Enterprise Resource Planning Software Market: Europe, 2002 (Executive Summary) Executive Summary

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1 Enterprise Resource Planning Software : Europe, 2002 (Executive Summary) Executive Summary Publication Date: 20 August 2003

2 Authors Fabrizio Biscotti Chris Pang Chad Eschinger This document has been published to the following place codes: SOFT-WW-EX-0116 For More Information... In North America and Latin America: In Europe, the Middle East and Africa: In Asia/Pacific: In Japan: Worldwide via gartner.com: Entire contents 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice

3 Enterprise Resource Planning Software : Europe 2002 (Executive Summary) Introduction The European market for enterprise resource planning (ERP) software is declining. Maturity of functionality, years of intense selling, reduced IT budgets,ashiftinbuyerbehaviorandlongerlifecyclesmeanthatspendingonerp is less of a priority for businesses. The only market segment to grow in 2002 was human capital management (HCM). But at 2 percent growth, compared with 18.5 percent in 2001, this is hardly the sign of a healthy market. Figure 1 shows the drop in ERP revenue in Europe from 2000 to Figure 1 ERP Software New License Revenue: Europe, Millions of Dollars 3,000 2,500 2,000 1,500 1, Source: Gartner Dataquest (June 2003) On a more positive note, the European ERP market has not suffered as badly as the worldwide market, which fell 9 percent in As shown in Table 1, HCM and financial management systems were the segments to suffer the least, owing to business trends to improve asset and human resources management. Table 1 ERP Software License Revenue by Segment: Europe, 2002 Segment Revenue ($M) 2001 Revenue ($M) 2002 Share 2001 Share 2002 Rate 2001 Rate 2002 Enterprise Asset Management % 6.5% 1.9% -4.7% Financial Management Systems % 43.7% -16.6% -1.1% Human Capital Management % 19.7% 18.5% 2.0% Manufacturing % 30.1% -40.2% -3.9% Total 2, , % 100.0% -20.9% -1.6% Source: Gartner Dataquest (June 2003) 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 1

4 2 Enterprise Resource Planning Software : Europe, 2002 (Executive Summary) Gartner Dataquest Perspective The top five vendors in Europe in 2002 remained the same as in 2001, with slight increases in market share for SAP, Sage, Microsoft Business Solutions and PeopleSoft. The same vendors appeared in the worldwide top five, but in a different order. Table 2 Top Five ERP Vendors by License Revenue: Europe, 2002 Vendor Revenue ($M) 2001 Revenue ($M) 2002 Share 2001 Share 2002 Rate 2001 Rate 2002 SAP % 32.3% -41.4% 7.0% Sage % 6.8% 19.0% 20.7% Microsoft Business Solutions % 6.0% 20.7% 4.8% Oracle % 3.7% -22.5% -32.8% PeopleSoft % 3.4% 37.2% 2.1% Source: Gartner Dataquest (June 2003) Aside from SAP's dominance, the market remains fairly open with no single vendor having a significant lead over its competitors. Consolidation in the market is inevitable. This has been exemplified by the merger between PeopleSoft and J.D. Edwards in July 2003 and Oracle's subsequent attempt to take over PeopleSoft. Consolidation between European players (which overwhelmingly dominate the top vendor rankings in Europe), North American players or both is the only way that another vendor will approach SAP's lead. Though the rest of the software market is also in difficulty, the ERP market is affected by several specific factors. A general feeling of reluctance toward business application software has developed because of unsatisfactory implementations and purchases. This is partly attributable to a lack of detailed planning and miscalculated projections for return on investment. The negative feelings are also caused by project overruns and general end-user wariness over the potential disruption when changing systems that are critical to the business. TheERPmarketislargeandalmostsaturated.Theupperendofthemarketis saturated, and while sales opportunities among smaller enterprises exist, the funds they allocate to IT spending are considerably less. For enterprises that need new software to remain competitive, the trend is for small tactical initiatives rather than large strategic projects. ERP software vendors should continue to expect longer sales cycles, smaller deal sizes and possibly, but not necessarily, fewer orders. The challenge for ERP software vendors is to increase the depth and breadth of their offerings. The market potential for niche vendors will grow. End users demanding deeper vertical experience will migrate toward niche vendors, especially in the midmarket. Conclusion The European ERP market remains depressed. Consolidation in the market is inevitable, and market share remains fragmented among regional vendors in Europe. Selling to established customers alone will not improve the situation in the long term. Vendors need to sell to new prospects. To do this, they need convincing total cost of ownership models and provable low-risk implementation strategies, combined with the more traditional "added value" products offering competitive advantage Gartner, Inc. and/or its Affiliates. All Rights Reserved. 20 August 2003

5 Enterprise Resource Planning Software : Europe 2002 (Executive Summary) 3 Link For the full market statistics, see "Enterprise Resource Planning Software : Europe, 2002," which is published to the Software Europe Cluster: SWSF-EU-MS Gartner, Inc. and/or its Affiliates. All Rights Reserved. 20 August 2003

6 4 Enterprise Resource Planning Software : Europe, 2002 (Executive Summary) 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 20 August 2003