Enterprise applications continue to be an interesting area as vendors continue to adopt innovative ways to reach out to customers
In FY14, India underwent a lot of change. Elections in several states including the general elections kept a number of businesses away from investing in newer technologies or systems. Enterprise apps market had thus a direct impact of the social and political scenes in India. Elections and lower profits from government sector investments led the software market in India to grow at a lower pace, research firm IDC claimed in one of the statements. In our estimation too, the scene was no different. Software market in India witnessed slow growth, due to multiple factors including delayed payments, lower profits from government sector investments, and rupee depreciation among others.
However, a number of areas showed growth and investments, including e-commerce and mid-tier companies. Cloud computing helped them embark on the enterprise apps journey. Gartner and IDC both are positive with regard to the mood in the ongoing year. For 2014, IDC expects the software market in India to grow at a CAGR of 10.3% over the five-year forecast period (2014-2018), primarily driven by segments like security software, system software, enterprise applications and analytics, which continue to be the top priorities for enterprises in terms of IT investments.
Application software markets include enterprise resource planning (ERP), customer relationship management (CRM), business intelligence (BI), supply chain management (SCM), business intelligence (BI), etc. The growth was primarily driven by new spending on SaaS and cloud based deployments, as well as upgrades and improvements to continue the modernisation of established, mission critical software.
Unlike other markets India has a lot of scope of adoption since there is less legacy. Vendors are trying to come out with long-term strategies to woo Indian enterprises. The software industry is in the middle of a multiyear cyclical transition as organizations are focusing investment on technologies to support existing systems, in order to maintain competitiveness, while still taking advantage of cloud/subscription-based pricing where it makes sense to grow and advance the business.
The top five vendors in India remained stable, but their success and performance varied. ERP, CRM, and BI and analytics were the largest software markets. SAP, Oracle, IBM, Salesforce and Microsoft continued to be in limelight.
ERP: Growing Steadily
Enterprise resource planning (ERP) is an integrated suite of solutions that help a company plan and manage its core business processes like production, inventory management as well as other operations like HR and accounting. The ERP market continued to grow at a stead rate of 12 %. However, top vendors continued to poach customers from each other’s kitty. New customers acquisitions were done only through new delivery models such as SaaS (Software-as-a-service) ERP. An increasing number of companies, especially small and medium businesses (SMBs), are now looking at adopting ERP solutions on the software as a services (SaaS) model for faster deployment and enhanced cost effectiveness, research firm Gartner stated in one of the releases.
According to Gartner, SaaS ERP in India is expected to grow at a compound annual growth rate (CAGR) of 28%.
In line with the global trend, end users in India and China deploy SaaS ERP because of the benefits of faster deployment and the perception that it is cost effective. Also, for organizations looking for solutions that can scale up as their businesses grow, SaaS seems like a good option.
According to an estimate, there are over 500 user organizations that have adopted SaaS-based ERP in India and China combined. However, SaaS ERP applications in India constitute less than 5% of the overall ERP market in India.
On-premise ERP market in India is expected to touch $538 mn by 2017 from $178 mn in 2013, growing at a CAGR of 17%. In rupee terms, Dataquest estimates the ERP market in India at `2,233 crore. It is a growth of 12% over last year’s `1,993 crore.
When it comes to marketshare, SAP is an undisputed leader in the ERP space as it holds 47% of the market followed by at a far end by Oracle with 17%. Microsoft owns 11% of the market. Besides, smaller players are increasing their footprint in this market. Players such as Infor, Sage and others, including open source solutions are gaining footprint in the mid-tier segment.
Traditional sectors continued to rest faith in ERP solutions. Particularly, heavily regulated sectors such as banking, insurance, telecom and public sector continued to use on-premise ERP solution. Even manufacturing sector chose to use on-premise ERP solutions since most players do not want to share sensitive data with third party organizations.
SCM Market in India
Supply chain management is a critical component for several logistics-based organizations, since they can not afford to lose customers over poor logistics. Perhaps this is the reason that SCM software market is constantly growing significantly in India. While India witnesses an onrush of e-commerce companies, it is critical for them to improve their logistics for better customer service. Besides, manufacturing players and suppliers are always wary of their supply chain. According to PwC, the next wave of transformation is likely to happen in the logistics space as companies embrace the new success mantra of delivering superior customer response while managing minimum inventory across supply chain.
