Paul Hamerman Byron Miller Vice President Principal Analyst

ForrTel:ERP Applications: Market Maturity, Consolidation And The Next GenerationPaul Hamerman Byron MillerVice President Principal Analyst

Forrester Research

June 14, 2004. Call in at 10:55 a.m Eastern Time

Theme

ERP is a long-term investment. Drive out

support and integration costs for better ROI.

Agenda

• ERP challenges and deployment trends

• Market size and maturity

• Vendor landscape — leadership, consolidation, and the midmarket

• The future: SOAs will transform the market

• Recommendations

Definition: ERP

► ERP — a set of applications for core business operations and back-office management

► Applies to a wide variety of businesses and government

ERP challenges

• Functional gaps, supplemented by bolt-ons

• Costly to maintain

• Customized

• Multiple vendors, multiple installations

• Integration — numerous internal and external interfaces

Trends in ERP deployment

• Single ERP vendor versus multiple vendors

• Fewer instances or single instance

• Using integrated modules instead of bolt-ons

• Deeper vertical functionality

• Better integration capabilities

One global single instance — when and why

Market trends

• Shrinking to flat license revenues

• Fewer large new deals, more sales to existing customers

• Accelerating growth in maintenance

• Focus on midmarket

• Moderate recovery expected in 2004 after declines last three years

ERP market forecast

A closer look at Big 3 revenue mix

Combined revenue percentagesfor SAP, PeopleSoft, and Oracle (applications)

Vendor Landscape

ERP vendor perspective — key points

• SAP’s dominance continues to gain strength

• Vendor consolidation will continue

» Oracle/PeopleSoft case playing out in court

• The midmarket is the key battleground now

• Microsoft influence increasing

ERP market leaders by revenue 1994-2003

The DOJ vs. Oracle case — what to look for

• Context: Market definition semantics and the prospect of higher prices

• Possible revelations:

» Sales tactics

» Microsoft’s plans

» Customer experiences

» Technology stack vendors versus apps vendors

• Impact: The deal is still a long shot, faces other obstacles even if Oracle wins case

ERP market segments by customer size

Microsoft’s growing presence

• Current products focused on midsize companies

» Axapta moving to upmarket to some extent

» Strong reseller channel geared to the midmarket

• Project Green — next generation of product still a few years out

• Will Microsoft compete in the top end?

» Last week’s disclosure of SAP merger talks indicates that Microsoft would have to buy its way in

The Future:SOAs will transform the market

SOA stages for ERP

• Integration of heterogeneous applications across multiple platforms

» Time frame: Now

• Modular components within suites

» Time frame: Two to three years

• Market transformation to standards-based architectures

» Time frame: End of decade

Components and SOA

Service-based integration

HumanResources

Customerrelationshipmanagement

Financials

SOA and Components = Flexibility

Service-based integrationComponent arbitration

Component arbitration

Process integration

Process integration

Productlife-cycle

management

Supplychain

management

BusinessAnalytics

Humanresources

Vx.y

Businessanalytics

Vx.z

Smaller components add more flexibility

HumanResources

Customerrelationshipmanagement

Service-based integrationComponent arbitration

Component arbitration

Process integration

Process integration

Productlife-cycle

management

Supplychain

management

BusinessAnalytics

GL AP ARCNHuman

resourcesVx.y

Businessanalytics

Vx.z

…Across an extended enterprise

The extendedThe extendedenterpriseenterprise

The enterpriseThe enterprise

Bus extension Bus extension

Finance HR CRM

PLM SCM analyticsBusiness

EAI — message-based integrationComponent arbitration

Workflow/event integration

Component arbitrationWorkflow/event integration

Enterprise Portal

Enterprise Portal

CLP R NGA A

Enterprise Portal

Enterprise Portal

Start where we are

CRM

ERP

Componentize

Assemble/rebuild common components

Recruit other components

Common components become suite

Common components

A new application approach

Process-oriented suitewithout

redundant/conflictingfunctionality

Process execution

Common technology

Common components

SOA for ERP — What it means to you

• Message-based integration — easier connections using standards

» Lowers maintenance and integration costs

• Components — more flexibility

» Assembly of industry-specific and process-oriented solutions (e.g., order-to-cash)

» Fewer vendor choices but more deployment options

• Architecture transformation — large vendors may force major upgrades by end of decade

Recommendations

• Invest for the long term

• Consolidate disparate ERP applications, especially HR and financials

• Understand and reduce ownership costs —maintenance, upgrades, infrastructure

• Favor openness

• Extend but do not customize

Paul Hamerman

[email protected]

www.forrester.com

Thank you

Entire contents © 2004 Forrester Research, Inc. All rights reserved.

Byron Miller

[email protected]