Demand picks up for packaged enterprise systems

Demand for enterprise IT systems, including customer relationship management (CRM) and enterprise resource planning (ERP) packages, will continue to drive IT investments across Western European companies, market watchers believe.

According to IDC, companies are expected to maintain a "rather cautious" attitude towards IT investments.

However, signs of a recovery are emerging as 34 percent of companies expect to increase their total IT budget in 2007, and 22 percent expect to increase their external IT spending budget.

The analyst firm cited new research pointing to opportunities for ERP vendors in manufacturing and transport/communications/utilities, among others.

CRM opportunities are expected to centre on the integration, modification or enhancement of old CRM systems (verticals with an already high installed-base), first-time implementations (retail/wholesale), and complete system replacements (insurance/other finance).

Meanwhile, significant opportunities for industry-specific packaged systems are expected in process manufacturing and transport/communications/utilities, which represent the most interesting segments for supply chain technologies.

"Companies across the Western European vertical market landscape show a growing interest in software-as-a-service as an alternative to traditional software," said the IDC report.

"Nonetheless, evidence suggests that these companies are still rather unwilling to adopt software-as-a-service for functionalities that directly impact core business processes."

Education, transport/communications/utilities and banking stand out in terms of expected external spending increases, with banking yet again at the forefront of the opportunity ladder.

"Sparked by improving economic conditions, IT investment in Western Europe is gaining momentum and overall the market potential is quite encouraging for vendors," said Nina Bonagura, senior research analyst for European vertical markets at IDC.

"Survey data confirms that companies in the vertical markets studied spent a larger share of their IS operating budgets externally in 2005.

"Furthermore, some 22 percent of interviewed companies are expected to increase external IT spending during 2006, led by above average percentages of companies planning increases in transport/communications/utilities and banking. "