Slow, Steady Growth
The current trend of slow but steady growth is likely to continue for the next couple of years in the enterprise software market, said Chad Eschinger, an analyst with Gartner Inc. in Stamford, Conn. "We would anticipate over the next year or two that we are going to continue to see low, single-digit growth" in the enterprise resource planning software market. But Eschinger expects that sometime between 2006 and 2007, sales growth will start to gain momentum due to product innovation and a faster pace in the technology replacement cycle, Eschinger said. This should allow the market to start "hitting double-digit growth, but it is going to be a slow struggle as far as growth is concerned, he said."Think of the market as an hourglass. We are in the middle of that hourglass," Eschinger said. The sales growth is slowly expanding back up the slope of the hourglass and will continue to do so for the next couple of years, he said. During this time, there will be some of the consolidation that Ellison has predicted as ERP point solution vendors start to merge with companies that can offer a wider range of applications. Click here to read about Microsofts plans to invest $850 million in a new division that will focus on selling its business solutions software to SMB customers. Many companies are hoping that small and midsize businesses would provide a strong new market for enterprise software. But there is no way SMBs (small and midsize businesses) can compete with the buying power of large enterprises. For the ERP vendors, there was the perception that the SMB space "is all the virgin territory that is left. They had to turn their attention there," said Michael Doane, senior vice president of professional services strategy with The META Group Inc. market research firm in Stamford, Conn. This was particularly a target for SAP in North America, which has been competing tenaciously with Oracle and PeopleSoft for ERP customers. "There has been a long-term perception that SAP was a big boy toy," Doane said. Next Page: Hopes riding on SMB market.
"Demand is still fluctuating at best," and buyers are still extremely cautious about how much they spend on enterprise applications software, he said. But sales have bounced up after bottoming out in 2003, he said.