Executive Summary: Development of the ERP 3.0 Market

The market for ERP business applications has changed in recent years like no other. Developments in technology and demand in the areas of digitalisation, IoT, cloud migration, mobility, micro-services, BI/Big Data analytics and the growing convergence of IT and production were especially instrumental in promoting the ERP market. These factors have translated into shorter innovation cycles at providers and have also accelerated market consolidation, above all in the case of older ERP generations. While the number of on-premises software products (ERP 2.0-, 2019: 570; 2020: 468; 2021: 441) and providers (2019: 414; 2020: 403; 2021: 376) is dwindling, cloud solutions (ERP 3.0) continue their uptrend (2015: 4; 2019: 25; 2021: 36). ERP provider weclapp SE and Hamburg-based IT consultancy and market research company SoftSelect GmbH have joined forces to critically examine the ERP market in their current study, with a special focus on developments of the second and third generation of ERP solutions.  

Market consolidation and accelerated shift away from ERP 2.0

While conventional second-generation ERP solutions are clearly identifiable, first and foremost from their client/server architecture (n-tier), with a rich client in on-premises or ASP/hosting operations, ERP 3.0 solutions present the characteristics of a concerted focus on web technologies, largely made available as cloud applications based on subscription models, also known as Software as a Service (SaaS). Second-generation ERP applications, gradually developed over time in the direction of web technologies, at least in part (e.g. web-based user interfaces), have dominated the ERP market from the 1990s and 2000s up until the present day, and not without reason: They have delivered huge efficiency gains in mapping commercial processes in user companies. Around half of the ERP 2.0 software products available today provide part of the functionalities by drawing on browser-based web applications as well. 

Consolidation on the ERP 2.0 market and disruptive technological change in the market has sent the number of actively operated and managed products into steep decline. The outcome: ERP 2.0 product development cycles are being prolonged while momentum in demand is gradually growing, with new technologies and collaboration networks up and coming.

Since the viability of user companies hinges on the mapping business models with the aid of ERP software, the realignment of the ERP environment is becoming increasingly unavoidable for companies – also due to growing pressure to take action emanating from macroeconomic developments and their impact on existing and future business and working models. Demand for cloud-based solutions which dispense with the costs of consultancy and/or implementation is on the rise, particularly from small and mid-sized companies. Consolidation is producing a self-reinforcing effect in favour of software products from the ERP 3.0 generation. For example, growth in service revenues was observed through to 2019 for ERP 2.0 providers in the regions of Germany, Austria and Switzerland. In 2020 and 2021, this trend reversed despite stronger COVID-19-induced demand in the business software environment.

Heralding the age of ERP 3.0

Technological progress in cloud computing in recent years has not led to fundamental developments or innovations in second-generation ERP solutions but at best to extensions moving towards web-based user interfaces and integrations. ERP 3.0-generation software products are rather more thin on the ground compared with the overall market. A significant proportion of ERP 2.0 generation providers with partial web extensions use the potential scope for interpretation to position themselves as cloud software providers and put flesh on the bone by offering a selection of functionalities made available with the aid of browser-based web applications. The fact that these are not fully-fledged ERP 3.0 solutions but largely self-sufficient functional areas instead, with a dose of healthy marketing, often blurs the vision.

Although this strategy goes some way to disguising the deficiencies of the underlying system architecture, it harbours decisive disadvantages for providers in the medium term as, going forward, developments must be implemented across a range of different clients. Furthermore, further fragmentation of functionalities sets in on the various clients, which will impair the acceptance and integrity of the software products. For a long while now, many providers have been putting out the message that the rich client will be replaced by the web client in years to come. In reality, however, most ERP 2.0 providers are still a long way off in terms of their range of functions. Some ERP 2.0 products therefore also offer a public cloud option with a subscription model, in essence adopting a multi-instance approach for software products with web extensions. The advantages of a cloud architecture can only be harnessed with fully-fledged ERP 3.0 architecture, however.

