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Increased Uptake Of Enterprise Resource Planning
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Article Date: 2004-08-18
Growing competitiveness in the small and medium businesses (SMBs) sector has led to the widespread adoption of mid-market enterprise resource planning (MERP) solutions.
As SMBs begin to perceive MERP solutions as an operational necessity, vendors are being challenged to reduce the complexity and price of their products. In a bid to meet mid-market requirements, vendors are trying to concentrate on products that are viable in terms of return on investment and pricing.
New analysis from Frost & Sullivan Australia Mid Market ERP Software Market, reveals that revenue in this industry totaled $56 million in 2003.
"With ERP solutions continuing to find acceptance in the marketplace, implementation fees that used to be several times the price of the software are likely to reduce," notes Frost & Sullivan Research Analyst Arjun Chennegowda.
The price of software and implementation is likely to vary widely based on the number of connected or concurrent users and the modules required. Quotes received recently for several SMB clients range from $60,000 for a job shop with a few users to $190,000 for a 50-user ERP system.
The industry has also been seriously considering the adoption of an application service provider (ASP) model, where a client gets access to MERP modules for an affordable price on a monthly basis according to the total number of users. Vendors have also been trying to increase sales by offering discounts on complementary modules, components, and upgrades to their existing client base.
"The emergence of a number of participants at the local level has further intensified the competition, and ERP vendors are finding it increasingly difficult to maintain their position in the market," says Chennegowda. "Tier I ERP vendors are expected to expand their product lines in the market by acquiring niche participants."
This requires an in-depth understanding of the business process and functionality in an SMB enterprise. For instance, Australian SMBs that emphasize the functionality of the MERP solution and adopt a best-of-breed rather than a one-size-fits-all solution are likely to fare well.
Tier II vendors are best positioned to take advantage of this shift in SMB perspective. However, increasingly, Tier I vendors are also shifting gears and providing flexibility in their products to suit the requirements of smaller businesses.
The saturation of opportunities among large enterprises resulted in notable vendors such as SAP, PeopleSoft, and Microsoft launching specific MERP software to cater to the SMB segment. The potential that this sector holds is evident from the fact that out of the 50 ERP packages that are being marketed in Australia, 20 are targeted toward the SMB sector.
"The rising competition between Tier I and II vendors is likely to ensure the best bargain for SMBs," concludes Chennegowda.
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