Spending on enterprise IT systems rising by 5% in 2004

Increasing business confidence since June this year and early signs of rising salaries for IT consultants and programmers after the crash of the last two years tie in with growing ERP and related project uptake now and into 2004 and beyond. Indeed, the manufacturing sector can look forward to enterprise system growth of around 5% – others are already seeing 10—15% – for the rest of this year, and further significant upturn in activity for the next two or three years. Those are chief among findings of the second annual European ERP salaries and fees survey conducted by Millennium, which took data from 2,000 managers and directors across most of the industrial, commercial and public sectors. Its study concludes that mergers and consolidation – like those involving PeopleSoft, JD Edwards and potentially still Oracle, and also SSA Global buying EXE, Baan, Ironside and before that CA’s ERP systems and Max – will continue as ISVs lag the upturn. However, signs of recovery are compelling across ERP, supply chain systems, business intelligence and web-orientated systems in particular. Interestingly, it also points out that since the fall in new ERP license revenues during 2002 was less than 10% despite the economic downturn, the pick-up should not only be relatively quick but robust and sustainable, as enterprise IT users restart their IT investment programmes. It backs that by the mood of pragmatism it detects among users where expectations of IT’s capabilities are now more realistic, and set around changed business processes. Beyond that, it indicates that, while today IT remains a buyers market, that – and required skill sets – may yet change as the predicted growth takes hold. Millennium “believes firmly” that 2003 “will be the last year of decline in ERP sales,” but that the buying pattern will be for “less expensive pieces of software to quickly drive bottom line results.” Says Philip Keet, managing director of Millennium: “Our figures show that permanent salaries have remained generally static during the past year … and contract rates continued to plummet… But now there’s movement, vacancies arising and companies are offering better remuneration. It’s nothing outrageous – 5—10% – but we’ve been seeing it for the last six months and that’s significant.” Keet believes that since the end of the Gulf War, business confidence has been improving. “The FTSE indicators are generally positive, company profitability is going up, and we see a watershed as companies go out of cost reduction mode and into investing again.” Web-based solutions will be key, he says. “Businesses that have been holding off are saying to us that they’ve got to change their business processes around the web.” And Keet says that across the sectors, that will amount to market “10—15%” sustained growth now and for the foreseeable future. That is already being seen, certainly in the financial sector, he says, and in certain geographies like the Middle East. “For manufacturing, which has been going through very tough times, the improvement is less pronounced, but we still expect growth of around 5% to follow through the general upturn.” Interestingly, Millennium, which since it’s inception in 1995 has now racked up around 4,000 clients, around 10% of which are in manufacturing industry, believes that it’s the bigger hitters that will see most of the action. The firm sees SAP as continuing to dominate in most sectors, Oracle as slipping as it “fails to make market headway”, and the PeopleSoft/JD Edwards combination as moving in to the “clear Number Two” slot. ERP developers like Baan, now under SSA Global, are unlikely to ride the wave quite so well, says Keet, “not due to any technology issues, but because of business confidence given recent history.” However, the vast majority of the software vendors serving the middle market – which weren’t covered by the Millennium survey – can expect similar, possibly even greater, improvements in their fortunes, given the sheer size of the markets they serve and their inevitable and pressing requirements in the IT covered.