COMMUNICATIONS OF THE ACM April 2000/Vol. 43, No. 4 27
JEAN-FRANCOIS PODEVIN
UU
ntil recently, the major
ERP vendors (SAP, Ora-
cle, Peoplesoft, JD
Edwards, and Baan)
were mainly targeting
the high end of the mar-
ket (companies with
more than 1,000
employees), but this
market comes close to saturation. Many large com-
panies have already adopted ERP systems and are
planning the next step of how to use the installed
ERP infrastructures as foundations for e-business [1,
2]. Most of the small- and medium-sized companies
still have to make the decision to deploy ERP. The
midsize market is an interesting market, for exam-
ple, the number of midsize companies (50–1,000
employees) in Europe is estimated to exceed
100,000. Data from our research shows that with
average annual IT budgets of more than $500,000,
the total European midsize market for IT products
and services surpasses a staggering $50 billion per
year. This market as a whole is very attractive for the
major ERP vendors. However, since the wave of
adoption by midsize companies is in its early stages,
little is known about developments and drivers that
form the basis of ERP adoption decisions. The pur-
pose of this article is to understand developments in
ERP adoption within the European mid-market.
Our empirical information is based on a large-scale
European multicountry/multi-industry survey con-
ducted in mid-1998. Based on the survey data, we
will address various issues, such as: How did ERP
penetration in the mid-market develop until 1998
Yvonne van Everdingen,
Jos van Hillegersberg,
and Eric Waarts
EERRPP AADDOOPPTTIIOONN
BBYY
EEUURROOPPEEAANN
MMIIDDSSIIZZEE
CCOOMMPPAANNIIEESS
Searching for ERP systems offering a perfect fit.
and what can be expected in 2000? Furthermore, we
explore criteria used by European midsize companies
for investing in ERP systems and for choosing an
ERP supplier.
ERP Penetration Development
The survey included questions both on current
(mid-1998) adoption of ERP and planned adoption
within two years (mid-2000). In 1998—over all
countries and industries—already 27% of the Euro-
pean midsize companies had ERP software installed
in one or more functional areas. The functional
areas included in the interview were purchase and
sales order management, inventory and materials
management, production and assembly, transporta-
tion, service and maintenance, marketing and sales,
warehouse management, financial accounting, and
human resource management. Interestingly, a
minority (13%) of the adopters used ERP software
in just one functional area, while most companies
(70%) used it in more than three functional areas.
Thus, companies clearly aim at using ERP’s main
strength: integrating several functional areas. The
data further reveals that in nearly all companies, the
various functional areas are automated using ERP
software of a single vendor. Hence, difficulties in
integrating ERP software from different vendors
often seen in large companies are not yet an issue for
midsize companies. This may change, as midsize
companies will increasingly integrate their supply
chains, and thus communicate with suppliers that
are likely to have adopted different ERP solutions.
With respect to expected further penetration of
ERP software our estimations are based on invest-
ment indications by the respondents. Among the
firms that did not have ERP software installed in
1998, about 40% indicated intention to invest in
ERP before mid-2000, yielding an expected average
penetration level of 56% over all countries and indus-
tries. If we consider average market prices for ERP
software, the total European ERP mid-market can be
roughly estimated to exceed $5 billion per year for
1999 and 2000. It must be borne in mind that invest-
ment intentions are not necessarily equal to actual
behavior, but one may cautiously estimate that during
this year, a majority of all Euro-
pean midsize companies will
embrace ERP.
We’ve shown average penetra-
tion percentages across all coun-
tries and industries. However,
the data also reveals some inter-
esting differences between Euro-
pean countries and industries.
Figure 1 shows the penetration
developments for each country.
In 1998, Sweden, Denmark, and
The Netherlands were far ahead
with penetration rates of 45%
and higher, while U.K. and
Spain were lagging behind with
penetration rates less than 20%.
