Although the South Africa (SA) enterprise application suite (EAS) market expanded by more than 50 percent in 2003 when measured in dollars, growth was a more moderate 9.5 percent in rand terms. Nevertheless, this was well ahead of the economy, which grew by just under 2 percent last year.
According to a new IDC study, while the sluggish economy has resulted in lowered hardware investments, increasing mobility and the need for optimization has maintained demand for software and services. Even the large enterprise segment, which is nearly saturated, will further invest in complementary EAS upgrades like CRM, business intelligence, and e-commerce solutions.
Nevertheless, sustainability rests in the small and medium enterprise segment. According to the study, vendors have already stepped up efforts to sell to the midmarket. "This has resulted not only in modifying solutions, but also in the cutting of prices to match the ICT budgets of smaller organizations," says Heini Booysen, senior research analyst, IDC CEMA's Software Group. High-end players like Oracle Corp. and SAP AG have been forced to reduce prices by vendors that target the midmarket, like Microsoft Business Solutions, which in turn have faced stiff competition from local vendors able to offer competitive prices at the low end. "To stay competitive," says Booysen, "larger vendors can leverage their size by carefully choosing partners that offer rapid installation and post-installation care with a 'local touch.'"
This is likely to be particularly true for core EAS modules, like accounting and procurement. In terms of licence and maintenance revenue, despite reaching saturation levels, these applications represented two of the top three modules in SA in 2003. Moreover, they are likely to continue to be the top modules for the next few years, as SMEs start their EAS investments with core applications, and changing accounting laws help fuel the sale of upgrades. "The benefits of these modules can be easily demonstrated to small and medium-sized organizations," says Booysen. "And they provide a primary path for vendors to establish a solid presence in the midmarket. Once in, vendors can then tailor or simplify other modules to the SME segment."
Inventory management was also in the top three best-selling modules in SA in 2003. This reflects the need to integrate all aspects of an industry across the value chain. For instance, both mining companies and process manufacturers are set to optimize or expand operations in SA, and will need software capable of linking core enterprises with suppliers and customers. The education and government sectors are also poised to upgrade ICT, according to the study. "Both international enterprises and locally based companies will need to adopt systems that match global and local offices and partners," says Booysen. "Although sustainability is rooted in the midmarket, this means that there are also significant growth opportunities in the vertical arena."
The study, South Africa Enterprise Application Software 2004-2008 Forecast and 2003 Vendor Shares, aims to provide a detailed overview of the local market for high-end integrated EAS packaged software products. The study includes detailed qualitative and quantitative information, analysis, and forecasts. It delineates the defining characteristics of the local EAS market, shows which segments are investing in EAS solutions, and notes how future spending will affect market development.
The study covers the primary EAS operating environments, how sales will affect third-party hardware and software vendors, and how vendors across the ICT spectrum (hardware platform vendors, database vendors, operating system vendors, and enterprise application vendors) can capitalize on the continued expansion. In addition to noting how political and economic conditions specific to SA will affect the market, the study also tracks and analyses the leading players.