The business applications market in India during FY 08 resembled the Indian cricket team. Initially, it began with a lot of euphoria with hopes of recording the highest ever growth; by the year-end, much of the hype had been cut off. At Rs 9,977 crore, the industry recorded a 26% growth (not modest in a year like this), but nothing close to the sounds made at the beginning. The second cricketing analogy was the inconsistent performance across sectors. Barring BI (36% growth) and the specialized horizontal applications 46%) (those beyond standard enterprise-wide apps), the core application areas like ERP, CRM, and RDBMS grew modestly indeed. Does it mean that Indian enterprises slowed down in their software adoption, while all reports point on the contrary?

The answer might not be so simple: to assume a slowdown in domestic adoption would obviously be erroneous. What probably happened was that large enterprises saturated on standard applications (ERP, CRM, RDBMS) and therefore went for smaller modules; this in turn contributed less to the revenue kitty of the vendors. Add to this the assiduous wooing of the SMBs by all leading software vendors. Devising new schemes and strategies at price reduction also meant taking a bit of a hit on the top line, though indulging in a volume game could mean bottomline improvement this year. This could almost mean that a modest FY 08 would mean a much better FY 09. Much like Indian cricket captains promising a better show next time after receiving a drubbing.

Individually, SAP that leads in three categories emerged as the dominant player, as evident from its entry into the DQ Top 20 club for the first time. Oracle, thanks to its myriad of acquisitions, was a close second, emerging the leader in at least two categories. Microsoft finally shed off its image as only a consumer software player and emerged as the third point in this software love triangle, albeit much behind the two leaders.

ERP: The SMB Paradigm
The Indian ERP market has been monopolized by SAP for a number of years; FY 08 threatened to make it almost a one-horse race. With almost half the market share (48%), SAP could now turn back and watch its closest competitors Oracle and Microsoft fighting it out for the #2 slot. Though Oracle still remains a comfortable second (clocking Rs 83 crore more in revenues than Microsoft), the latter grew by a whopping 120% thanks to its penetration amongst SMBs.

In fact, SMBs contributed maximum to the ERP market in FY 08, accounting for nearly 40% of the overall market; all the top three vendors courted them aggressively. This challenge from the SAPs, Oracles, and Microsofts ensured that smaller players like Ramco, Infor, Sage, and ESS who once dominated the SMB space were gradually squeezed out.

The market leader SAP especially benefited from the third wave of IT adoption among Indian businesses. While large enterprises in primarily large cities formed the first wave of IT adoption in India, SMBs in larger non-metro cities formed the second wave. Now with Indias economic growth broadbasing into its smaller towns and cities, local businesses there are forming the third wave of IT adoption for vendors like SAP. Most of these businesses are part of extended value chains of larger corporates including their dealers, distributors, traders, suppliers, and even large customers. One example of the third wave in action in FY 08 was Infodart Technologies India, a part of the Videocon Group; the company partnered SAP to roll out SAP Business One to over 2,000 of its dealers, distributors, traders, and vendors across India.

A few more examples of this wave included companies such as Phoenix Lamps based out of Gautam Budh Nagar in Uttar Pradesh up north to PSN group of companies from Trissur in Kerala. SAPs third wave successes also included Mangalam Timber Products based out of Nabarangpur in Orissa in the east to Welspun Syntex from Silvassa in the west.

Large enterprises also contributed to SAPs overwhelming success. Large enterprises who adopted SAP solutions during the year included ACC, United India Insurance, Modi Rubber, Tata AIG, Brihanmumbai Electricity Supply, Dakshin Haryana Bijili Vitran Nigam and Adani Infrastructure. A few existing customers like BHEL, Mahindra & Mahindra, Asian Paints, Tata Motors, Dimexon Diamonds, BPCL, Bennett & Coleman, and HCL Technologies deepened their ERP connections significantly by deploying specific modules for corporate governance, master data management, corporate performance management, and ecosystem enablement.

Realizing SAPs near monopoly and the fact that most large enterprises are already running ERP, Oracle changed its strategy and started pushing niche modular applications like logistics management and human capital management. This game plan of tapping existing SAP ERP customers to push more horizontal applications started paying dividends too when Oracle managed to sell its CRM to Hero Honda and Tata Motors, two SAP ERP clients.