The data also shows the penetra-
tion of ERP software is expected
to grow, especially in countries
that showed low 1998 adoption
figures. Nevertheless, the expected penetration rates
in 2000 still are especially high in the Northern Euro-
pean countries: Norway, Finland, Sweden, Denmark,
and The Netherlands. This is an interesting phenom-
enon, which may be related to certain cultural factors.
Cross-cultural research by Hofstede reveals four
dimensions of cultural characteristics of a country
that can be used to group European countries into
three clusters [3, 5]. One of these clusters includes the
four Scandinavian countries and The Netherlands,
which are characterized as having a low level of uncer-
tainty avoidance, a high level of individualism, a small
power distance, and a low level of masculinity. This
cluster is recognized as the most innovative cluster
with relatively weak resistance to new products and a
strong desire for novelty and variety. There is no solid
proof of a causal relationship here, but these general
cultural characteristics of the Scandinavian countries
and The Netherlands may have led to a higher level
of ERP trial and adoption. The relatively low ERP
penetration in Great Britain could similarly be
28 April 2000/Vol. 43, No. 4 COMMUNICATIONS OF THE ACM
Figure 1. Penetration development across countries (n=2647).
Percentage of companies
Norway
Sweden
Finland
Denmark
Netherlands
U.K.
Belgium
France
Italy
Spain
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
Expected ERP Penetration 2000
ERP Penetration 1998
explained by the fact that Great Britain (together
with, among others, Ireland), belongs to a cluster that
is described as a fairly risk-averse market. This indi-
cates companies from these countries tend to wait to
adopt a new product until a large group of other com-
panies has already adopted it.
In addition to country differences, the data shows
different penetration rates between industries in 1998
(see Figure 2). They run from about 20% in the
Project industry and the Wholesale industry up to
nearly 40% in Discrete and Automotive. The fact that
ERP has its roots in manufacturing is likely to explain
these differences. Expected penetration levels for 2000
show, however, that the former
industries will make up arrears
since many firms in these sectors
are planning to implement ERP
in the near future. Interestingly,
Electronics is expected to become
the leader in ERP implementa-
tions, with an adoption percent-
age of nearly 70%.
Information Systems
Selection Criteria
When companies consider buy-
ing a new product, the perceived
characteristics of the product
play an important role in the
final decision to start using that
new product [6]. Thus the char-
acteristics of the ERP software
have to match the criteria used
by companies to select an infor-
mation system. In the survey,
respondents were asked to indi-
cate the three most important
criteria for selecting their current
information system (lowest cost,
user-friendliness, fit with busi-
ness procedures, scalability, sup-
port, and training). The results
show the most important crite-
rion used in selecting an infor-
mation system is the best fit with
current business procedures (see
Figure 3). About one-half of the
respondents have mentioned the
best fit in the top three criteria
ranking, while more than one-
third mentioned it as the single
most important one. Hence,
compatibility with the business
procedures is the major issue for
companies to decide on a new system. Although
ERP vendors have given much attention to allow
easy configuration of their packages to match exist-
ing business processes, several studies have shown
that configuring and implementing ERP systems can
be costly, and may even require reengineering entire
business operations [4], (see also other articles in this
special section, for example [7]). Given the large
potential of the midsize market and the limited bud-
gets of midsize companies, there is much potential
for an ERP package that succeeds in meeting this
main selection criterion. Other important selection
criteria are flexibility, cost and user-friendliness of the
COMMUNICATIONS OF THE ACM April 2000/Vol. 43, No. 4 29
Figure 2. Penetration development across industries (n=2647).
Industry
Percentage of companies
discrete and
automotive
electronics
food and
beverage
process industry
wholesale
project industry
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Expected ERP Penetration 2000
ERP Penetration 1998
Figure 3. Criteria for information systems selection (n=2401).
Support
Scalability
User-
friendliness
Cost
Flexibility
Relative importance
Fit
system, and to a lesser extent scalability and supplier
support. The importance of criteria is very similar
across all industries, but some differences between
countries were found. For example, Italian and
Swedish companies focus relatively more on user-
friendliness, while Spanish companies score the high-
est on flexibility. Companies from The Netherlands
judge the total cost of implementing an information
system as important as the fit with current business
procedures.
