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Enterprise apps find niche in financial world

A recent report estimates that the market for global enterprise solutions in financial services industry will top $40 billion by 2003.

In coming years, the lion's share of the financial services market will be up for grabs to providers of enterprise software that links back-office and front-end operations, according to a report released today.

The new report by applied market research and consulting company G2R estimated that the market for global enterprise solutions in financial services industry will top $40 billion by 2003, which is based on demand- and supply-side interviews.

According to G2R's research, traditional enterprise resource planning (ERP) applications are increasingly being expanded out of the back-office to incorporate additional business processes and greater industry-specific functionality. G2R defines these expanded ERP applications as "Enterprise Solutions."

For banks, insurance companies, and brokerages, "Enterprise Solutions" will eventually link front-end, customer-facing operations with sophisticated customer information, product development, and analytical applications on the back end.

Companies like SAP, Oracle, Baan, and PeopleSoft are major vendors in the ERP market space, providing packages used to automate and integrate corporate functions such as sales forecasting, inventory, control, procurement, manufacturing planning, distribution, finance, and project management.

ERP applications have become fixtures at a large majority of multinational corporations in recent years, but sales have begun to stagnate with market saturation, observers say. ERP vendors have devoted large resources to try to extend their core product to the front-office to make it attractive to a more diverse market.

The G2R report found that the expansion of core ERP applications has so far been achieved through linking these systems with process-specific software in areas such as sales force automation, and product/policy development and management.

"Over time, however, G2R believes that the prevailing model for developing and delivering these solutions will change considerably," stated Matthew Chivers, an analyst in G2R's Financial Services division. "Rather than ad hoc assemblage of core ERP applications and 'bolt-on' software, enterprise solutions will eventually consist of tightly integrated modules, designed to support a full array of business processes in specific industry sectors."

G2R believes that as core ERP applications become more standardized and commoditized, vendors will increasingly differentiate themselves in the marketplace according to their ability to develop integrated offerings which expand upon these discrete functions, and incorporate mid- and front-office functionality.

As a direct result, the report concludes, ERP vendors will eventually be judged by prospective end-users based on their perceived business process and industry expertise.

As enterprise solutions are expanded to incorporate wider applicability and industry-specific functions, systems integrators and professional services firms will engage in considerably less proprietary applications development and customization, according to the report.

At the same time, however, the added reach and complexity of these expanded solutions will require significant front-end consulting and implementation support, according to the report.