ERP market projected to gain from European Union expansion

Dedham, MA—Besides opening markets in Eastern Europe, this year's expansion of the European Union (EU) is expected to result in more manufacturers in these countries needing enterprise resource planning (ERP) solutions, according to recent research by ARC Advisory Group.


Dedham, MA— Besides opening markets in Eastern Europe, this year's 10-nation, 40-billion-euro expansion of the European Union (EU) is expected to result in more manufacturers in these countries needing enterprise resource planning (ERP) solutions in the next few years.

Poland, Hungary, the Czech Republic, Slovakia, Slovenia, Estonia, Latvia, Lithuania, Cyprus and Malta are all becoming EU members in 2004, pushing Europe's borders to Russia and the Middle East.

The EU expansion will likely help the worldwide ERP market grow at a projected 5.7% compound annual growth rate (CAGR) from $9.1 billion in 2003 to more than $12 billion in 2008, according to a new study, "ERP Software and Services Worldwide Outlook," by ARC Advisory Group .

Created after World War II to unite the nations of Europe, the EU economically surpassed North America as the leading ERP region in 2002, and continued that trend in 2003. The EU presently includes 15 nations and 370 million people, who speak 11 official languages, and share the common institutions and policies that have allowed the Europe, Middle East, Africa (EMEA) region to become the leader in implementing ERP solutions.

"The EU is the largest economic entity in the world, and it's now solidified even further by its single currency, the euro. The EU is becoming even larger in 2004, and it is a key element of the growing ERP market," says Steve Clouther, ARC analyst and principal author of ARC's study.

In addition, the EU is working out trade agreements with Mercosur, an economic entity that includes Argentina, Brazil, Paraguay, and Uruguay, which represents the fourth largest economic entity worldwide. It has more than 200 million consumers, and boasts a combined GDP of more than $1 trillion. "Mercosur is now among the fastest growing markets in the world, and any trade relationship with the European Union will be a definite win-win situation for both entities," adds Clouther.

Process industries adopting ERP
Though the process industries have lacked ERP solutions designed especially for them, they remain relatively strong ERP adopters. ARC's study found that this sector will see a more than 5% CAGR over the forecast period as solutions become more robust, and as vendors develop and support more vertical solutions for critical process industries. Particularly strong growth areas will be in the food and beverage and pharmaceutical industries. Consumer packaged goods and food and beverage industries, as they expand to serve the global market, will use ERP solutions for better brand management, regardless of where product is manufactured.

Service dominant in ERP solutions
Revenues from ERP-related services, such as consulting, implementation, training, and maintenance, represent 70% of total ERP revenues in 2003, and this will continue to drive the successful growth in the ERP market. While maintenance/support services account for a large percentage of the service revenues, more value-added services for the solution will kick in during the period covered by the report. In conjunction with potential growth within the process industries, value-added services play a key role in vertical process industry solutions and fast-track implementations.

Control Engineering Daily News Desk
Jim Montague, news editor

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