ERP Supplier Selection Criteria
In addition to criteria to select a new system, other cri-
teria may be used to select the supplier of a new infor-
mation system. The data shows that European midsize
companies tend to focus on product characteristics
rather than on characteristics of the ERP supplier of the
product. It makes little difference whether the vendor
is a market leader, an international
oriented company, or a company
with a superior corporate image.
Companies predominantly look at
the functionality and quality of
the products and services for eval-
uating ERP suppliers, which has
been found across all lines of busi-
ness and all countries (see Figure
4). To a somewhat lesser extent,
the speed of implementation, the
possibilities of the product for
interfacing with other applica-
tions, and the price of products
and services also are important
supplier selection criteria.
Supplier selection brings us to
the final issue in this article, regard-
ing the market positions of the var-
ious ERP suppliers. The data
provides information about the
awareness of the various ERP vendors among the mid-
size companies in Europe (circa mid-1998), their share
of the market, and their nomination as preferred sup-
plier for future investment. It should be noted, how-
ever, that since the time of the survey market positions
may have changed substantially due to various circum-
stances. For instance, Baan has had significant negative
publicity over the past two years, which may enhance
the company’s awareness level, but also may have wors-
ened their position as preferred future supplier.
At the time of the survey, the penetration of the
five major ERP vendors (SAP, Oracle, Peoplesoft, JD
Edwards, and Baan) in the European midsize market
was rather modest. Obviously, the penetration of ERP
at that time was in its early stages. About half of com-
panies still preferred their in-house developed, tailor-
made information systems to the standardized systems
of the large ERP vendors. Among the adopters of ERP,
the combined market share of the big five vendors was
slightly more than 20%. Regarding specific vendors,
SAP had both the highest awareness (that is, it was the
most often spontaneously mentioned supplier by
respondents) and highest share in the European mid-
size market. Roughly 11% of the companies had SAP
installed. The European-based ERP vendors (SAP,
Germany; Baan, The Netherlands) clearly had a
higher level of awareness among the European compa-
nies than U.S.-based ERP vendors. SAP and Baan
were mentioned spontaneously by 60% respectively
50% of the companies, followed by JD Edwards
(33%), and Oracle (28%). Peoplesoft was hardly
known in 1998 and had a negligible share of the mar-
ket. Based on the respondents’ indications concerning
30 April 2000/Vol. 43, No. 4 COMMUNICATIONS OF THE ACM
Figure 4. Criteria for supplier selection (n=2623).
Importance
Criteria
Functionality
product
Quality
product
Implementation
speed
Interface
other systems
Price
Market
leadership
Corporate
image
International
orientation
Figure 5. First considered future ERP
supplier (n=1574).
SAP Baan
Peoplesoft Other
Oracle JD Edwards
39%
25%
12%
18%
5%
1%
preferred suppliers for future investment in ERP sys-
tems (see Figure 5), it can be expected that the com-
bined share of the big five vendors will sharply increase
to over 60%. SAP is expected to be the most preferred
ERP supplier among the European midsize compa-
nies; Oracle is expected to strengthen its position.
Conclusion
While ERP has been adopted by most of the large
companies, the midsize market is now catching up.
Given the large number of midsize companies, this
adoption wave represents a huge number of ERP
implementation projects that have been recently com-
pleted, are in progress, or are about to begin. These
projects will raise mid-market ERP adoption from our
measured 27% in 1998 to the expected 56% this year.
Both industries and countries that showed low ERP
adoption in 1998 will decrease the gap considerably.
