Despite its flailing popularity and marginal growth in the US, the era of ERP (enterprise resource planning) software is not over, an industry analyst says.
“ERP is not dead, it’s just going through a very unpopular phase,” said Vinnie Mirchandani, vice president, applications of technology, research and advisory services at US-based research firm Gartner Group and author of “ERP Implementations: What We Have Learnt (and Forgotten) in the Last Five Years.” Since the ERP market in Asia is still somewhat immature, Mirchandani said his latest research report is based mostly on US cases. Greater China and Asia are just now starting to show an interest in ERP, he said.
The US market’s snubbing of ERP applications is reflected in the latest revenue results for some ERP vendors. For example, PeopleSoft's license revenues slid 61% in the second quarter 1999 compared to the same quarter in 1998, while SAP AG’s product revenue was up only 1% in the second quarter 1999 compared to the same quarter in 1998. Meanwhile, Baan Co. reported a 17% decline in license revenues between its first and second quarters in 1999.
The reason for this apparent fall from grace is that ERP is at the end of its popularity or “hype cycle” in the UUS, according to Mirchandani. The biggest problem for vendors is that the demand for ERP-based Year 2000 fixes has dwindled, he said.
Another factor is Wall Street, which is losing interest in ERP stocks and moving on to Web investments instead, Mirchandani said.
Despite the less than rosy outlook, Mirchandani says that ERP is not a “dead man walking.”
“There’s still a lot of mileage left,” especially in the packaged application market, he said. In addition, Mirchandani cited immature markets such as China and Japan as future sources of revenue for ERP vendors, although he acknowledged that there is a risk that those untapped markets may try to bypass business application implementations and go directly to Web applications.
But such a Web-centric strategy may not be a good idea, Mirchandani warned. Web applications are not capable of handling the complex transaction processing, supply chain management and procurement functions that traditional ERP can handle, he said.
Moving from back-office to front-office applications may be one way for ERP vendors to reap some profits going forward, according to Mirchandani. In the past, ERP vendors have focused on back-office ERP systems such as manufacturing systems, but Mirchandani noted that there’s still a lot of opportunity in front-office applications such as customer service, procurement and shop floor functionality.
Mirchandani remains positive about the prospects for ERP vendors and customers, at least in Mainland China. “I think the first wave of (ERP) investments should be very good on the Mainland,” Mirchandani said, adding that Mainland companies can now learn from mistakes made in the US