Nothing measures the maturity of IT usage in an organization better than the pattern on investment in business software. The very fact that as much as 18% of software investment goes to vertical applications means the market is maturing for sure. Add to that the 7% spend on business intelligence suites, one can conclude that Indian IT companies are becoming smarter users of IT.

The total business applications software marketthat is the total package software market excluding system software, security, and storage software that we have estimated separatelyrecorded sales of Rs 7,093 crore. The packaged software market in DQ Top 20 last year, which included system software, was Rs 5,887 crore. Adding the system software revenue of 2006-07 to the business applications revenue, the total market size of what comprised "packaged software" last year is, hence, pegged at Rs 8,053 crorethat is a growth of 36.8%, significantly more than the average industry growth, meaning software is increasingly accounting for a larger part of IT spend.

What needs to be explained, however, is some of the categories like CRM and engineering tools have seen large revenues, partly due to the fact that Indian services companies in BPO and engineering services have significantly invested in them.

Another interesting trend was that middleware finally got to be noticed as a segment by itself and is likely to make an impact as Indian users become serious about service oriented architecture (SOA).

ERP: Spreading Out
It is perhaps the most popular of the business applications available today; not just large enterprises, even SMBs consider ERP adoption as hygiene for their businesses. Result: the Indian ERP market pegged at Rs 1,056 crore in 2006-07 constituted a healthy 15% of the overall business applications pie. Not surprising, considering India Inc has traditionally looked at ERP as the panacea for all its operational ills.

Interestingly, however, the ERP implementation record in India (and this includes even large enterprises) often tells a different story; where reality often falls short of matching the hype generated. A Gartner survey found that while the average cost overrun in Indian ERP implementation was a staggering178%, the average implementation time overrun was 230% of original expectations; combined, the two led to an average 59% decline in productivity.

Nevertheless, the momentum of ERP implementation showed no signs of abating in 2006-07. The reason being in todays competitive environment organizations across all sectors had to battle declining prices and a squeeze on their margins. These challenges had driven most enterprises to realize that business decisions should be based on real-time information, resulting from synchronized business and production processes. Result: Implement ERP solutions to ensure that decision makers have the required information visibility across the value chain.

Indian ERP Market Company Revenue (Rs crore) SAP 415 Oracle 195 Tally 98 Microsoft 59 Ramco 54 3i Infotech 37 SSA Global (Infor) 29 QAD 18 Intentia 8 Cognos 5 Others 138 Total 1,056
Source: DQ estimates CyberMedia Research
Using a single ERP (as against multiple vendor offerings) became the norm. SaaS began to make small inroads

The benefits of increasing ERP implementation, however, did not percolate uniformly across all vendors. It was the case of big ERP vendors getting bigger. The combined shares of the two largest ERP players, SAP and Oracle reached close to 60% of the overall market; no windfall, however, awaited other vendors who struggled to enhance their market shares. Indian ERP vendors like Tally (its fortunes dipped this year), 3i Infotech, and Ramco have their niches, but were squeezed hard by the biggies.

While SAP has been the de facto ERP king in India for years now, Oracles increase in market share in 2006-07 owed much to its successful integration of Peoplesoft and JD Edwards. However, the jury is still out on the merits of a virtual two-horse race where others lined up to make the numbers. On the flip side, niche players like Infor (formerly Baan), Intentia or QAD tended to lose out to the marketing muscles of the two big daddies of ERP. With more M&As in the space likely to place, further concentration of the market share among these larger vendors is a distinct possibility.

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