This, of course, constitutes a very interesting mar-
ket for ERP vendors to penetrate. A number of issues
emerge from our study that are critical for the devel-
opment of this market. From the viewpoint of clients,
the fit with current business processes is the most
important selection criterion for a new system. At the
same time, companies within the mid-market rate a
low price and short implementation times as highly
important. Some of the current ERP vendors are
attempting to satisfy these requirements by offering
“accelerated” implementation methods. However,
these methods are usually based on offering a minimal
fit, thus ignoring the number-one wish of small and
medium enterprises. Therefore, vendors aiming to
penetrate in this market should offer a new generation
of ERP systems that is flexible enough to easily han-
dle a wide variety of business procedures. Further-
more, they should have sufficient interfacing
capabilities in order to reduce the risk of vendor lock-
in and cost of switching. Finally, vendors should take
into account that the European midsize business mar-
ket is not homogeneous. This study shows that signif-
icant differences exist in selection criteria among
countries. However, for ERP vendors succeeding in
satisfying these various requirements, the huge mid-
size market will be rewarding.
References
1. Foley, J. ERP and E-Business: Perfect Together?, www.information-
week.com, (Sept. 13, 1999), 169.
2. Gilbert, A. and J. Sweat, Reinventing ERP, www.informationweek.com,
(Sept. 13, 1999), 15–20.
3. Hofstede, G. Culture’s consequences: International differences in work
related values. Beverly Hills, Sage, 1997.
4. Jarosh, T.J. AS/400: The high scorer in ERP. Midrange Systems (Apr.
1999), 36–37.
5. Kale, S.H. Grouping euroconsumers: A culture-based clustering
approach. J. International Marketing 3, 3 (1995), 35–49.
6. Rogers, E.M. Diffusion of Innovations. The Free Press, a division of
Macmillan, 1995.
7. Soh, C, Kien, S.S., Tay-Yap, J. Cultural fits and misfits: Is ERP a uni-
versal solution? Commun. ACM 43, 4 (Apr. 2000).
Yvonne M. van Everdingen (yeverdingen@fbk.eur.nl) is
a member of the faculty in the Department of Marketing
Management, Rotterdam School of Management, Erasmus
University, The Netherlands.
Jos van Hillegersberg (jvh@acm.org) is a member of the
faculty in the Department of Information and Decision Sciences,
Rotterdam School of Management, Erasmus University, The
Netherlands, and a component manager at AEGON Bank.
Eric Waarts (ewaarts@fbk.eur.nl) is a member of the faculty in
the Department of Marketing Management, Rotterdam School of
Management, Erasmus University, The Netherlands.
The survey was conducted at the request of one of the major ERP vendors, but was car-
ried out independently of that company. We are grateful to this vendor for their sup-
port of this research.
Permission to make digital or hard copies of all or part of this work for personal or
classroom use is granted without fee provided that copies are not made or distributed
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on the first page. To copy otherwise, to republish, to post on servers or to redistribute
to lists, requires prior specific permission and/or a fee.
© 2000 ACM 0002-0782/00/0400 $5.00
c
COMMUNICATIONS OF THE ACM April 2000/Vol. 43, No. 4 31
T
he survey was performed using a prestructured
questionnaire that covered questions about
ERP adoption decisions, general company policies
concerning IT, and investment planning. Because
various European countries were included in the
survey, the questionnaire was translated into local
languages by translation agencies. Subsequently,
telephone interviews were performed with IT
managers and financial managers responsible for IT
decisions. The interviews were carried out by
professional call centers. In total, a substantial
sample of 2,647 companies were interviewed from
10 European countries (Finland, Sweden, Norway,
Denmark, the Netherlands, Belgium, France, Spain,
Italy, and the U.K.) in six industry
sectors (discrete and automotive industry, project
industry, electronics industry, process industry,
food and beverage industry, and wholesale
industry). The countries and industries were
selected in cooperation with the sponsor of the
research. For each country/industry combination
an average 45 companies were interviewed. They
were randomly selected from local industry
databases. This procedure ensures that for each
country the total sample size exceeds N=200, and
for each industry the sample size is over N=300.
c
How the Survey was Conducted
