$17 Billion Expected in Enterprise Applications Market

Enterprise Resource Planning (ERP) powerhouse vendors such as SAP and Oracle have steadily bitten off market share positions in Customer Relationship Management (CRM) and Supply Chain Management (SCM), according to a report released today by AMR Research.

The report indicates that in 2004, 75% of ERP vendors' revenue was derived from core ERP systems, compared to 87% in 2000. ERP-vendor revenue derived from CRM applications has doubled–leaping from 6% to 12%–in the past four years.

ERP vendors' influence and presence will be even more evident in 2005, as the software applications industry adjusts to Oracle's acquisition of Siebel. AMR Research expects the enterprise applications market to grow from $47.8 billion in 2004 to $64.8 billion by 2009.

"The shift in market share can be attributed to widespread consolidation and the decision by large ERP vendors to make strategic investments in traditional best-of-breed territories," said Tony Friscia, president and CEO of AMR Research. "The availability of add-on modules from suite vendors prevents best-of-breed vendors from commanding premium prices as they did when they created these markets."

The success and growing presence of hosted applications from companies like salesforce.com are changing the pricing model of the software industry. While the traditional pricing model continues to dominate the enterprise applications market, AMR Research predicts that application hosting will grow faster than other revenue categories through 2009: 22% per year.