ERP Makes a ComebackBy John Moore | Print
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Opinion: ERP installations dropped dramatically after the dot-com bubble burst. Now, though, the market is nosing up.Enterprise resource planning projects have been a staple of the integrator's business for years.
Implementations of ERP's antecedent, MRPII (manufacturing resource planning), were a huge business long before the Web came along, and even before client/server computing, for that matter.
But the ERP business has had its ebbs and flows, hitting a particularly low point during the 2001 recession. The recovery has been gradual and a recent AMR Research bulletin suggests why.
"The severe economic downturn from 2001 through 2003 not only slowed the purchase of new ERP licenses, but it also tended to stretch out the deployment of the applications that had already been purchased," Shepherd said.
The result: empty ERP seats.
Recent evidence, however, points to resurgence in the ERP market.
Sapient Corp. in June closed the acquisition of BIS (Business Information Solutions), a SAP-related services firm that focuses on business intelligence. Jerry Greenberg, Sapient's co-chairman and co-chief executive officer, reported last week that BIS, now Sapient's SAP practice, and Sapient already have 15 joint opportunities.
Greenberg, speaking during an earnings teleconference, added: "I do think it validates the demand for business intelligence and value optimization services we can offer around SAP."
Ciber Inc. has also witnessed the ERP uptick. Mac Slingerland, the company's president and chief executive officer, recently cited a good quarter in the company's package software implementation business, noting ERP wins.
In one deal, the company captured a $3.5 million contract with Dunelm Mill, a home furnishings retailer in the United Kingdom. Ciber's London SAP Practice won the contract. In addition, Ciber in June inked a 5-year go-to-market partnership with SAP.
AMR said it believes the ERP work will continue to flow, despite the high number of unused seats from previous implementations. Companies, according to Shepherd, "are once again planning to invest heavily in ERP projects."
AMR reports that 71 percent of the companies it surveyed expect to increase ERP spending in the next 12 monthsthe average budget boost is 14.6 percent.
Most of the firms with unused seats also plan to increase their budgets, a situation that Shepherd said bodes well for "ERP vendors, as well as services and infrastructure providers."
ERP work appears particularly ample in niches such as energy. Accenture officials, discussing the company's results for the company's May-ended quarter, noted a steady demand for ERP business in its resources industry group. The resources group, which grew 12 percent for the quarter, includes energy and utilities companies.
Earlier this year, EnterSys Group LP reported an annual growth rate in the 20 to 30 percent range for its SAP practice, which focuses mostly on energy clients.
Signs point to a vastly improved ERP market, but integrators may find the rules of the game have changed since the recession. Customers "have become much more cautious and tend to buy in much smaller increments," Shepherd said. Average deal sizes have declined accordingly.
Another reason to repress giddiness: the historical problem of wrenching, delay-ridden ERP deployments.
Sapient's Greenberg acknowledged the "additional pressure and stress" greater demand places on integration efforts. He said Sapient needs to make sure it has the project leadership and bandwidth to pursue opportunities.
The industry would do well to heed Greenberg's cautionary note.