International Data Corporation or IDC, the market research firm said it has “slightly downgraded” its expectations for the ERP market in India due to a “continued mindset of caution and tactical investments” among organizations in India.
ERP or enterprise resource planning software provides large organizations a ready made way of keeping track of different assets, processes and people within it. The market is dominated by Germany’s SAP and U.S.-based Oracle, and constitutes the biggest chunk of the global enterprise software market.
In India too, ERP (also called ERM) makes up the bulk of the enterprise software market.
In 2013, IDC said, the ERP market would be worth Rs 2,000 crore (about $400 million) and the market will grow at an average of about 12.8% till 2016.
ERP – which often includes software to keep track of inventories, production, raw materials, shipments and labor – has been hit hard by the current uncertainty in economic outlook globally, and the transition to the Software-as-a-Service (Saas) or Cloud Computing model.
The second biggest chunk of enterprise software, CRM or customer relationship management suites will make up for Rs 1,600 crore (about $320 million) this year. “The view on the CRM market is comparatively more bullish .., with very similar growth trajectory as ERP for the 5 year period,” IDC said.
The two above have traditionally made up nearly all of the readymade enterprise software market (that excludes customized application development.) However, both have been hit in recent years as the Internet has become ever-prevalent and smaller companies have sprung up to take advantage of the network and offer browser-based tools at a fraction of the cost of traditional CRM and ERP software.
Salesforce.com is the pioneer in this regard and offers one of the most successful CRM software ever.
IDC noted that leaders like SAP and Oracle are now also offering Cloud-based solutions.
SaaS model (Software as a service) is going to drive the ERM deployments, specifically in the small and medium business segment, due to its subscription pay-per-use model, it said.
“Leading vendors have a dual focus on their On premise as well as On demand delivery models for enterprise applications and working with partners to make the most of the existing pie in the market across employee segments. This level of flexibility and agility is expected from the market leaders in these challenging times. Organizations are more likely to work with firms that understand their business processes better and suit their requirements and budget,” saids Nirupam Chaudhuri, Research Manager, Software and Services, IDC India.
Shweta Baidya, Senior Market Analyst- Software, with IDC said smaller companies understand that they don’t need a huge amount of customization to be done on the software, and are willing to go with largely plain-vanilla offerings — an area where SaaS is stronger.
“They also understand that, as the level of customization increases, the cost as well as complexity goes up” Baidya said.
Global enterprise software brands have traditionally found the Indian market nearly immune to their marketing efforts due to the price factor, and lower awareness of the benefits of such software.
“In line with the need, vendors have started expanding their portfolio through partnerships and acquisitions to be able to offer a comprehensive end to end solution to the customers under one wing,” Baidya said.
IDC also pointed out that the enterprise market in India is saturating fast, there is increasing focus on lower parts of the organizational pyramid, such as the SMB, and the need for new delivery models.
“Enterprises who are looking at online business models, are venturing for options such as e-retailing solutions which is integrated with traditional CRM solutions,” it said.
