| Abstract: | Globalization and the need to boost operational efficiency are driving increased investments in ERP, supply chain and integration software, three separate studies say. |
| Keywords: | Software spending, manufacturing software, integration software, software as a service, SaaS, AMR Research, Forrester Research, Accenture |
Spending by manufacturing companies on technology -- particularly ERP and manufacturing software and integration tools
-- is poised to accelerate through 2007, stimulated by business issues such as globalization and the need for operational efficiency, according to three recently released reports.
ERP application budgets will grow by an average of 12.3% in 2007, according to a recent survey of manufacturing and services companies by AMR Research. Manufacturing applications will attract especially high spending levels in 2007, the report predicts. While only 43% of companies surveyed by AMR have deployed manufacturing software so far, 20% of those surveyed said they plan to do so over the next 12 months. The percentage planning to deploy manufacturing software was exceeded only by those planning to deploy software for financial management (21%) and business analytics (25%).
Meanwhile, a study by Forrester Research predicts that enterprise spending on software will rise by 10% in 2007, with 18% of enterprises planning major ERP upgrades during the year, and 16% planning major upgrades to customer service and support software.
And a third study shows that manufacturing companies are placing increasing emphasis on technology investments, even though today many do not believe that their internal IT organizations are consistently performing at a high level. According to a recent survey by Accenture of makers of industrial products, 41% of respondents said investing in IT ranks as a high or very high priority today, and 69% said they expect that investing in IT will rank as a high or very high priority two years from now.
The results of the three surveys closely resemble those of the Managing Automation 2007 reader outlook poll on page XX.
The largest group of respondents in the Accenture survey, 54%, said manufacturing and supply chain systems are among their top three IT investment priorities. Other IT investment priorities include decision support systems (33%) and financial systems (31%).
The planned increases in software spending, particularly ERP spending, represent a continuation of recent patterns. Last year, AMR predicted that ERP budgets would grow by 11.3%, much faster than overall IT spending.
The increases in software and IT spending are being driven by the desire of manufacturers to improve operational efficiency and take advantage of trends such as globalization, according to the AMR study. Both of those drivers, AMR said, are pushing manufacturers to invest in software that can support common processes across enterprises. Forty-three percent of manufacturers said they plan to implement ERP as a single global instance, up from only 26% that do so today.
The need to build globally efficient supply chains and support initiatives such as lean manufacturing also is pushing corporations to intensify their software integration efforts. The largest group of respondents to the Accenture poll, 46%, said enterprise integration is currently a top IT goal. And 77% predicted that enterprise integration will be a top IT goal in two years.
Similarly, 27% of respondents to the Forrester survey said that improving inter-application integration will be a "critical priority" in the next 12 months. That placed integration at the top of respondents' priority lists, ahead of security (21%).
That focus on integration, not surprisingly, is driving increasing interest in service-oriented architecture (SOA) technologies. Although only 22% of respondents to the Forrester survey reported such an interest, that figure is up from 16% who said so last year.
Enterprises also are showing increasing interest in software as a service (SaaS), the surveys showed. According to the Forrester poll, that interest is greatest among large, Fortune 2000 enterprises, 47% of which said they have some interest in SaaS. In contrast, only 28% of small businesses said they have some interest in SaaS.
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