Market Overview

The ERP solution package license market in 2022 rose by 10.9% from the previous year to 140,640 million yen, based on the end-user price delivered.

The market in 2021 was boosted by many of the projects being implemented in order from what had been postponed, and the return of customer purchases that had been hesitated which accumulated during the pandemic in 2020, in addition to negative impact of COVID-19 crisis being eased, which raised the market by 9.3% to 126,860 million yen. The market in 2022 even outpaced the growth of 2021.

The growth factors for 2022 were mainly the following five:

1) Digital transformation addresses started moving forward from the strategic phase to the implementation phase due to changes in business environment and strong corporate earnings.
2) Increased motivations for corporate IT investment, which promoted replacement of legacy systems and investment in management bases as a part of digital transformation, which resulted to keep the conventional demand for ERP.
3) Demand for taking measures against Transaction-Based Reporting and the revised Electronic Book Preservation Act mainly among SMEs rapidly expanded.
4) Packaged solutions started being deployed for the systems of production management and others that had been mostly developed in-house (on premise) mainly among major companies.
5) The ERP projects became larger, as companies started adopting multiple ERP modules. In addition, those companies that use cloud ERP continued increasing.

Noteworthy Topics

ERP Investment Relating to Digital Transformation Continued Growing

IT investment that used to chiefly aim for cost reductions have become more strategic in recent years, as the understanding of strategic IT investment widespread among user companies.

By September 2020, “The Study Group on Improvement of Sustainable Corporate Value and Sophistication of Human Capital” was announced by Ministry of Economy, Trade and Industry (METI), positioning the human capital as the prime source for the company and explaining the necessity of measures to bring out the best of human capital under strategic management operations.
For effective management of business foundation (human resources, products, and funds), consolidation to one-stop operation and data-driven management should be achieved. Robust growth of the ERP market for the past few years seems to be because of aggressive digital transformation/IT investment in which replacement for reconstructing the business foundation rather than replacement of mere legacy systems seems to be underway.
This tendency does not remain only among major companies. Though it may have been triggered by the system replacement that came with expiration of maintenance contracts, increasing numbers of SMEs are conscious of digital transformation when considering and propelling ERP deployment. If it is only about replacement of ERP, companies may leave some concerns related to “2025 Digital Cliff”, the issues of the transformation efforts to be deteriorated or to end up in vain if exceeding 2025, pointed out by METI in its “DX Report” in 2018, but ERP investment connected to digital transformation that can be considered as strategic investment has steadily been in progress.

Future Outlook

As the projects have kept on being larger in 2023, and as the measures against the Transaction-Based Reporting is likely to continue until October, the market growth rate is projected to outperform 2022 to 11.5% in 2023, attaining 156,810 million yen.
The reasons for this are robust intentions for IT investments by user companies and increasing deployment of cloud ERP in response to “2025 Digital Cliff” and rapid changes in business environment.
Meanwhile, the factors for growth deceleration may be aggravation in economic conditions stemming from: Intensifying wars and conflicts around the world, phenomenon caused by extreme modifications in climates and weathers, raised inflation rates and soaring commodity prices, and fluctuation in exchange rates including further depreciation of yen. Nevertheless, even under the current weak business climate, steadfastness is observed in IT investment, which is projected for the market in 2023 to attain a double-digit growth.

Research Outline