During 1990, ERP market was dominated by few vendors namely SAP, BaaN, Oracle, People Soft and JD Edwards, who were also known as big five of ERP market. The market was, then, was growing at compound rate of approximately 35%. Fortune 500 companies were the major customers. Key focus of ERP vendors, during that period, was to expand functional scope of their product and provide sharper vertical focus. Manufacturing made up for the largest segment of ERP spending.
IT spending as a whole slumped after the collapse of internet bubble and 9/11 terrorist attack,. Market for ERP also saturated for fortune 500 companies. ERP vendors started to face financial difficulties. ERP market went into an upheaval and following trend emerges:
Increased acquisition and merger activities: Financially stronger ERP vendors started to swallow their weaker brethren. Private Equity firms also started to play a big role. BaaN was taken over by Invensys and subsequently by SSA Global. SSA Global was later merged with Infor, which was supported by a large private equity company. J. D. Edwards was merged People Soft which in tern was taken over by Oracle through a hostile takeover.
Segmenting / diversifying of ERP Market: Due to saturation at top end, ERP vendors were trying to penetrate medium and small market segments. The market thus got segmented into tier 1(large organization), Tier 2(medium organizations) and tier 3 (small organization). Major ERP vendors started offering products for lower end of the market either through extension/rationalization of their products or through acquisition. ERP vendors were also diversifying their product to different verticals. Whereas, manufacturing provided the major chunk of their revenue, the focus area turned to retail, public sector, utility, financial sector, and telecom.
Web enablement: Rising opportunity of ERP vendors was to leverage their existing products with niece acquisition, to extend beyond their earlier solutions, limited to four walls of an organization. The explosive development of internet made possible seamless web based collaboration by organizations with their vendors and customers, such as mySap.com solution from SAP and e-business suite from Oracle.
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