ERP market faces slowdown in 2011

The market for enterprise resource planning (ERP) software will decline slightly in 2011, as companies put off major investments in new systems or upgrades, according to a new report from Forrester Research.

Planned investment in ERP systems is falling, and there are virtually no software-as-a-service (SaaS) companies operating to provide alternative avenues for growth.

Some 25 per cent of over 900 companies surveyed in Europe and North America are planning an investment in ERP this year, compared to 29 per cent last year, the research found.

Over a quarter of businesses are not planning any expansion of existing systems, and 24 per cent are not interested in ERP at all.

"When we looked at the data it wasn't all that encouraging that the level of investment seemed to be dropping off a little bit," principal Forrester Research analyst Paul Hamerman told V3.co.uk.

ERP systems require a certain level of upgrade activity to be factored into the market, but the data, in conjunction with a previous study in September, indicated that many companies are stretching out the upgrade cycle to as long as five years.

One factor is that there are very few SaaS suppliers of ERP software. They make up only a few per cent of the market and most are "substantially downmarket ", Hamerman said.

The launch of Oracle Fusion Applications is expected by March, but this will have little initial impact on the marketplace, according to the report.

"Oracle has work to do to create demand for Fusion, and we'll see if they can deliver," said Hamerman. "There is not going to be a flood of people buying in initially. People are going to wait a couple of years to see how it shakes out. "