Manufacturing and Foreign Investment Drive Resurgence of Czech EAS Market

IDC: After two years of relatively slow growth, the Czech market for enterprise application software (EAS) expanded by more than 24% in 2005 to surpass $105 million in license and maintenance revenue. The near doubling of foreign direct investment and a booming manufacturing sector strengthened the economy and fueled investments in EAS solutions. With large and very large enterprises already well equipped with EAS, most vendors focused on scaled-down products aimed at the small and medium-sized enterprise segment, where opportunities abound.

Vendors benefited from the thriving economy, with the top 5 enjoying revenue surges of between 15% and 60%. SAP again dominated the Czech EAS scene, capturing more than half the market. However, other top vendors managed to eat away at SAP's market share, with second-ranked Microsoft Dynamics, third-ranked LCS, and fourth-ranked QAD all outperforming SAP (and the total market) in terms of revenue growth. Fifth-ranked Oracle also experienced healthy growth. Together, the top 5 vendors accounted for nearly 78% of the market.

The rising economic tide of the Czech Republic does not lift all ships, and competition is fierce. The top 5 vendors have slightly increased their market share, leaving less for the smaller vendors. With SAP moving into the midmarket, niche and smaller vendors face tough times ahead, even as the market continues to expand.

Discrete manufacturing was the largest purchaser of EAS in the Czech Republic in 2005 and process manufacturing was second. Moreover, spending on EAS among discrete manufacturers rose year on year, with the automotive industry jumping by more than 24% and industrial machinery and equipment manufacturers soaring by almost 47%. Process manufacturers also dramatically increased their EAS investments in 2005, with the primary and fabricated metals sub-segment shooting up by 37% and the chemicals and allied products sub-segment by more than 52%. The utilities sector was the third largest vertical last year, sustained by a large installed base. Together, these three sectors accounted for 47% of spending on EAS in the Czech Republic in 2005.

In terms of EAS investments, the manufacturing sphere was the hottest show in town last year, but it was by no means the only show. The central government returned with a bang by more than doubling its EAS investments in 2005. Spending among wholesalers jumped by more than 42% and among retailers by more than 35%. Smaller vendors not present in at least some of the major verticals will face an uphill battle for customers and might consider forming an alliance with a player with a complementary portfolio or working to establish themselves as preeminent in a given vertical.

Functional spending reflected the vertical pattern of investments in the Czech Republic in 2005. While enterprise resource management (ERM) was again the largest EAS area in terms of vendor revenue, supply chain management and operations and manufacturing applications revenue expanded the fastest.

The influx of foreign capital and foreign ideas, as well as the extension of supply networks across national and regional borders, has heightened the necessity for ERM solutions to help manage or facilitate EDI communication or manufacturing practices and processes such as lean, just-in-time, and kanban. The smart vendors are working more closely with customers and industry bodies to ensure their solutions help meet vertical compliance needs, thus serving a double purpose of satisfying clients while also deepening vertical expertise, something essential for winning new business.

Czech Republic Enterprise Application Software 2006–2010 Forecast and 2005 Vendor Shares Publ 20060727