Report:
Magic Quadrant for Cloud ERP for Product-Centric Enterprises
How does Gartner define the Cloud ERP for Product-Centric Enterprises market in 2023?
Gartner defines cloud enterprise resource planning (ERP) for product-centric enterprises as a market for application technology that supports the automation of operational and financial activities for the manufacturing, distribution, delivery and servicing of goods. Cloud ERP for Product-Centric Enterprises is delivered under a SaaS license model with frequent updates and where application support and infrastructure is the responsibility of the vendor. ERP solutions enable enterprisewide business processes associated with systems of record and systems of differentiation. For product-centric ERP solutions, process enablement covers supply chain planning, procurement of product inputs, production control, warehousing, distribution, transportation logistics, customer order intake and invoicing, vendor invoice management, and all elements of financial transaction processing and reporting.
Key Facts for Magic Quadrant for Cloud ERP for Product-Centric Enterprises in 2023
- Publication Date: 03-Oct-2023
- Document ID: G00779879
- Coverage: Global
- Authors: Greg Leiter, Robert Anderson
- Core Purpose: Product-centric organizations are adopting cloud ERP applications with superior process automation and analytic capabilities. Application leaders should use this Magic Quadrant to evaluate cloud ERP vendors as part of a composable strategy that emphasizes process standardization and agility.
Strategic Planning Assumptions
- By 2026, 35% of product-centric enterprises will achieve high composability in their ERP applications, integration, data and security
- By 2026, 30% of enterprises will rely on their ERP applications to enable environmental, social and governance (ESG) reporting
How was the Cloud ERP for Product-Centric Enterprises market evolved in 2023?
- ERP is one of the largest categories of enterprise software revenue, growing by nearly 8% from 2021 to 2022 to a worldwide total of $43.8 billion
- Gartner estimates that 40% of ERP revenue came from on-premises offerings and 60% from cloud ERP offerings in 2022
- Forecast split of approximately 25% on-premises and 75% cloud by 2027
- Product-centric organizations have been lagging behind service-centric organizations in cloud ERP migration due to higher business process complexity
- Revenue in the subcategory of manufacturing and operations ERP components grew by only 2% in 2022
- Product-centric cloud ERP is still considered an emerging market
- Vendors are delivering new capabilities in a composable application architecture, including xP&A, subscription billing, supply chain planning and execution
- GenAI has potential to enhance and improve business outcomes in operational ERP
- ERP vendors are incorporating sustainability capabilities into their solutions to meet ESG reporting demands
- Most vendors have announced end-of-life dates for legacy on-premises ERP solutions, driving migration to cloud ERP
What product features are required to be included in this year's evaluation?
- Plan supply and demand
- Source and procure inputs into the production process
- Manufacture products
- Manage customer fulfillment
- Manage product logistics
What are the common features of top products in the Cloud ERP for Product-Centric Enterprises space?
- Financial management processes: general ledger, cost accounting, accounts payable and accounts receivable, fixed assets, project accounting and financial planning and analysis (FP&A) or extended planning and analysis (xP&A)
Scope Exclusions
- Service-centric ERP (organizations that do not physically manufacture and sell products)
- On-premises ERP deployments
- Hosted or managed cloud service deployments not meeting cloud service attributes
- Solutions without minimum 150 customers above $50M revenue threshold
- Solutions without $30M in booked subscription revenue
- Vendors without active presence outside home region (less than 25% revenue from outside home region)
- Solutions without mandatory operational ERP capabilities (supply chain, manufacturing, logistics)
- Solutions without standard financial management capabilities
Inclusion Criteria
Vendors must, among other requirements:
- Must deliver cloud-based, product-centric ERP suite with operational ERP (supply chain, manufacturing, logistics) and financial management capabilities
- Minimum 150 customer organizations with annual revenue/expenditure exceeding $50 million, each using at least 3 operational ERP modules and core financial modules in production
- At least $30 million in booked subscription and support revenue for ERP cloud service (January-December 2022)
- Active sales and market presence outside home region, with minimum 25% of cloud service revenue from outside home region
- Cloud service must be vendor-managed infrastructure, subscription-licensed, with at least 2 annual upgrades containing new functionality
- Single code line for all customers, no customer-specific versions, with self-provisioning capabilities
Ability to Execute — Relative Weighting
- Product or Service - High
- Overall Viability - Medium
- Sales Execution/Pricing - High
- Market Responsiveness/Record - Medium
- Marketing Execution - Low
- Customer Experience - High
- Operations - Medium
Completeness of Vision — Relative Weighting
- Market Understanding - High
- Marketing Strategy - Medium
- Sales Strategy - Medium
- Offering (Product) Strategy - High
- Business Model - Low
- Vertical/Industry Strategy - Medium
- Innovation - High
- Geographic Strategy - Medium
FAQs
Q: What does this research cover?
