP software, the manufacturing industry has opted for the maximum ERP adoption with adoption rates of approximately 21 percent. On the other hand, BFSI and telecommunications industry respectively have 16 percent and 13 percent adoption rates.
Hybrid ERP, SaaS adoption in ERP, and IoT in ERP can be considered the dominant trends in the industry that have their own variables. For instance, hybrid ERP is a combination of in-house ERP and Cloud-based ERP. These are good for the organizations that want to increase their efficiency and functionality but do want to replace or change the legacy systems.
Similarly, the mid-market segments prefer to opt for the SaaS ERP as these are highly cost-effective due to perks such as reduced operating costs and increased business efficacy.
Global ERP Industry Practices:
The ERP contract payment period is usually calculated in weeks in which each phase has its specific tenure and payment variables. The contract period ranges from 0-3 years while the top negotiation factors include AMC cost, hardware cost, customization and long-term license.
Take a look at the ERP contract payment period practices.
- License: Starting Period – 0 Week, Payment – 15 Percent
- Development: Starting Period – 12th Week, Payment – 20 Percent
- Deployment: Starting Period – 14th Week, Payment – 20 Percent
- Training: Starting Period – 18th Week, Payment – 10 Percent
- Support: Starting Period – 78th Week, Payment – 35 Percent
As far as the pricing practices are concerned, fixed pricing and time and material-based pricing are two major pricing standards that are employed as per the negotiation. Regarding all these practices the ERP deployment dynamics suggest that 58 percent deployment is on-premise, cloud-based deployment is 25 percent, and SaaS deployment is 17 percent.
ERP systems have become the backbone of many large-scale enterprises and the credit goes to the increasing technological innovations such as automation and AI. Having said all of that, entrepreneurs already know the future of ERP software as AI-enabled ERP is already knocking at the door of modern business landscape.