As the holidays continue through the end of the year, many of us are finishing year-end activities, planning our budgets for 2009, and enjoying time with friends and family. This is also a good time of year to think about where the ERP industry is headed in 2009.
Next year will be unique. The global economy is projected to stay soft throughout the first half of 2009, which will no doubt impact ERP vendors and their customers. As we wrote in a recent blog entry, the soft economy is already affecting vendors’ software and maintenance pricing.
Based on current economic conditions, continuing industry trajectories, and newly emerging trends, Panorama has compiled its six top predictions for 2009:
- Continuing growth of the SMB segment. Because of both the soft economy and the continuing growth of small- to mid-size businesses, ERP will continue its widespread adoption of ERP. Due to ERP’s ability to automate business processes and allow small businesses to do more with less, it will continue to become more widespread in this segment. However, expect SMBs to proceed with caution and in a cost-effective manner.
- Rationalized costs. The days of implementing ERP at any cost may be over, at least temporarily, hopefully for good. Because capital and IT budgets are under pressure, CIOs can no longer afford to implement ERP without reigning in total cost of ownership. As outlined in a recent blog entry, this is already causing vendors to more aggressively price their solution offerings to win new business.
- More benefits realization, less new implementations. A pattern we are seeing with our client base is more of an interest in stabilizing and optimizing current ERP systems rather than engaging in a replacement of the systems. Because companies are becoming more cautious in their capital spending and in some cases simply don’t have the funds to invest in an entirely new system, many CIOs are looking for ways to leverage their current ERP systems to generate more measurable business benefits that they can take to their executive team. This trend is underscored by the large increase in Panorama’s ERP Benefits Realization service offerings.
- Continued adoption of software as a service (SaaS). Numbers 1 and 2 above are driving more companies to look at SaaS offerings such as NetSuite and Salesforce. Generally speaking, SaaS offerings require less up front investment than traditional ERP implementations. However, they can also provide less flexibility, so CIOs need to carefully evaluate tradeoffs as part of their ERP software selection.
- Emergence of open source. Budgetary pressures will also tempt companies to give open source ERP a closer look. Open source allows companies to own and customize the software’s source code, providing a great deal of flexibility at a lower initial cost. However, as with SaaS, there are tradeoffs: such flexibility can introduce costly complexities and ongoing software maintenance is generally less robust than with an off-the-shelf ERP solution. These tradeoffs need to be considered during the ERP software selection process.
- Higher adoption in specific industry verticals. Evolving government priorities and a new US administration in January will likely increase ERP adoption in certain industry verticals. The US federal government is expected to grow significantly in the foreseeable future, which will likely increase ERP spending in the government sector. In addition, green energy, labor, legal services, and other industries are expected to benefit and grow from changing priorities in the US, and will likely look to ERP solutions as viable options for scaling for such growth.
These are the significant trends we expect to see in 2009. What are your thoughts? Please leave a comment below with your insights, or click here to take the poll about companies’ plans for ERP software in 2009.