Enterprise Resource Planning (ERP) is all about managing resources in the most effective way possible.
Businesses of all shapes and sizes can benefit from a well-integrated ERP software through noticeably simplified and enriched business interactions with clients, employees, suppliers, etc.
It’s no wonder ERP is growing at such a rapid rate. Let’s take a look at some of the specifics behind the trends and growth predictions we are seeing with ERP.
First, What Is ERP?
ERP is a category of business management software or, simply stated, an umbrella term for a complex, multi-layered, and integrated software solution used to manage the business process.
Essentially, ERP connects every person, every department, and every process throughout the entire enterprise with the right information.
It’s the tool by which enterprises manage, collect, and then store critical business and activities. And a fully integrated real-time system offers the flexibility to work from anywhere around the globe.
ERP systems and solutions offer businesses the ability to scale across customer relationship management, E-commerce, human resources, supplier management, and many more areas.
Projections from Allied Market Research place the anticipated ERP market growth at approximately $41.69 billion in sales by the year 2020. And between 2014 and 2020 they expect the market to register a growth of 7.2 percent.
And even more impressive, Price Waterhouse Coopers (PWC) predicted a doubling in cloud-based ERP investments by the end of this year (2016).
Catalysts to cloud-based ERP growth include the steady adoption of mobile phones and other electronic communication devices, and the erosion of corporate barriers to the Internet and social media.
On-premise and Cloud-based ERP
The two types of ERP offered to date are on-premise ERP and cloud-based ERP. The major difference between the two is this: On-premise ERP is a manual installation, whereas cloud-based ERP (also known as Software as a Solution or SaaS) is based online.
While on-premise ERP is still anticipated to amass a 57 percent grip on the industry by 2020, according to Allied Market research, cloud-based ERP is beginning to see greater investments in its solutions.
This should not be surprising at all. As mentioned above, the increasing popularity of social media platforms and mobile technology is incentive enough for companies to invest in cloud-based ERP solutions.
Additionally, cloud-based ERP offers the added benefit of low investment costs. Some additional features include flexibility to access and store real-time data from anywhere around the world.
Companies now integrate cloud-based ERP with legacy ERP systems, creating Hybrid ERP systems. This is partly why Allied Market Research expects cloud-based ERP to register a growth of approximately 10 percent by 2020.
Some ERP vendors have launched ERP products that can be easily accessed through mobiles and tablets.
Moreover, the Software as a Service (Saas) model is gaining in popularity among Small and Medium Enterprises (SMEs) as well as among more innovative organizations.
Verticals: Aerospace and Defense Growth
ERP systems serve business verticals consisting of, but not limited to, healthcare, retail, government utilities, manufacturing and services, BFSI, aerospace and defense, telecom and more.
Related Article: What Is ERP Software & How Can It Increase Efficiency?
Compared to the rest, aerospace and defense verticals are expected to contribute a total CAGR of 8.9 percent during the forecasted 2014 to 2020 period, according to Allied Market Research.
From 2012 to the present, commercial aviation has continued on a steady upward slope. The reason for this growth lies in data transparency offered with ERP systems, especially cloud ERP which offers the ability to monitor and control operations remotely.
From the same study, the forecast period 2014-2020, mid-size aerospace and defense enterprises are projected to grow at a CAGR of 7.9 percent.
This is primarily due to the reduced operational IT cost, associated with cloud-based software models, that ERP requires to maintain competition in a tight market.
Small and Medium Enterprises (SME)
The projection that SMEs will contribute a CAGR of 7.9 percent from 2014 to 2020 is in part due to ERP incentives for SMEs, which include low operating costs, inventory reduction, and improvisations in scheduled compliance.
With many mid-size enterprises looking to reduce operational cost to gain an edge in the competitive business industry, it’s no wonder more organizations are adopting this software.
Functions: Financial Growth
Implementing ERP software ensures highly-integrated business functions for a well-running operational system, including modules such as: finance, human resource management, sales, marketing, supply chain, and much more, with finance being one of the most popular.
A highly integrated system in finance and accounting, for example, guarantees the enterprise has proper tax management and capital management.
Allied Market research found that the finance function is projected to contribute an impressive 30 percent growth to the overall market revenue by 2020.
The year 2013 witnessed ERP software systems rise in Asia-Pacific. Currently, that region holds the most impressive market, with a projection of $9.77 billion by 2020.
As a result, many leading vendors are initiating SME cloud-based suit within the region.
Cloud-based ERP continues to demonstrate popularity among American and European enterprises. This is due in part to the growing interests in the analytics features associated with most Androids and smartphones.
Such features offer the freedom to access data, i.e. important notifications, contracts, and information regarding ongoing operations, from anywhere in the world.
Also, growing interest in cloud-based ERP is a direct result of stricter project deadlines and financial cuts.
Key Growth Trends for ERP
- Project ERP market is estimated to rise to approximately $41.69 billion in sales by the year 2020. Between 2014 and 2020 ERP will register a growth of 7.2 percent.
- On-premise ERP software will continue to hold a majority of market share by 2020, occupying up to 57 percent. However, cloud-based ERP continues to rise in popularity, with a projected growth of up 10 percent by 2020.
- From 2014 to 2020, aerospace and defense verticals are expected to contribute a total CAGR of 8.9 percent.
- From 2014 to 2020, SMEs are projected to contribute a CAGR of 7.9 percent.
- By 2020, the finance function is projected to contribute 30 percent growth to the overall market revenue.
- By 2020, Asia-Pacific is projected to contribute $9.77 billion.
Related Article: Customization is Key: Why Your Business Needs “Change Ready” ERP Implementation
As a whole, ERP trends demonstrate a steady overall growth in the market, primarily because investing in an ERP software solution can take your business to new heights and unexplored levels of efficiency.