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SAP and The Online Procurement Market

Introduction
SAP is a german software company that was started off by five ex-IBM engineers in 1972. It is the world’s second largest business software company and the third largest business software provider in terms of revenue. SAP’s main focus is on enterprise resource planning (ERP) software. ERP stands for enterprise resource planning. ERP is a type of software that automates corporate processes such as manufacturing, accounting and human resource management. ERP was first written in the 60’s and 70’s for mainframe computers. These were used by manufacturing organisations to help automate production planning. For example a car maker could use this software to calculate the precise quantity of parts required for various productions runs on a particular vehicle.
Online procurement is when goods and services are obtained via internet technology. Many companies had automated purchasing of direct resources. Direct resources are materials and services that are directly used in production of a company’s goods. However few had automated the purchasing of operating resources. Operating resources are non-production goods that companies require to run its business, for example pens and paper.

Why Is The ERP Industry So Concentrated?
The ERP industry is so concentrated primarily because of the amount of revenue involved with installing ERP systems and the demand for ERP systems.

The ERP market had exploded in the 1990’s with worldwide sales of $2.1 billion in 1993 to $16.6 billion in 1998. SAP had profited more than any of its rivals commanding 30% of the ERP market, this was twice as much as second place Oracle Corporation. This has got a lot to do with the introduction of SAP’s R/3 software. This was a client/server based system where as the previous R/2 software was a mainframe application. A client/server architecture is where client computers are connected to...