ERP applications enjoyed a better year that expected, with growth trends leading IDC to revise its five-year forecast to 5,5% CAGR (compound annual growth rate). 

Preliminary results indicated that ERP, which showed disappointing growth of just 2,5% in 2005, surged to 6,8% growth in 2006.
"2006 appears to be the turnaround year for ERP applications in Western Europe," says Bo Lykkegaard, manager of European Enterprise Applications research at IDC.
"The European ERP market has benefited from replacements of ERP systems from the late nineties as well as an upswing in business conditions in general in Europe. Mergers and acquisitions have also helped consolidate vendors of questionable financial viability into larger, financially stable vendors.
"These market improvements witnessed during 2006 have prompted IDC to raise our forecast for 2007 to 2011."
Forecasts by segment reveal that midmarket companies in the 100-999 employee bracket will outspend other company size segments. The study also includes the first ERP application forecast by deployment model (traditional on-premise deployment model versus the much talked about on-demand model).
IDC predicts a rapid growth in excess of 50% annually of "ERP as a service," particularly in 2008 to 2011. However, on-demand ERP applications are not expected to have a significant revenue impact in the entire ERP market until the end of the forecast period.