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2009 Opportunity Assessment and Demand Trend Analysis of the U.S. SMB Accounting & Enterprise Resource Planning (ERP) Market

AMI-Partners, Inc.
June 10, 2009
SKU: BDHQ2421965

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Countries covered: United States

This report examines the evolving market opportunity for Enterprise Application Software (ERP) among U.S. small and medium businesses. ERP has evolved in recent years beyond its roots in accounting and inventory management to touch all functions within the enterprise. Spending by US small and mid-market firms on accounting & ERP software and services will grow sustainably between 2008 and 2013. Perspective is provided on ERP and accounting software adoption drivers, as well as guidance on alternative growth paths.

Executive summary: Accounting and Enterprise Resource Planning (ERP) Definitions; Accounting and ERP solutions deliver value to the enterprise through direct improvements to financial, operational, and risk management; ERP has evolved in recent years beyond its roots in accounting and inventory management to touch all functions within the enterprise; Spending by US small and mid-market firms on accounting & ERP software and services will grow by $1 billion between 2008 and 2013; The ERP segment will create incremental revenues for vendors largely in the upper-small and core-mid markets; ERP should deliver a respectable premium on the average spend per `firm in most employee segments; Microsoft and Sage are taking the early lead in creating a migration path for SMBs from pure accounting to ERP environments; There is ample room for vendors to build on core ERP applications with bundles that address specific business needs; A focus on business and financial management could be an attractive play in sectors that are service oriented and human capital intensive; Bundles that optimize core back-office production processes would most benefit firms in manufacturing, retail, and wholesale industries; Market Overview & Opportunity for US Accounting & ERP Software and Services; Steady growth in the US SMB market for application software and services will create a $30 billion spending opportunity in 2013; Accounting and ERP solutions will drive $3.1 billion of the total spend on a CAGR slightly higher than the market average (7% vs. 6%); SB and MB contributions to spend are highly skewed by product category yet roughly equal on an all-up basis; Demand Trends in the Small and Medium Business Market-Accounting Software & Services; Trend data suggest that accounting software is well entrenched across the full spectrum of small and mid-market firms; On premise software and ERP accounting modules trump all other categories of accounting methods; There is a high correlation between enterprise scale and the deployment of accounting applications attached to ERP suites; Penetration rates of accounting software by sector generally show more stability in the small business segment; Average spending/firm is up 43% in the mid-market and trending flat among smaller enterprises; Short product lifecycles provide a built-in upgrade model for vendors and frequent opportunities to target potential switchers; Intuit is best positioned to drive consolidation in the mid market by leveraging its QuickBooks franchise among smaller firms; Demand Trends in the Small and Medium Business Market-ERP Solutions; ERP solutions are broad and touch all functions within the enterprise; Limited need in the small business segment will cap the ERP market opportunity to a narrow band of firms with >20 employees; ERP adoption rates are increasingly concentrated among upper-small and mid-market firms; Mid-size companies are using ERP more broadly and at a higher level of sophistication than smaller enterprises; The average ERP spend per firm is declining by 18-37% among all mid-market segments and in the >10 employee small business tiers; The bulk of spending shifts from consulting to maintenance and licensing fees as enterprises transition from the small- to mid-market; The average cost per seat drops precipitously until firms reach an average deployment of roughly eight users; ERP brands from Microsoft and Sage appear to have the largest footprint in a marketplace experiencing consolidation; Small ERP firms have made the biggest bets on SaaS/on-demand software services; Broad acceptance of SaaS-based accounting and ERP applications suggests that hybrid delivery models could be opportunistic for vendors

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2009 Opportunity Assessment and Demand Trend Analysis of the U.S. SMB Accounting & Enterprise Resource Planning (ERP) Market

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