ERP Software marketis expected to generate the revenue of approximately $56.8 billion in sales globally by 2025. The market would register a CAGR of 6.9% from 2016 to 2025. ERP (or Enterprise Resource Planning) is a software used for managing business processes. The software enables a company to access a system of highly integrated application, which manages not only the business but also automates certain back office activities. This software facilitates the integration of resources, business function, supplier, and customer of the organization. The assemblage of utilities and features in an enterprises resource planning system can generally be categorized into front office functions and back office functions. An ERP software supports almost all business system that maintains crucial data for different business functions such as customer relationship managements, manufacturing, human resources, financials, supply chain management, and projects in a single database. One of the most notable advantages of the systems back office functionality is its capability to accumulate, store, manage, and organize aggrandized data for business.
Furthermore, integrated system architecture is a major component of the system as the integration enables an enterprise to access the same system across different demographics. This software is also responsible for increasing productivity by reducing expenses and enabling the enterprises get potential ROI. The software can integrate high volume of data as well as processes across a many departments and geographies. It further empowers an enterprise to move their products much quicker, reconcile shipments faster, and many more. Nonetheless, the enterprise resource planning software provides organizations access to a multitude of crucial data which was either unavailable or impossible to derive with other software.
Based on the type of deployment, the enterprise resource planning segment is further categorized into on-premise deployment and cloud deployment. The on-premise software deployment is anticipated to occupy a major market share of more than half by 2025. However, companies are now integrating, legacy enterprise resource planning, and cloud based applications to support new business models. This has paved way for hybrid systems that can serve new user demands. Besides, adoption rate of features that enable customer access such as enterprise applications from smartphones or other mobile devices is expected to increase. So, with growing market size, cloud based system are expected to register a CAGR of about 9.5 percent during the forecast period, 2017-2025.
Some of the most impressive functions or modules offered by the system includes supply chain, finance, human resource, and others. The software facilitates the centralized operation and decentralized control or management to help the human resource department to concentrate on its strategic functions of planning programs for personnel development. Supply chain benefits of the enterprise resource planning system include vendor performance, automated purchasing, and leverage in cost negotiation across the industry. Moreover, a perfectly integrated system in finance and accounting ensures proper tax management, bank reconciliation, capital management, purchase management, account receivables, and others. Likewise, among the different functional area, finance is expected to drive the ERP systems market significantly by 2025. This area would contribute around 30 percent of the total revenue.
The business verticals served by the enterprise resource planning systems majorly consist of manufacturing and services, BFSI, healthcare, retail, government utilities, aerospace & defense, telecom, and others. To monitor and control their operations, aerospace & defense sectors have started implementing and heavily investing on the system. Thus, aerospace and defense end use segment is expected to register a CAGR of 8.5% during the forecast period, 2017-2025, as compared to other business verticals. The significant reason for such expansion is the need to maintain data transparency.
By End User
The end user segment of ERP software market is classified into large, medium, and small enterprises. Owing to the rapid adoption of these systems, the mid-size firms are likely to register a CAGR of 7.6 percent during the period, 2017-2025. Mid-size enterprises today are determined to lower operational cost and sustain the bottle neck competition in information technology era. To help SMEs manage specific growth goals, the system provides quantifiable business advantages such as low operating costs, inventory reduction, and improvisations in scheduled compliance. The application is an attractive solution for bigger organizations to project major financial measures, establish production, and allocate costs & other business processes.
Adoption rate of enterprise resource planning software is high in North America and Europe. In these regions, the application is no longer about financials. Customers prefer smarter data integration. The enterprise resource planning is majorly used where a company is demographically distributed with multiplex resourcing, enterprises intending to get faster control over their resourcing, and firms having volatile resources. Cloud application is accelerating rapidly in these regions. Crucial factors including tighter project deadlines fueled by reduced budget are the major drivers of cloud application in these regions. Moreover, mobility is unifying several manufacturing functions quicker than anyone had ever imagined. Manufacturing companies in North America and Europe are showing greater interest in Android and smartphone analytics for monitoring operations, approving contracts, and getting notification via alerts. Asia-Pacific region is the most lucrative market in terms of growth and is expected to garner nearly $13.2 billion in sales by 2025. Setting their sight on Asia- Pacific, leading vendors have joined hands to provide startups and SME (or Small and Medium Enterprises) cloud-based application suit. These packaged solution serve wide range of clients that are promoting their business globally. Although in LAMEA, the demand for on-premise enterprise resource planning is growing in the region swiftly.
The enterprise resource planning marketplace that has once suffered a significant slow-down during the recession has revived. Besides being stable, enterprises that had postponed investment in such systems, are beginning to invest again to get maximum returns. Some prominent vendors including SAP, Microsoft, and Oracle are launching products that are easily accessible via smartphones or other mobile devices. These major market players are putting great efforts to develop software that can be delivered from third-party vendor's platform. The market is increasingly witnessing a shift towards Software-as-a-Service (SaaS) model.