Enterprise Applications Review

2007 has been a buoyant year for the big Enterprise Applications vendors, with plenty of M&A activity and strong growth in revenues. The big mergers and acquisitions include Oracle buying Hyperion and SAP buying Business Objects. Vendors that underwent large mergers in recent years have started to reap the benefits. These include Lawson (merging with Intentia) and Infor (with SSA).

The last few years of consolidation has established a very different 'big 5' of SAP, Oracle, Sage, Infor and Microsoft Business Solutions (MBS). Microsoft is starting to blur the distinction between enterprise applications and Office applications. Half-way through 2007, Microsoft re-organised its divisions, merging MBS, now referred to as Microsoft Dynamics, with its personal productivity range (essentially Office). Microsoft's joint project with SAP to seamlessly link SAP's ERP solution with Microsoft's Office products has further closed the gap between the two. Indeed, at the micro-business level Microsoft's Excel is one of the main competitors for many of the functions within ERP. Microsoft's new 'Microsoft Business Division' (MBD) would be the leader of this larger segment, with revenues of about $16bn per year.

The revenues of the 10 largest vendors grew strongly in 2007 - on average up nearly 24% over 2006 (when viewed in US dollars). Much of this growth was driven by acquisition, but some of the biggest growths were from companies that grew mainly organically. SAP did not include revenue from Business Objects in 2007, but still grew by 20%, likewise Lawson grew nearly 45%, compared to combined Lawson and Intentia revenues in 2006. Infor focussed on smaller acquisitions and its rapid growth slowed to join the general trend growth of the 'big 5' vendors.

Figure 1: World revenue growths by company 2003 - 2007, based on revenues in US $

In Europe, 2006 ended with a disappointing fourth quarter (Q4) - down 11% on the Q4 2005 (when viewed in Euros). In contrast, 2007 has been a bumper year with strong growth in all quarters and 32% growth in Q4. The exceptional Q4 was mainly fuelled by SAP's growth (46% over Q4 2006). Some of this is because of SAP's poor Q4 in 2006, which was down 17% from Q4 2005.

Figure 2: Quarterly European revenue growths by company 2005 - 2007, based on revenues in Euros

In recent years, the devaluation of the US dollar has distorted the view of the European market. In some years, there was strong growth when the revenue data was viewed in dollars, but a worrying decline when viewed in Euros, as shown in figure 3. 2005 saw a switch - where the US dollar view was more negative than the Euro view; in 2006 the views were more or less consistent with each other; and in 2007 both views show a promising growth trend for the future. In itself, the strong growth in 2007 should predict another buoyant year for Enterprise Applications in 2008. However, economic pressures may well dampen this enthusiasm as companies find it increasingly difficult to borrow money for capital investments. We expect Enterprise Applications vendor revenues in Europe to grow to about €10.6bn in 2008, at a modest 1% year-on-year growth.

Figure 3: Quarterly European revenue growths

Dan Roberts

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