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Consolidation turns ERP mid-market on its head

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The ERP mid-market of a few years ago is today almost unrecognisable as mass consolidation has affected virtually every player. The major causes of this are vendor size, aided and abetted by a number of more fundamental shifts in the sector.

Errol Wills, MD of branded business and technology solutions supplier Lorge, says the fundamental shifts include the fact that while ERP was a growing market, it is now primarily a changing market in which processes have changed, habits have changed and people are looking for different things from their ERP software and suppliers.
“A significant change is that there is now a different way of doing business. ERP is a mature business: like white goods and cars, the products now last longer and are better served and customers want a better return with less pain.”
Wills adds that the “merger and acquisition roll call” includes virtually every player in the market and the level of activity is raising questions for prospective buyers because it is not so much a question of whether their chosen mid-market ERP vendor will be bought but when and by whom?
“So one of the most important criteria for companies to focus on when they select a vendor will be flexibility, not only in terms of architecture but also in its operations.
"One of the fundamental changes influencing the ERP market is the fact that it is set to grow by 7% annually. The growth rate compares well with the global rate which has been identified as 14%, but which in reality comes down to between 8% and 9% in real terms when the euro to dollar exchange rate is factored in."
Wills says ongoing consolidation is ensuring that revenue is going to a smaller group of vendors. Whereas in 1999 five vendors accounted for 59% of the industry's revenue, today five vendors, namely SAP, Oracle, Sage Group, Microsoft and SSA Global, soak up 72% of total revenue.
Within this scenario Wills believes that a mid-market ERP solution for the small-to-medium business sector needs to meet a number of important criteria, including:
* A comprehensive suite of applications tightly integrated with accounting applications (as the accounting application is the foundation/backbone of the whole ERP system);
* Rapid, low-cost implementation is critical as delays or long implementation times adversely impact the business;
* Flexible pricing, packaging and deployment options that allow the SMB to scale up the business applications implemented according to its business requirements;
* Internet and wireless device accessibility – essential given the speed of business and the need for anywhere, anytime access; and
* Local consulting and implementation support is critical as SMBs typically do not have enough technical resources.
“The needs of companies in the SMB sector have changed markedly and solutions providers have to accommodate those changes and meet the challenges they pose if they are to survive,” Wills says.