Even though Oracle avoided engaging SAP in a no-holds barred battle on the ERP front, its guerilla tactics ensured that it never completely went off the radar. Customer win backs in between the two were another regular feature that was heavily publicized throughout the year. If SAP replaced JD Edwards in Greaves Cotton, Peoplesoft Apps and Oracle database in Sasken Communications as well as the entire Oracle suite in MRF, Oracle returned the compliments by replacing SAP in Aditya Birla Retail, Reliance Energy (BSES), Tata Chemicals, Tata Power, and ITC among others.

While the two biggies sort of mutually neutralized each other, this win back saga heralded near oblivion for many of the smaller ERP vendors. While SAP replaced Ramco in Moser Baer and Infor in Bharat Bijlee, Oracle stole the thunder from competitors in Tata Sky, Ultratech Cement, Hindusthan Copper, Sun TV, and Dabur among others.

	ERP Market in India Vendor Revenue (in Rs crore) Growth (%) FY 08 FY 07 SAP 579 415 40 Oracle 213 195 9 Microsoft 130 59 120 Tally 95 98 -3 3i Infotech 48 37 30 Ramco 37 54 -31 Infor 19 29 -34 ESS 17 14 21 Sage Accpac 11 14 -21 Others 57 70 -19 Total 1,206 985 22
Source: DQ estimates
With most large enterprises getting saturated, the ERP segments growth is driven by the SMB sector now. All businesses irrespective of the verticals such as auto ancillary, pharmaceuticals and chemicals, textiles, government, aviation and more are joining the ERP bandwagon. Though the number of SMBs adopting ERP would constantly rise, still revenue growth would be lesser than the overall ERP market; the challenge being that the number of licenses bought will be lesser due to the comparatively smaller sizes of organizations

As full-fledged ERP adoption obviously reached a plateau amongst large enterprises, even the large vendors focused heavily on SMBs during the year to offset this lull. With SMB spending on ERP nearly touching Rs 500 crore this was a market no vendor could afford to ignore. The large ERP vendors became interested in volume business and accordingly tailored their strategies to the special needs of the SMB market. Consequently, SMBs who could afford branded ERP solutions, have started benefiting from a price war in the Indian ERP space. Although local ERP vendors like Ramco, Tally, and ESS understood the special requirements of Indian SMBs, it started becoming difficult for them to evolve their products quickly enough compared to the rapidly changing technology and business environment. Larger ERP vendors cashed in on this shortcoming in FY 08 by lowering end-user prices. The top five factors that determined the buying decision by Indian SMBs in ERP during the year were the purchase and installation price, ease of implementation and RoI, product flexibility and scalability, functional fit with the SMBs business process and long-term support

SAP took the honors among SMBs too with more than 1,500 customer wins (Subhiksha Retail was the 1,000th customer). Prominent wins included Nilgiris, Spinach, Khadims, and Bharat Box Factory. The established SAP portfolio included SAP Business One for companies with 10 to 100 employees as well as SAP Business All-in-One for companies with 500 to 2,500 employees. It also started the Fast-Start Program for SAP Business All-in-One in Q4 08 (30 wins in a single quarter) whereby coupled with SAP MaxDB, the SAP database product, and free choice of operating system, the AIO offering helped to lower the TCO for the on premise business solution.

Microsoft, a relatively late entrant into the ERP space with its Dynamics suite, gained the maximum from this SMB thrust and if it maintains the momentum it could overtake Oracle in fresh license sales of ERP software in India by 2010. SMBs accounted for more than 70% of Microsofts ERP business, with strong traction in manufacturing, auto ancillaries and textile sectors; it worked well in clusters like Tirupur for textile, Ahmedabad for pharma and Pune for auto and ancillaries. Referrals too worked well for Microsoft among SMBs: the Rs 40 crore Consolidated Carpet Industries from Delhi deployed Dynamics after watching it at several of its clients.

The increasing SMB focus also translated into ERP vendors targeting micro verticals like insurance, power, food & beverage among others. SaaS too started finding takers among SMBs on the ERP front: SAP launched its hosted offering, SAP Business By Design for SMBs in India. For Microsoft, about 10% of its customers opted for the hosted model in FY08. Ramco too made ERP available on a SaaS model and roped in Yuflow Engineering, Parry Enterprises India, Ayyapan Industries, SaS Autocom, and CSA Consultants for its ERP OnDemand solution.

