Mid-market Segment Holds Huge Potential for Latin American ERP Software Markets

Frost: Enterprise resource planning (ERP) is fast gaining popularity with companies constantly focused on reducing operational costs and maximizing efficiency to earn more revenues. ERP software solutions offer compelling benefits such as complete control and improved management of a company’s processes.

This market earned revenues of $394.2 million in 2005 and is likely to reach $719.6 million in 2011

ERP solutions are becoming a mandatory tool for large corporations as they can help companies become more organized and transparent as well as improve their processes and integrate different areas. However, around 80 percent of the large enterprise segment in Latin America has already implemented ERP solutions, leading vendors to target the mid-market segment instead.

.ERP vendors are increasingly focusing on small- and mid-sized businesses (SMBs) since they offer better opportunities for revenue growth. However, SMBs are still at the beginning stage of adopting professional ERP tools and also lack the capital required to make huge investments in IT.

Obtaining aid from financial institutions is an added challenge for companies in the region, especially SMBs, due to the lack of tax incentives. In addition, the presidential elections taking place in many Latin American countries in 2006 are likely to reduce the pace of IT investment.

The many restrictions faced by SMBs are prompting vendors to adjust their strategies to better meet the unique needs of these companies. For instance, they are working to reduce the implementation period by offering pre-configured solutions focused on specific verticals.

Vendors are also looking to offer less expensive packages with simpler features to reduce the total cost of an ERP project, thereby making these solutions more accessible to the cost-conscious SMB segment. The provision of ERP through the application service provider (ASP) standard could prove to be a good option for SMBs as it is based on the rental payment model and therefore, eliminates the need for investment in hardware and infrastructure.

Thus, with all ERP vendors actively engaged in revising their strategies to increase penetration in the mid-market segment, the levels of competitiveness are extremely high. These markets are also witnessing increasing consolidation, as larger participants increasingly acquire smaller companies that create solutions for specific verticals.

The sales channel is a critical success element to leverage the opportunities offered by the mid-market segment,. All participants are striving to increase their distribution channels and have the right partners that will help them carve a space for themselves in this segment.

Latin America ERP Software MarketsPubl 20060810