ERP Vendors Battle for Hearts and Minds

The competition and the rhetoric are heating up as the major ERP software vendors face slow growth in new license revenues.

An enterprise resource planning software market study released by IDC last week forecast that overall ERP revenues would grow less than 7 percent this year to about $26.7 billion. While that is an improvement from recent years, it also signals the need by vendors to stay aggressive to meet IT industry expectations for above average financial growth.

The Framingham, Mass., research firms report painted an inconclusive picture of just who among the top ERP vendors—SAP AG, PeopleSoft Inc. and Oracle Corp.—is taking market share from whom.

The IDC numbers indicate that PeopleSofts revenues fell nearly 8 percent from 2002 to 2003, while Oracles revenues increased by nearly 8 percent, and SAPs grew at more than double that rate. Those numbers include a percentage of CRM (customer relationship management) revenues determined by a formula unique to each company.

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However, IDC research director Albert Pang, who authored the study, said there were no real gains or losses in market share among the top three vendors from 2002 to 2003. He said PeopleSofts revenues fell largely because of the more than $100 million in maintenance revenue that the company wrote off as part of accounting for the J.D. Edwards acquisition.

Meanwhile, Oracles gains were largely from increased maintenance revenues, not from selling new software. And SAPs 17-percent revenue gain came mostly from the strength of the euro, which the German-based company reports revenues in, against the dollar from 2002 to 2003. In real-dollar terms, SAPs revenues were also flat, Pang said.

"The top three were all essentially flat," Pang said. "The only companies who really saw an increase in market share were companies like Microsoft, SSA Global and Sage."

All three of the top ERP vendors are playing up their services-based architectures with SAP playing up its NetWeaver integration stack, PeopleSoft offering its own take on service-oriented architectures, and Oracle concentrating on its own integration offerings.

In the highly competitive market, officials from the top companies have been sniping at each other. PeopleSoft CEO Craig Conway was perhaps the most direct, unloading on SAP and its CEO, Henning Kagermann, at the PeopleSoft Executive Leadership Summit last week.

SAP spokesman Bill Wohl chided Conway for attacking Kagermann, describing the PeopleSoft CEO as a "loudmouth."

"Its inappropriate behavior for a person who wants to see his company viewed as No. 1 in the market," said Wohl, in Newtown Square, Pa. "If you want to be viewed as an industry leader, you have to act like an industry leader."

Wohl dismissed Conways assertion that Kagermann had co-opted the PeopleSoft CEOs "flexibility and adaptability" mantra and described Conways claim as "inappropriate, inaccurate and irresponsible."

"Last time I checked the words flexibility and adaptability were not trademarked by PeopleSoft," he said.

Wohl said Conway was "more and more trapped into a corner," facing competitive pressure from SAP as well as feeling the heat from a hostile takeover bid by Oracle, which is scheduled to go to court next month to determine if the $7 billion offer violates U.S. antitrust laws.

"Customers are uncertain of PeopleSofts future," said Wohl. "Theyre looking at SAP as a safe harbor in a stormy sea.

"Concerns about our competitors have been a boon to SAP," he continued. "Theyre driving customers in our direction."

IDC predicted that ERP revenues will grow to $36 billion in 2008. But the researcher cautioned that such things as open-source ERP could change the way ERP software is delivered.

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