Top 10 ERP Software Industry Predictions
By Barbara Mayfield and Edy Henao
Salesforce.com Acquired By Oracle
Yes, that's Oracle (Benioff's former employer), not Google as the predicted acquirer. Google has passed Salesforce.com by and we expect CEO Marc Benioff to reunite with his former boss - kingpin Larry Ellison. It's long been rumored that Salesforce.com has offered itself to Oracle as an acquisition candidate and this year may be the year this happens. CEO Benioff has single handedly grown the CRM software company from start-up to more than 1 million SaaS subscribers - and we suspect he will view the next year as the last year to go out on a big bang. Maintaining the helm much longer may not provide the retirement party atmosphere Benioff is looking for.
On-Premise ERP Software Achieves Negative Growth; ERP SaaS Solutions Grow 12%
The current economy is clearly influencing technology adoption and technology trends. The faltering economic climate will not be kind the the traditional client/server and on-premise ERP software vendors. In the last down economic period following the dot com bust at the turn of the century, the ERP software vendors were able to largely retain stagnant growth. Not so this time - because this time buyers have a proven and viable cost-effective alternative with SaaS ERP solutions. SaaS ERP will prove to be recession resistant, but not recession proof. We expect hosted ERP systems growth to decline to about 12%. However, as the Economist recently predicted, once out of the recession, SaaS will gain large numbers of new followers simply because it offers better economics. Also as well stated by visionary or mouth piece Marc Benioff (depending upon your perspective), "The capital crunch of 2009 and 2010 will put a spotlight on the advantages of cloud computing: less risk, no capital expenditure, predictable operating expenses and fast results ... I believe that will translate into greater adoption for both cloud computing applications and platforms."
Microsoft's Cloud Computing Will Disappoint
Despite Microsoft's attempt to join the cloud computing bandwagon, Microsoft Azure will become little more than an improved platform for Exchange. The Microsoft PR machine will continue to suggest Azure is the next software as a service platform (or Platform as a Service as proclaimed by Salesforce.com), however, the technology does not yet match the rhetoric and Azure will gain minimal adoption from customers and ISVs. Microsoft's 20 year history of getting new products right by the fourth version will likely be beat with Azure and we suspect it will become a viable Exchange platform by 2011, however, not be taken seriously as a cloud-based or SaaS solution.
Google Remains Irrelevant in the Enterprise
This was a prior year prediction - that held true - and despite Google's ambitions will hold true for the next year as well. Google has attempted to lay a path for enterprise customer acquisitions with company acquisitions like Postini and investments in Google Apps. While Google's application portfolio is making progress in terms of transparency, information security and enterprise level development languages, the applications themselves are inherently limited in terms of feature sets, functional depth and flexibility. We do expect a number of small businesses to adopt Google programs as an attempt to save software licensing fees and for the most part at the direct expense of Microsoft Exchange, Office and Lotus Notes. Google may slowly but steadily penetrate the small business market, however, the enterprise market demands more than just 'free' before committing to a replacement for their traditional commercial applications.
Business Intelligence Gets SaaSy
Business Intelligence (BI) will gain traction among SaaS solutions over the next 18 months. On-demand CRM, HRM and ERP software applications are accepted and plentiful as online transaction processing (OLTP) systems, however, few have complimented their hosted business software offerings with real BI solutions. In the next year, SaaS solutions will evolve from the over-hyped dashboards to include more powerful data warehousing and online analytical processing (OLAP). We’ll also witness a bifurcation in the BI offerings, with one set of applications embedded into traditional CRM and ERP applications and other offerings distributed as autonomous solutions capable of web services and mash-up integration.
SaaS ERP Becomes a Three Horse Race
Notwithstanding the economic downturn and an overall declined growth rate, expect hosted ERP systems to gain the attention and media spotlight garnered by hosted CRM systems over the prior years. Also expect three vendors - NetSuite, SAP and Aplicor - to gain the majority of that attention and market share. NetSuite continues to grow, however, also continues to struggle with excessive customer churn, partner churn and soon with those employee stock options deep under water, employee churn. Nonetheless, the company is a marketing powerhouse and will continue its growth. SAP will finally put a stake in the SaaS ERP ground with its Business ByDesign hosted ERP product. The German giant has incurred several self inflicted setbacks, including multiple software release delays, mixed market intentions and a bipolar approach in building its new SaaS business without eroding its core on premise revenue stream. Expect SAP to show progress, albeit in continued roller coaster fashion. Aplicor's hosted ERP system gets outstanding reviews from customers and very good marks from analysts. Expect Aplicor to continue to grow its almost sleuth like customer acquisition success and grow its market share as well.
Corporate Barriers to Social Media Begin To Erode
Enterprises and IT professionals wary of information security compromises will begin to reduce the corporate barriers associated with Web 2.0 and social media adoption. The next year will see a greater balance between officially sanctioned (and supported) social media tools and insistence that security guidelines and mandates are equally applied to these new (often free, viral and open source) Gen Y productivity applications. Front office knowledge workers such as sales and marketing staff will figure out how to correctly utilize social networks in day-to-day operations and for explicit business objectives. An increased volume of sales leads, recruits, market intelligence and enterprise content will be sourced from traditional business applications that tap into LinkedIn, Facebook, Twitter and other social networks.
ERP Merger & Acquisition Activity Accelerates
The prior year was a relatively slow M&A year in the ERP software industry and while a down economy might first suggest an even slower next year, we suspect that the deflated market caps will bring acquisition candidates that were previously viewed as over-valued or just too expensive into the realm of acquisition. We also suspect a few of the smaller or midmarket software manufacturers may merge in an effort to achieve greater efficiencies and cost savings.
Open Source CRM and ERP Fail to Gain Traction (Again)
Last year was suppose to be the year that open source business software applications make the leap from an interesting proposition to a viable option. It didn't happen. The enterprise resource planning (ERP) open source community failed to show growth, demonstrate customers successes and actually moved backswords in many regards. The customer relationship management (CRM) open source movement saw similar declines from all recognized players, with the possible exception of SugarCRM. While SugarCRM does enjoy a vibrant open source community (60,000 members strong) and proclaims growth and an IPO, the company is rumored to be losing over $1M per month and living off its continual stream of venture capital infusions (now totaling about $50M). Further, despite SugarCRMs aggressive efforts to acquire enterprise level customers, demonstrated successes and documented case studies are absent. Expect open source CRM and ERP applications to show slow but steady penetration in the small business market and continue to be rejected by the middle market and enterprise markets.
- Twitter Gets Acquired
The merging of customer relationship management software and Twitter is not recognized by most, but we suspect it will become more recognized in the next year. The value of any innovation - and particularly social media innovations - is influenced in large part by emotion. Twitter has generated those emotions with an outstanding community that shares the love. Next year will be the year that the owners of Twitter choose to sell the company while the focus is on growth and good vibes and before the focus returns to developing an acceptable plan to monetize the traffic, evolving into a traditional business or preventing more downtime outages.