Users Focusing on Supply-Chain, CRM Projects

PHOENIX (06/01/2000) - For the next five years, large companies will spend a hefty portion of their information technology budgets on best-of-breed software and implementation projects designed to streamline supply chains and manage customer relationships, according to Boston-based AMR Research Inc.

Between now and 2004, purchases of both supply-chain and customer relationship management (CRM) software are likely to grow 35 percent to 40 percent annually to reach a combined total of more than US$40 billion, analysts predicted at an AMR conference for IT executives here.

On the other hand, AMR said sales of all-encompassing suites of enterprise resource planning (ERP) applications, such as SAP AG's R/3 software, will slow significantly. The company predicted that ERP purchases will grow by just 5 percent per year as more users focus on integrating highly specialized e-business applications for tasks such as managing channel partners via the Internet.

AMR rolled out these and other market projections at a press conference last night. It said the estimates were based on a survey of 1,400 software vendors and interviews with 1,000 user companies across 13 vertical industries.

"Between 1995 and 1998, the ERP market grew at 40 percent a year, but now it's running out of gas," said AMR analyst Rod Johnson. One big reason is that the Internet has forced companies' attention away from the back office to more "customer-facing activities," an area ERP vendors are targeting but one in which they face much broader competition and some skepticism from users, according to AMR's findings.

William Irons, CIO at Lowe's Cos. in North Wilkesboro, North Carolina, said his company fits the AMR profile of a user that's focused intently on supply-chain and CRM projects.

For example, Lowe's, a home improvement retailer with 589 stores, is in the process of testing an Internet-based "hub" into which its smaller suppliers can retrieve electronic purchase orders and enter invoices. The targeted suppliers, such as local nurseries that supply garden plants, typically lack electronic data interchange capabilities and now fax a combined total of 30,000 invoices each week to Lowe's, Lord said.

"But if we set them up on the Internet with a browser-based interface, they can send invoices and we can send our purchase orders to a Web site," Lord added.

Lowe's is testing the system with 10 suppliers and eventually may migrate even its largest suppliers to the same Internet-based hub - a move that could save individual suppliers as much as $3 million to $5 million per year in value-added network charges, Lord said.

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