Over each of the last several years, we have published our widely recognized predictions for the ERP software industry for the upcoming year. These predictions are typically based less on the academic and hype-driven viewpoints of traditional analysts and more focused on our hands-on ERP software selection and implementation consulting experience with our clients. Although we are diligent about posting our top predictions for the upcoming year, we have never looked back to see whether or not our crystal ball was aligned with reality.

Now it’s time to take a long hard look at our predictions from three years ago to see how close we were to the bullseye. Click through to revisit our six ERP predictions for 2009, which we published at the close of 2008, and keep reading for our assessment of what happened in reality:

1. Continuing growth of the SMB segment. We posted the blog at the end of 2008, during the early stages of the global economic recession, and assumed that the small and mid-size organizations would fuel much of the growth in ERP. It turns out that this was what happened in reality, as larger and more risk-adverse companies tightened their purse strings, cut their IT budgets, and invested less in ERP systems, while smaller organizations invested a bit more aggressively. Several backward-looking industry metrics show that although growth in the ERP software market was slow, it was driven primarily by smaller and mid-size organizations.

2. Rationalized costs. It turns out that companies have managed their implementation budgets and overall investments in ERP systems over the last few years. ERP vendors have been more aggressive in pricing their software to win business and CIOs have been smarter about how they invest in ERP systems – ensuring they don’t bit off more than they can chew, better managing scope and cost, and focusing on low-hanging fruit – which has led to organizations making smarter investments in their ERP implementations. While some of the cost pressures and strained IT budgets have subsided in the last 12 to 18 months, organizations generally are rationalizing cost and investing smarter than they were four to five years ago. On the flip side, however, we are starting to see more ERP implementation failures surface now as a result of under-investments in ERP implementations and cut corners along the way.

3. More benefits realization, less new implementations. While we have seen a steady increase in organizations looking for guidance on optimizing the business benefits of their existing ERP investments, there also was a fair share of greenfield ERP implementations as while. This mixed dynamic was partially driven by aggressive pricing by ERP vendors (see #2 above) and the fact that small and mid-size organizations continued to grow and strain their legacy systems, even in the midst of an economic downturn (see #1 above). One consequence among organizations that held off on their investments in ERP software in the past is that many of these organizations now want to implement quickly and take shortcuts to make up for lost time – a dynamic that is shifting much of the market’s focus away from benefits realization and other implementation best practices.

4. Continued adoption of software as a service (SaaS). This prediction has clearly transpired, especially among small and mid-size organizations that might not otherwise have the capital budgets to invest in new ERP systems. In addition, larger organizations have leveraged SaaS ERP solutions as a way to address isolated functional areas by implementing solutions like Salesforce in the CRM space, Workday in HR, Plex Systems in manufacturing, and NetSuite in financials. And, as outlined in our 2012 ERP Report, the market share of cloud and SaaS ERP solutions has grown exponentially from the low single digits in 2008 to 16-percent in 2011.

5. Emergence of open source. This is our one prediction that was the least aligned with the realities of what actually transpired in the last few years. Open source has yet to gain any meaningful traction, especially among larger organizations. Consider this: when we published this prediction in 2008, the open share and SaaS ERP market shares were virtually identical. In the meantime, SaaS ERP has gained tremendous momentum and market share, while open source has waned to the point that we couldn’t even measure its market share with any statistical confidence due to the small sample size of organizations implementing ERP systems in 2011. Given the various advantages of both SaaS and on-premise ERP systems, this predictions is not likely to come true any time soon.

6. Higher adoption in specific industry verticals. Our sixth prediction for 2009 was mildly accurate at best. We expected that industry verticals such as green energy and the public sector would see significant upticks in ERP investments, but none of our market research, experience or data suggests that this expected trend ever materialized. Instead, we saw more small and mid-size organizations adopt at a faster rate, but not necessarily within any specific industry verticals.

In a few short months, we’ll be publishing our ERP predictions for 2013. In the meantime, it’s interesting to look back to see how close or far off the mark we were in the past. While the results are mixed and the jury is still out on some of the predictions, the industry has definitely made some good progress that is benefiting organizations implementing ERP systems.

To learn more about ERP software, where it’s going in the future and how the right choice can benefit your organization, join me for tomorrow’s webinar, Tips for Selecting the Right ERP Software for Your Organization.

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