With the big three dominating the show, there was not much scope for maneuvering by the smaller players. Even within them, local vendors like 3i Infotech and ESS performed credibly bagging a host of SME clients like Negi Sign Systems (for 3is Orion) and Indo-NISSIN, manufacturers of Top Ramen instant noodles, and Haeir India for ebizFrame ERP from ESS. Other local vendors like Ramco and Tally as well as MNCs like Sage and Infor saw revenues dwindling with the biggies eating into their shares. Individual strategies were devised like Sage partnering Tassa Netcom to offer its ERP in the West.

	CRM Market in India Vendor Revenue (in Rs crore) Growth (%) FY 08 FY 07 Oracle 156 119 31 Avaya 153 142 8 SAP 144 111 30 Aspect Software 122 135 -10 Microsoft 56 39 44 Talisma 39 48 -19 Sage Accpac 18 31 -42 Salesforce CRM 10 3 233 Cincom 8 5 60 Ramco 7 15 -53 Others 12 12 -45 Total 725 660 10
Source: DQ estimates
CRM adoption is mainly seen across three areas, viz, sales force automation, customer service and marketing automation. These are mainly required in the banking and financial verticals and the telecom sector. With saturation in ERP deployment among large enterprises, the next step of growth for many of them is happening in the adoption of CRM apps to get closer to their customers. The demand in the telecom and IT/BPO verticals has been high due to increasing number of call centers and also with rising customer base of the telecom service providers. The demand should be consistent in the years to come

CRM: Multiple Drivers
CRM adoption during FY 08 was mainly seen in terms of three areas, sales force automation, customer service, and marketing automation. With these services mainly required in the banking and financial verticals and the telecom sector, naturally CRM adoption thrived in these verticals. Unlike ERP, the competition here was also much closer; in fact, Oracles strategy to focus on niche applications paid maximum dividends in CRM where it emerged as the #1 vendor. Overall business application leader SAP was relegated to #3 position, thanks to Avayas widespread adoption by the Indian BPO sector.

IT/BPO, telecom, and BFSI accounted for more than 70% of the CRM market in FY 08. The increasing number of call centers and the growing customer base of telecom service providers bringing along with it increasing complaints ensured that the CRM vendors were busy throughout the year. And unlike ERP, where large enterprises had seen saturation, there were still fresh deployments happening this year. Therefore, year 2007-08 saw BSNL, Idea Cellular, Tata Sky, Tata Motors, and Genpact deploying Oracle CRM while Prudential ICICI and KLG Systel deployed SAP.

SAP, in fact, pioneered CRM adoption in verticals like manufacturing, government, FMCG, media and pharma. Customers bagged during the year included Municipal Corporation of Greater Mumbai, ABB, Blue Star, Hindusthan Lever, Malayala Manorama, and Dr. Reddys Laboratories among others. Avaya entered into a strategic tie-up with Microsoft Dynamics to primarily cater to contact centers, BPOs, and KPOs. Ramco, Logix, Smiles, and Ibhar were some of the niche players operating mainly among SMBs.

With all the leading vendors adding large enterprises as well as SMBs to their kitties, FY 08 was the year when CRM finally delivered in India; something ERP had done a few years back. With most businesses becoming customer-centric, a long list of companies adopted CRM using at least three different user models.

	SCM Market in India Vendor Revenue (in Rs crore) Growth (%) FY 08 FY 07 SAP 288 184 57 Oracle 101 94 7 Infor 22 48 -54 Take Solutions 19 20 -5 Lawson 9 11 -18 Microsoft 7 5 40 JDA 4 9 -56 Red Prairies 4 7 -43 Others 8 20 -60 Total 462 398 16
Source: DQ estimates
The demand for the SCM solution is dominated by the manufacturing sector and is picking up sharply now with the long anticipated retail boom. Indian SCM market is a little different from the rest of business applications in the sense that other than the SAPs and Oracles, there are a few niche players providing specialized applications suited for specific businesses. Hence, vendors like Red Prairies, Manhattan and other home grown players are also trying to compete and establish their foothold in the SCM arena

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