Published on the 14/06/2023 | Written by Heather Wright

Amidst the ChatGPT rush, don’t forget ERP…

ChatGPT and generative AI might be garnering all the attention currently but don’t count ERP out – it might be less flashy but it’s drawing plenty of VC funding amid an overall funding slump, and is forecast for some big growth ahead.

“Startups focused on ERP planning tools raised around US$23 billion last year.”

ERP is the backbone of many companies’ supply chains and financial transactions and while there might be a temptation to focus on the new shiny toys – aka generative AI – the current economic conditions are pushing companies to focus too gaining the full control and visibility of operations that ERP can provide, particularly in light of recent reports of widespread dissatisfaction with IT systems being used to support effective aggregate medium- to long-term business planning.

And investors are reportedly taking note.

Analyst firm PitchBook Data says globally, startups focused on ERP planning tools raised around US$23 billion last year – that’s around 37 percent of the overall $62.4 billion raised by enterprise SaaS companies.

“Notably, the 2022 deal count and value were heavily skewed to ERP which held 36.2 percent of the deal count and 37.1 percent of the deal value, and CRM, which held 28.0 percent of the deal count and 28.1 percent of the deal value,” PitchBook says in its Q1 2023 Enterprise SaaS report.

Together, ERP and CRM represented almost two-thirds of both deal numbers and values for the year.

Analytics platforms and supply chain management, were the next largest categories, but lagged well behind ERP and CRM, at just 11.4 and 10.1 percent of deal values.

“We anticipate enterprises will continue to emphasise their revenue-generating and customer focused segments, notably the CRM segment, with additional investments to continue across our manufacturing and operations subsegment of ERP, especially in solutions specific to certain verticals, such as medical technology, insurance technology and agricultural technology,” the analyst company says.

Meanwhile, the global ERP software market is projected to hit US$47 billion this year, up from US$44 billion in 2022. That number is expected to surge to US$71 billion by 2030, a CAGR of 6.2 percent, according to Fortune Business Insights.

Companies, it notes, are focused on increasing their productivity and enhancing business processes. Corporations are searching for a solution that can handle several operations, such as procurement, sales and marketing and supply chain management.

“ERP software solves this issue by managing business operations efficiently and error free,” Fortune Business Insights says, adding that it provides a view of the entire company data on a single uniform platform, enabling complex procedures such as multi-step production plans to be done ‘easily’.

Earlier this year Gartner noted that globally there were ‘significant signs of a revival and an increase in investment in renovating and replacing ERP’.

Neha Ralhan told iStart that was true too of the Australian and New Zealand market, with companies looking to ERP to do heavy lifting during the economic uncertainties, providing greater day to day operational and tactical focus for organisations.

While for some that might mean a wholesale change, many organisations across A/NZ were looking to reconfigure their existing ERP systems, optimising them to better meet changing demands or work processes.

AI meets ERP 

AI hasn’t bypassed the ERP market, of course.

In fact, it’s the rising adoption of both AI-based and cloud-based ERP software – and heavy investment by leading players to transition their software offerings to capitalise on the AI and cloud trends for automating business processes – that is expected to boost market growth, Fortune Business Insights says.

Big name providers including SAP and Salesforce, have been jumping on the AI bandwagon.

SAP chief executive Christian Klein recently told SAP Sapphire attendees that the company has increased its internal R&D investment for AI use cases while also entering partnerships include AI capabilities in its offerings. Those partnerships include Microsoft, whose Copilot AI is being embedded into the SuccessFactors HR platform, and IBM, whose Watson AI is being added into SAP cloud products.

And, Fortune Business Insights notes, there are still issues for the ERP market which could hinder growth, including heavy installation costs and the complexities of linking the software with previous outdated systems, which can result in errors.

Technology One, which claimed a AU$5 billion valuation recently after logging strong revenue growth of 22 percent for its 2023 half year, admits time-to-value, cost and complexity are all challenges for the ERP market.

The ASX-listed company is riding high on the ERP wave.

Edward Chung, TechnologyOne chief executive, says the company has seen an acceleration of customers moving to its global SaaS ERP offering, with more than 189 large enterprise customers committing to make the shift in the last 12 months – the highest number to date for any comparable period.

Last year it launched SaaS+, an all-inclusive offering which sees TechnologyOne taking responsibility for delivering the complete ERP solution, including implementation, for a single annual fee. It says 15 organisations have signed on for the offering in its first six months.

In New Zealand, customers include MTF Finance, with Queensland Nurses and Midwives Union, Tweed Shire Council and WA’s Town of Cambridge among the Australian customers.

In less positive news on the ERP front, Australia’s high profile GovERP project, which aims to deliver a common, SAP-based, ERP system for government, has had $60 million of planned work pushed out a year.

Angela Diamond, Services Australia chief financial officer, told a Senate Estimates committee meeting that $60 million from the GovERP project had been moved from this financial year to next due to ‘some delays’.

Diamond was unable to specify why the funding had been reprofiled.

“That was due to some delays. Obviously, there’s a lot of activity in trying to undertake this work. But I think the chief information digital officer would be best placed to answer that question,” she said when asked the reasoning for the change.