A: This research covers cloud enterprise resource planning (ERP) solutions for product-centric enterprises - organizations involved in manufacturing, distribution, delivery and servicing of goods. It evaluates vendors offering cloud-based ERP applications delivered under a SaaS license model with capabilities spanning supply chain planning, procurement, production control, warehousing, distribution, logistics, customer order management, and financial management. The research includes 12 vendors positioned across the Leaders, Challengers, Visionaries, and Niche Players quadrants based on their Ability to Execute and Completeness of Vision.
Q: Who should use this research?
A: Application leaders and IT decision-makers at product-centric enterprises should use this research when evaluating cloud ERP vendors as part of a composable strategy. It is particularly useful for organizations looking to: migrate from legacy on-premises ERP systems to cloud solutions, adopt cloud ERP with superior process automation and analytics capabilities, understand vendor positioning across different organization sizes (midsize to large global enterprises), assess vendors' capabilities in specific manufacturing verticals (discrete, process, project-based, asset-intensive), evaluate composable ERP architecture approaches, and understand market trends including AI/ML, sustainability/ESG capabilities, and digital transformation initiatives.
Q: What are the mandatory features of vendors included in this market?
A: Vendors must provide capabilities to: (1) Plan supply and demand, (2) Source and procure inputs into the production process, (3) Manufacture products, (4) Manage customer fulfillment, and (5) Manage product logistics. Additionally, standard financial management processes are required, including general ledger, cost accounting, accounts payable and receivable, fixed assets, project accounting, and financial planning and analysis (FP&A) or extended planning and analysis (xP&A).
Q: What are some reasons for not being included in this report?
A:
- Insufficient customer base: Less than 150 organizations with $50M+ annual revenue using the ERP cloud service in production with required modules
- Inadequate revenue: Less than $30 million in booked subscription and support revenue for ERP suite cloud service
- Limited geographic reach: Less than 25% of cloud service revenue from outside vendor's home region, or lack of active sales/marketing outside home region
- Incomplete cloud service attributes: Not meeting requirements for vendor-managed infrastructure, subscription licensing, single code line, minimum 2 annual upgrades, or self-provisioning capabilities
- Missing mandatory capabilities: Lack of required operational ERP capabilities (supply chain planning, procurement, manufacturing, fulfillment, logistics) or standard financial management features
- Service-centric focus: Solutions designed for service-centric rather than product-centric enterprises
- Deployment model: On-premises, hosted, or managed cloud offerings that don't meet true cloud service definition
Q: What differentiates Ability to Execute vs. Completeness of Vision?
A: Ability to Execute measures a vendor's current market performance and operational capabilities - including product quality, sales effectiveness, customer satisfaction, and organizational viability. It focuses on present-day execution and delivery. Completeness of Vision assesses a vendor's strategic direction and future market understanding - including their ability to anticipate customer needs, articulate market trends, drive innovation, and position themselves for future opportunities. It evaluates forward-looking strategy and market vision rather than current operational performance.
Reference
- Gartner, Magic Quadrant for Cloud ERP for Product-Centric Enterprises, 03-Oct-2023, ID G00779879
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