The industrial Enterprise Resource Planning (ERP) market, which had software and services revenues of approximately $15 billion in 1999, suffered a sharp downturn with the advent of the new Millennium and fell to $9 billion in 2001.
Despite the economic downturn, the ERP market will rebound over the next five years and grow to $9.5 billion by 2006 on a CAGR of 1.0%, according to a revised study by ARC.
The ERP market growth in manufacturing industries of the late 90’s was fuelled by the Y2K issue facing the larger Tier 1 manufacturers (revenues in excess of $1 billion). But with the passing of Y2K and the saturation of Tier 1, the market from ERP software license revenue has been in a nose dive that will start to recover in the latter half of 2002.
Over the past two years, the revenues from ERP related services, especially maintenance, has kept many of the suppliers afloat. The concept of the extended enterprise and e-collaboration, coupled with fast-track implementations in Tier 2, will be key elements in the recovery.
In 2001, ERP services accounted for 65% of the total ERP revenues to the discrete and process industries. Of the service revenues, maintenance represented the lion’s share, with 42%, and for many vendors it was in the 60-70 % range. Many of the larger ERP suppliers started breaking-out maintenance as a separate line item in their financial reporting, and some suppliers attempt to classify the maintenance service revenues with product revenues.
The growing installed user base and changing technologies and architectures will continue to make maintenance a very vital element of the future revenues.