“Although recent years have shown SMEs increasingly migrating to cloud-based ERP 3.0 applications, the greater variation in the scope of functions offered by ERP 3.0 providers has fuelled uncertainty with many ERP 2.0 user companies and also been one of the causes for them holding back on software projects, seeking advice from external consultants or refining their own digital and cloud strategies,” says SoftSelect Managing Director Michael Gottwald.

As an IT consultancy and market research company, SoftSelect assumes that the demand for web-based ERP 3.0 applications is set to rise in the coming years, regardless of the reference model, particularly as the initial costs for companies switching are considerably lower and service and maintenance costs decline, and also in view of the decisive advantages which accrue to software providers and customers alike:

• Enabling a genuine multi-tenancy architecture with flexible horizontal scalability, infrastructure automation and high availability
• Shorter development cycles through tool support
• Potentially extremely high degree of standardisation of ERP 3.0 products, with significantly enhanced efficiency in development and maintenance
• Possibility of developing and updating a software ecosystem and integrating cloud services based on web technologies with substantially lower outlays compared with products of the ERP 2.0 generation

The transformation from ERP 2.0 to 3.0 nevertheless presents providers with huge challenges: Products cannot simply be adapted through “re-factoring” but generally require complete revamping as the existing source code cannot be applied one-to-one to the development process.

“If ERP 3.0 is correctly implemented it has the ability to grow with future requirements and already harbours the potential of the fourth generation – the intelligent ERP solution,” says Ertan Özdil, CEO and founder of weclapp SE. weclapp has already positioned itself successfully in the ERP 3.0 market with its cloud ecosystem featuring web-based standardised applications, extensions available on an integrated marketplace and intuitively usable user interface.

Connecting to and integration of further cloud services into the ERP environment is one of the many practical advantages of ERP 3.0 ecosystems today. Integration scenarios such as the increasingly popular use of collaboration tools during COVID-19, Microsoft Teams for instance, take a mere few minutes to implement, and workflows such as approval processes and the sharing of records and documents from the ERP system can evolve. Even greater relevance may be derived from future AI and analytics services from the cloud which are likely not only to automate but also to revolutionise the data- and event-based control of workflows in the ERP system.

Publisher: 

SoftSelect GmbH is a specialist IT consulting company established in 1994. As a vendor-neutral and independent firm of consultants, SoftSelect supports its clients in developing their IT strategies and in the selection of the right software solution (ERP, resources, CRM, business intelligence, document management etc.). Depending on the requirements and wishes, consultancy activities cover entire software selection projects or individual components, examples being preselecting providers, drawing up requirements catalogue/specifications, support in the presentation phase or reviewing offers and contracts. Along with information on business software, SoftSelect offers a free software selection tool for the analysis and shortlisting of solutions. A further area of activity consists of preparing and publishing market overviews and studies, along with conducting user surveys. SoftSelect has profound knowledge of both user requirements and the provider market gained from market surveys and numerous selection projects. It is also a contributor of technical articles and expert statements for the specialist press.

Press Office:
SoftSelect GmbH
Petra Spielmann
Tel.: +49 (0)40- 870 875-0
email: ps@softselect.de
Web: www.softselect.de 

Study partner:

weclapp SE was founded in 2008 and has been offering the cloud-based platform of the same name since 2013. Since market entry, it has grown by an average of 50% every year and is profitable. With Software-as-a-Service (SaaS), it mainly addresses small and medium-sized enterprises, with integrated ERP (Enterprise Resource Planning) and CRM (Customer Relationship Management) functionalities in particular. Customers thus have unrestricted access to their business transactions and data from any Internet-enabled device and from any location connected to the Internet. With storage and computing capacities in Germany and Switzerland and ISO 27001 certification, weclapp offers a high level of data security. The platform has repeatedly won awards as ERP system of the year. weclapp SE operates out of Frankfurt am Main and maintains branches in Marburg, Kitzingen and Worms. It is a subsidiary of Marburg-based 3U HOLDING AG.

For further information:
weclapp SE
Dr. Stephanie Nickel
Tel.: +49 (0)69-33390-2211
email: nickel@weclapp.com
Web: www.weclapp.com

Artikel vom 11.01.2022

Schlagwörter: ERP