Process Manufacturing Fuels Another Boom Year for the Russian EAS Market

IDC: The Russian market for enterprise application suite (EAS) software expanded 21% in 2005 to $236 million in license and maintenance revenue and is expected to grow by more than 28% this year. Strong economic development created an environment in which end-user companies were ready to invest in IT. Moreover, the competitive environment has pushed enterprises to purchase software and solutions to help them better manage their resources.

Driven by a boom in spending on EAS software by chemicals manufacturers, process manufacturing was the largest single industrial sector investing in EAS in Russia last year. Representing more than 35% of spending, the sector fueled growth in the overall market. The second- and third-largest verticals, discrete manufacturing and communications, both contracted. Together, these three sectors accounted for nearly 55% of the market. Starting from a relatively low base, local and central government were the fastest growing sectors in terms of EAS spending.

Over the next few years exports of chemicals and petroleum products will continue to increase, creating a capital base for additional investments in EAS software. Moreover, many firms are looking to expand operations not just into the rest of the CIS but also abroad in places like the Middle East, China, and Western Europe. They are also looking to launch IPOs on foreign stock exchanges and acquire or merge with other international companies, requiring further development of EAS solutions to facilitate adherence to international standards and practices.

Four vendors accounted for more than 80% of EAS revenue in 2005: SAP, Oracle, local player 1C, and Microsoft Dynamics. In the top spot, SAP again dominated the market, with almost twice as much revenue as Oracle, which took second. Russia-based 1C made the most impressive gains, more than doubling its revenue in 2005 to move from fourth to third in the vendor rankings.

1C's use of franchising to spread awareness and demand for its products suggests that its business model could be a powerful tool for competing with the large international vendors, a, especially among small and medium-sized businesses, which is where the market will see the most growth in the next few years.

Enterprise resource management (ERM) software accounted for nearly 49% of EAS revenue in Russia last year. Demand for financial modules was high among both SMBs seeking to automate accounting and large firms getting ready to launch IPOs or receiving large volumes of foreign investment. Supply chain management represented the second-largest group of solutions on the Russian market with operations and manufacturing applications coming in third.

ERM was the fastest growing functional area in Russia in 2005. This will start to change this year, however, as the high end of the segment is saturated and users will seek to expand to other areas, particularly into customer relationship management and business analytics.

IDC's Russia Enterprise Application Software 2006–2010 Forecast and 2005 Vendor Shares

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