Dataquest estimates this market to be at `1,222 crore in FY14 with 20% growth. Major players who dominate this space are SAP (35%), Oracle (32%), and Infor (4%), among others.
Given the huge investment and development taking place in this area, this is the opportunity that Indian corporates are likely to explore and leverage going forward. Managing profitability, reducing costs, and meeting customer requirements are the top three priorities of supply chain executives globally today. The companies are adopting different supply chain capabilities like collaborative planning, vendor-managed-inventory and best country sourcing. Moreover, they are also open to increasing interest in next-generation technologies, automation, and sustainability.
CRM Market in India
Indian customer relationship management (CRM) software totaled `2,002 crore in FY14, up 25% from `1,600 the previous year. High levels of end-user investment in digital marketing and customer experience initiatives were the primary growth drivers of the market in 2013-14. It is believed that CRM will be at the heart of digital initiatives in coming years. According to Gartner, this is one technology area that will get funding because digital business is critical for companies to remain competitive.
Strong demand for software as a service (SaaS), which represented a significant part of CRM total software revenue in 2014, was driven from organizations of all sizes seeking easier-to-deploy alternatives to replace legacy systems, implement net-new applications or provide alternative complementary functionality.
Competition intensified as major players continued to vie for broader market penetration in the mid and SMB segments. The top five CRM vendors accounted for more than 50% of CRM software revenue in 2014. Oracle continued to be the largest vendor overall in the CRM market with 23% marketshare followed by Salesforce.com which claimed 19% of the market. SAP was pushed to #3 spot whereas Avaya held 10% of the market. Microsoft had a number of customer wins in the growing digital and e-commerce subsegments and claimed 7% of the market.
Organizations are leveraging CRM as a major part of their digital initiatives to enhance the customer experience, according to Gartner. The outlook continues to be positive for CRM as buyers focus on technologies that enable more targeted customer interactions in multichannel environments.
CRM market growth is expected to stay upbeat in 2015, following three strong years of investment as high-tech, banking, insurance, securities, telecommunications, pharmaceutical, consumer goods, IT manufacturing and IT services vertical industries are expected to be the largest spenders on CRM as they have the widest use of different types of CRM applications and technologies.
According to Gartner, e-commerce is on the top of mind for CEOs, chief marketing officers (CMOs) and senior executives as they seek the ability to improve overall customer experience, profitability and sales. At the same time, marketing technology is a hot area for IT investment, but solution decisions are increasingly being driven by CMOs and the marketing organization, with little to no IT involvement. CIOs will need to work more closely with CMOs and marketing leaders to adapt to the increasing technology demands emanating across the marketing organization. Mounting pressure on CMOs to drive growth, improve accountability and reduce costs is pushing marketing organizations to make significant marketing technology investments across a broad set of applications and functionality.
BI Market in India
Indian business intelligence (BI) software revenue grew 15% in FY14 as businesses focused on using analytics and big data. BI revenues, which includes revenue from BI platforms, analytic applications and corporate performance management (CPM) software, stood at `2,058 crore in FY14 over `1,790 crore over last year.
Business intelligence software are tools designed to retrieve, analyse, and report data. These tools help identify and develop new opportunities, providing companies competitive market advantage and long-term stability.
According to a research firm, pressures from consumers, environmental policies, government and industry regulations, international standards of quality, and internal operational efficiency are forcing enterprises to improve their operations and processes to become both agile and efficient in a volatile marketplace.
BI platforms are expected to comprise the largest chunk of the market in 2015 because of trends such as big data. Analytic applications and performance management segment are also expected to see the fastest growth.
Gartner in one of its earlier reports had predicted that signs of the emerging importance of BI in India are high as senior executives are increasingly exploring the different styles of analytics to resolve their business imperatives. There is an increased emphasis on the metrics management and growing use of performance management and software and service providers are increasing marketing spend on BI, thus, leading to higher visibility.
SAP leads the BI market with 27% marketshare followed by IBM with 23% marketshare. SAS and Oracle remained at #3 and #4 respectively.