November 4, 1998 Market Analysis Industrial Enterprise Applications Market Could Exceed $70 Billion By 2002 The industrial enterprise applications (IEA) market will grow at a compound annual growth rate of 36 percent over the next five years, according to AMR Research (Boston, Mass.; www.amrresearch.com), a market research firm. AMR predicts that total company revenue will top $72.6 billion by the year 2002. This conclusion is based on the continued momentum of the enterprise resource planning (ERP) vendors and the strong growth of the supply chain management market. "While short term concerns regarding the global economy and Year 2000 issues abound, we continue to see companies investing in packaged applications," said Bruce Richardson, vice president of research strategy, AMR Research. According to AMR Research, the IEA market consists of several application areas including: enterprise resource planning, supply chain planning and execution, maintenance management, process management and manufacturing execution systems. As customers continue to purchase these systems and demand broader applications, software providers will expand their product functionality and target additional users and markets. In addition to product suite expansion, AMR Research has identified three key points that will propel the IEA market's continued growth: Increased Penetration into Existing Accounts. AMR Research expects application vendors to greatly expand penetration into their current installed-bases. An increased emphasis on broadening service agreements, increasing seat counts, and selling new products will drive vendor growth. Application providers with established sales teams, more focused business strategies, stronger products and better services will prevail. Vertical Expansion. The IEA market is also expanding into new vertical markets. While packaged application solutions were initially sold into manufacturing accounts, application vendors are now targeting new verticals with broadened product suites. Over the next several years AMR Research believes packaged applications will be in high demand for the utilities, retail, public, and telecommunication sectors. Geographical Expansion. Very few companies are initiating projects to develop custom software internally. Over the past ten years, AMR Research has seen the migration to packaged application solutions accelerating steadily throughout the U.S. Today, 55 percent of the IEA licenses are in the U.S. Over the next five years, AMR Research expects packaged applications vendors to heavily target the international space, especially Western Europe, Latin America and Asia/Pacific. AMR Research forecasts that the IEA market will continue to expand at a compound annual growth rate of 36 percent over the next five years and expects that application vendors will continue to acquire products and companies to broaden their footprints. The leading vendors are expanding their product offerings and moving into new markets, and looking at acquisitions to accomplish their goals. Today, it is not uncommon for ERP providers to acquire a supply chain management or front office application supplier, or for a supply chain planning vendor to merge with a supply chain execution provider. Similarly, partnerships will proceed to unfold as the market continues to show interest in broad applications. In order to stay competitive, vendors must go to market with the broadest suite possible. The Manufacturing Report © Copyright 1997, 1998 by Lionheart Publishing, Inc. All rights reserved. E-mail Editorial Dept: tmr-editorial@lionhrtpub.com Lionheart Publishing, Inc. 2555 Cumberland Parkway, Suite 299, Atlanta, GA 30339 USA Phone: 770-431-0867 | Fax: 770-432-696 E-mail: lpi@lionhrtpub.com Web Design by Premier Web Designs E-mail: lionwebmaster@preweb.com