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It was another volatile and unpredictable year in the ERP software industry in 2010. Just a few highlights from the 2010 ERP market include:

  • Waste Management and SAP finally settled their multi-million dollar lawsuit out of court
  • Marin County filed a lawsuit against Deloitte as a result of their failed $30M ERP implementation
  • Oracle hired Mark Hurd as their new president
  • Charles Phillips left Oracle to lead Infor
  • ERP vendors started seeing improvements to their top and bottom lines

As we approach the end of the year, it’s worth looking forward to what to expect in 2011. Below are our ten predictions for the enterprise software space in 2011.

Top Ten ERP Predictions for 2011

  1. Risk management and mitigation. Even though the economy may not be quite as bad as it was at this time last year, companies are still extremely risk adverse. They are not willing to spend millions of dollars on ERP software that are difficult to implement or don’t deliver measurable value. When they do go to implement, executives are going to rely on outside consultants and experts to help them manage and minimize risk.
  2. Increasing focus on organizational change management. Since risk management is the name of the game for CIOs, executives are finally smartening up and realizing that organizational change management is arguably the single best way to mitigate and manage implementation risk. As recently as 2-3 years ago, before the current recession began, companies viewed org change as an optional and nice-to-have implementation activity – now they are realizing that it is critical.
  3. Increasing need for ERP business cases, ROI analysis, and benefits realization. In the latter half of 2010, we saw a marked shift to organizations focusing on clearly defining a business case and conducting an ROI analysis to assess the viability of their ERP initiatives. Given the risk aversion of many companies, this trend is likely to continue into 2011. This quantitative focus has been a core part of Panorama’s methodology since its inception, so this is a welcome trend that will ultimately benefit companies.
  4. ERP lawsuits and canceled ERP projects. Despite companies’ desires to mitigate risk and focus on organizational change, they are still going to be pressured by slim IT budgets in the new year. This is going to create a conflicting pressure to cut costs in the wrong places, which will ultimately increase the rate of ERP failures. In addition, because of the low tolerance for risk, companies will be faster to pull the plug on troubled projects and file ERP lawsuits against their vendors if needed.
  5. ERP vendors will get their “mojo” back. Up until recent months, most ERP vendors were getting hammered by a mix of increased competition, tight IT budgets, and mediocre financial results. Signs in the latter half of 2010 pointed to increasing IT spending and pent-up demand for enterprise systems, which is likely to continue into 2011. This should give software vendors increased confidence to hold the line on software pricing, invest more in R&D, and provide more product enhancements.
  6. ERP vendor consolidation. Even though ERP vendors as a whole will be stronger in the coming year compared to years past, they all won’t be so lucky. As we emerge from the recession, the market will diverge into a class of stronger ERP vendors and a class of weaker players. Look for the stronger players to acquire some of the weaker ones, resulting in a wave of consolidation.
  7. Heavy adoption of Software as a Service (SaaS) models at small and mid-size businesses (SMBs). Assuming SMBs and start-ups lead us out of the economic doldrums as they have in past recessions, they will look to enterprise software to provide their business foundations for growth. However, these bootstrapped start-ups aren’t likely to have the capital funds for heavy up-front costs, so they will likely look more to SaaS ERP and CRM systems.
  8. Continued buzz around cloud computing. While SaaS ERP systems are still years away from capturing a significant portion of the ERP market among mid-size to large organizations, CIOs will continue to look at other cloud computing options. For example, hosted ERP solutions and outsourced IT infrastructures will likely be on the minds of many CIOs. In addition, although larger companies may not yet be in a position to adopt enterprise-wide SaaS models, they will continue to evaluate targeted SaaS solutions, such as Document Management Systems (DMS), Human Resource Systems (HRM/HCM), Product Lifecycle Management (PLM), and Customer Relationship Management (CRM).
  9. A good year for CRM software. Most companies have cut their operating and labor costs to the bone throughout the recession. Many are also starting to realize that the only way to make it out of the recession stronger is to fuel top-line growth and sales, and most will do so without hiring too many new sales and customer service reps. For this reason, companies will look to CRM software and social CRM applications to help makes their existing sales and customer service functions more effective and efficient.
  10. More focus on diagnostics, analytics, and business intelligence. Companies have reduced their margins of error for missteps during the recession, so companies will continue to rely on their ERP systems to help provide operational data to help make better and more informed decisions. Look for diagnostics, analytics, and business intelligence applications to gain momentum in the coming year.

What does this all mean to our clients and other companies considering ERP investments in the coming year? The companies that choose the right ERP software for their organizations, best manage business and organizational risk, implement effectively, and position themselves for benefits realization will be better positioned as they head into the new year. This will require companies to more effectively assess vendor viability during their ERP selection processes and leverage ERP implementation best practices more than they have in the past.

Panorama continues to provide tools, expertise, and resources to those wanting to effectively navigate their ERP system challenges in the new year. Visit our resource center to download industry reports, white papers, benchmark metrics, and other useful information related to ERP selection and implementation best practices.

Happy holidays and here’s to a prosperous and successful 2011!

Editor’s Note:

  • Eric’s blog post discussing his 2010 predictions was our most popular blog post in 2010.  If you haven’t read his post Top Ten ERP Software Predictions for 2010, you are encouraged to do so.
  • Eric, along with the Panorama team, would love to hear your thoughts on the upcoming year.  Please comment below and leave your own predictions at how the ERP market will look in 2011.