Published
Author
During the past week, the late summer warmth has provided a pleasant climate in large parts of the country. However, from the ERP market we hear that it is cooler. It may not be comparable to an ice age, but rather an autumn darkness with chilly winds. It may sound strange to talk about a chilly ERP market when SAP, Oracle, and Microsoft have all recently reported 20-25 percent increases in sales of cloud services.
These sales increases rather reflect the ongoing shift from self-operated systems to cloud services and thus the transition to a pricing model with recurring payments that is more favourable to the vendors. In our conversations with both system vendors and implementation partners, however, we hear a different story which is also confirmed by our own experiences. The picture is that new sales of ERP systems in Sweden are low, few procurements are underway, and decision cycles are long; moreover, this has been the case for a considerable time.
System vendors with an existing customer base still manage well thanks to the transition to cloud services. Implementation partners have so far also managed well on previously sold projects and the continual improvements that most customers carry out at regular intervals. However, we are now receiving signals that things are looking bleaker on the project front for many implementation partners, and increasingly often we receive questions from vendors asking if we have any procurements underway that might suit them.
It is naturally possible to argue that Swedish companies risk losing ground in the transition to more digitalisation and AI by not switching to modern ERP systems. Considering the long lead times in procurement and implementation of ERP systems, the truth is rather that a year here or there does not make much difference. Furthermore, ERP systems are generally not the type of systems that are at the forefront in adopting modern technology, although during our ERP Summit in May it was shown that the use of AI has made great advances compared with a year ago.
If the market cooling is prolonged, it could of course lead to some system vendors and implementation partners not surviving, but so far we have seen neither major layoffs nor a flood of bankruptcies among ERP vendors. However, some individual vendors may find it a bit difficult, especially if they do not have a large established customer base to work with.
What can happen, and what we have seen before, is a depletion of expertise primarily from implementation partners as their consultants choose to switch jobs to line positions or other industries at the same time as there is no financial capacity to hire new employees. This can lead both to skills gaps within the consultant community and to resource shortages when the market turns around. This naturally becomes worse the longer the cooling lasts.
We seemed to observe increased interest in new ERP systems during late autumn last year and during the winter. Unfortunately, interest in ERP systems cooled again during the spring, probably caused by ongoing uncertainty in the world, for example, due to uncertainty around US tariffs. However, there are signs that autumn may bring a brightening for the ERP market. Several countries, including the EU, have reached an agreement on tariffs with the USA. Naturally, there is room to debate how good the agreements themselves are, but it at least reduces uncertainty, which usually is positive for the economy. The Purchasing Managers' Index in both Sweden and the EU has also risen in recent months, now indicating, at least for Sweden, stable economic conditions.
Investing in a new ERP system is a large financial commitment, and even though it is comparatively easier resource-wise to carry out implementation in worse economic times, it is usually financially considerably easier to purchase ERP systems in a boom. Therefore, even if the weather turns colder during the autumn, there is hope that the ERP market will instead become warmer and warmer as we approach Christmas.
