Procurement is a new market for the traditional enterprise resource planning (ERP) software makers such as Oracle, which are pushing into new markets as their core sales cool down. Although Ariba is the leader in procurement software, analysts at Cambridge, Massachusetts-based research Forrester said Oracle is pushing ahead of rival SAP with a raft of new customers and an open platform for its new software.
The worldwide market for procurement software, which enables companies to buy goods and services from their suppliers online, is expected to grow from $147 million last year to $5.3 billion by 2003, according to market research firm International Data Corporation (IDC).
Companies focusing solely on the procurement market include Ariba and Commerce One. But lured by the chance at capturing new business, newcomers Oracle, SAP, Baan, and other ERP companies are moving toward the space as well.
Oracle now has 75 customers using its Strategic Procurement Software, compared with SAP's three users that have installed the company's B2B Procurement application. In its favor, Oracle's procurement software also can be used with non-Oracle back-office systems, such as SAP's.
Meanwhile, customers who install SAP's B2B procurement software must be using SAP's flagship R/3 back office system, said Forrester analyst Steve Cole. "Oracle is essentially taking a much more open strategy," he said. "SAP is falling short by just providing an adequate product for its installed base."
In the procurement area, Oracle is working with 75 companies, including British Telecom, Boeing, UPS, and Xerox. Forrester analysts said 25,000 users at British Telecom are using the software. SAP's three customers include aerospace giant Lockheed Martin.
Jim Shepherd, an analyst at Boston-based AMR Research downplayed Oracle's advantage, noting that procurement is small potatoes compared with the $16.6 billion ERP market that SAP dominates." Shepherd said that if you calculated revenue that's spent on procurement software worldwide, "it wouldn't even add to a day's worth of revenue for SAP."
SAP has been lagging with XML support for its procurement software as well, Forrester's Cole said. XML, similar to HTML is a type of markup language used to help exchange data between computer systems from multiple companies. In the area of procurement, companies can use XML to communicate with all their partners through their computer systems when ordering and purchasing supplies, whether it be office supplies, PCs, furniture, etc.
Oracle has its own XML data definitions to get catalog data and receive feedback from suppliers, said Cole.
Regardless, AMR's Shepherd said SAP shouldn't worry too much about its position in the heavily touted procurement space.
"It's worth more in the hype department, and in terms of actual revenue or accounting control or a real impact on the business, it's not even in the league of an ERP sale," he said.