Federal ERP Spending to Grow by 37%

    August 23, 2004

Driven by system consolidation at the Department of Homeland Security and Administration management mandates, the federal market for Enterprise Resource Planning (ERP) products and services will hit $7.7 billion in FY2009, a 37 percent increase over FY2004 spending of $5.6 billion, according to a report released today by INPUT, the leading provider of government market intelligence.

ERP Systems combine disparate software applications for such business functions as financial, accounting, acquisition management, human resources, supply chain and logistics, into a single integrated system. INPUT estimates the federal market for those products and services will grow at a 6.4 percent compound annual growth rate with civilian agencies accounting for the largest portion of spending – $3.4 billion by FY2009. The Department of Homeland Security will lead civilian agencies in spending as it continues to consolidate redundant systems within the various agencies that make up the department.

Department of Defense spending on the same products and services will reach $2.7 billion by FY2009 and will increase at a higher annual compound growth rate than that of civilian agencies – 7.7 percent – led by strong growth in the financial and supply chain management categories.

“The President’s Management Agenda and its five areas of focus – workforce management, competitive sourcing, improved financial performance, expanded e-government and budget and performance integration – are to credit for the healthy market for ERP,” said Chris Campbell, senior analyst, federal market analysis at INPUT. “We expect this growth to continue regardless of what the November elections bring.”

Services continue to make up the bulk of federal ERP spending, accounting for more than 50 percent of total dollars. INPUT predicts that increasing systems integration work, especially related to cross-functional solutions, will drive the need for even greater spending on professional services. INPUT’s forecast shows spending for ERP professional services increasing from $3.7 billion in FY2004 to $5.1 billion in FY2009.

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