Despite some consultants’ earlier predictions, it looks like 2011 will not be the year enterprises rush to invest in ERP upgrades. This information was gleaned from a recent Forrester (News - Alert) research survey, “The State of ERP In 2011: Customers Have More Options in Spite of Market Consolidation, that revealed of the 900 IT decision makers in North America and Europe responding to its survey, almost 75 percent indicated they will not be investing in ERP this year.

The reason? Principal Forrester Research (News - Alert) analyst Paul Hamerman told V3.co.uk. that one reason is a lack of SaaS (News - Alert) suppliers of ERP software, which comprise only a small percent of the market and most are "substantially down market," in Hamerman’s words. Hamerman was also quoted in that piece as saying, “When we looked at the data it wasn't all that encouraging that the level of investment seemed to be dropping off a little bit." Chris Kanaracus, writing for IDG News, said the reason may be that “the global economic downturn's effects are still lingering.”

The Forrester report suggested that enterprises are extending the ERP upgrade cycle for up to five years, pointing to its data that indicates the overall ERP software market will grow from $45.5 billion this year to $50.3 billion in 2015. "Nearly two-thirds of companies believe their current ERP status quo is good enough for the next few years," according to analysts and authors of the Forrester report Paul Hamerman and China Martens.

Ann All, in her IT Business Edge blog on May 5, noted that consultants with whom she had spoken a few months back, and even a magazine poll, had painted a much rosier outlook for 2011 ERP spending.

She wrote that she had earlier interviewed two consultants who told her that IT organizations were ready to spend on ERP software again. She said that Deloitte (News - Alert) Consulting's Bill Allison had told her that an improving economy would lead IT organizations to consider investing in their ERP systems and that some Deloitte clients were “looking beyond plain-vanilla functionality and adding features such as mobility to their initial project scopes.”

She also cited research from the Hackett Group that found moving to common ERP software platforms was a priority for 78 percent of IT organizations, a 36 percent increase from 2010. She wrote that Rich Pople, the Hackett Group's Global IT Advisory practice leader, told her enterprises wanted to move to a common ERP platform because of the “increasing need to support global business models.”

The Forrester report does indicate that more immediate ERP software spending will occur, but in a different form. It says that annual maintenance fees will rise (reportedly already accounting for 51 percent of the market in 2010) as will subscription-based SaaS (software as a service) ERP, while license sales will fall by 2015.   

Chris Kanaracus wrote that, according to the Forrester report, subscription-based SaaS ERP software now accounts for only $1 billion of total ERP revenue, but will grow 21 percent each year through 2015, doubling to four percent. The report further stated, "Ultimately, cloud-based extensibility, hosting, and managed upgrades will lead to a variety of hybrid deployment models that will provide most of the benefits of SaaS while handling the breadth and diversity that ERP customers require," according to Kanaracus.

So, will enterprises stick to their word and avoid ERP software spending altogether? It could be interesting as Forrester’s executive summary of the report said, “Companies investigating the pros and cons of such decisions [reinvesting in their administrative and operational apps] will face a wider choice of ERP offerings than previously available — particularly in terms of deployment models, where there's a notable uptick in the number of software-as-a-service (SaaS) options and managed cloud offerings.

Moving in that direction, SAP (News - Alert) is reportedly rolling out a series of on-demand extensions to its core Business Suite, while Oracle says its upcoming Fusion Applications can be adopted in a highly modular fashion, with the option of SaaS deployment.

In other news, TMCnet reported Product Quest Manufacturing will now be using ProcessPro Premier ERP software to manage its manufacturing operations.