Enterprise software vendors saw dip in 2013 but 2014 will be a better year

The enterprise applications (EA) software market posted a mediocre growth of 5.1% in 2013 in the Asia Pacific excluding Japan (APeJ) region, says research firm IDC. The company observed that the EA market grew 9% in 2012, but that Asian enterprises were more cautious about their investment just a year later.

Although organisations were keen to upgrade existing back-office applications to embrace the 3rd platform technologies – cloud, analytics, mobility, and social – a watchful spending strategy and the ad hoc nature of deployments did not warrant sustained growth in 2013, IDC said.

"The 3rd platform technologies, especially cloud, will be a critical driver for enterprise applications growth in APeJ. Enterprises are moving from an ad hoc deployment of cloud-based applications and other 3rd platform technologies, to a phase of strategic implementation. This new era of digital transformation and the speed of innovation of Asian businesses is expected to bring the market back on track in 2014 and through the forecast period," says Sabharinath Bala, Research Manager of IDC’s Asia/Pacific Enterprise Application Software Research.

The usual suspects – SAP, Oracle, Yonyou, Infor, and Microsoft dominated in the region from a market share perspective, but most of these major vendors were challenged strongly by niche new players as well as the established software as a service (SaaS)/cloud-based applications vendors. Some noteworthy names include Cornerstone OnDemand, Kronos, NetSuite, Workday, and Xero – all of which posted strong double-digit growth in 2013. 

"Although most of the major vendors have been creating new internal intellectual property, as well as acquiring assets and expanding their cloud capability inorganically, the challenge of integrating these new resources with their existing portfolio and convincing clients and prospects to take the cloud path remained critical in attracting newer EA investments. 

"But this scenario is slowly changing and vendors that rely primarily on maintenance and upgrade revenue for their existing legacy systems will start losing relevance in the coming days. Vendors offering cloud-based systems capable of delivering the agility, flexibility, and scalability of the dynamic Asian businesses, will trump them in their own game,” said Sabharinath.

IDC expects the overall EA market to grow at a compound annual growth rate (CAGR) of 8.4% and reach US$9.5 billion in 2018. Double-digit growth is expected from markets like enterprise asset management, logistics, and procurement; and there will be strong support from mature markets like financial accounting, human capital management, and inventory management.