Xero overtakes SAP in NZ – sort of

Xero has overtaken German multinational SAP to become the largest vendor by revenue in New Zealand's enterprise resource planning (ERP) software market, IDC says – or at least in the area of financial applications (the market research company revised its initial release after a query from NBR).

Xero, which recently reported 500,000 customers worldwide, said it had revenue of $32.9 million from the New Zealand market in the year to March 31, 2015 – a 25% year-on-year increase as Xero’s NZ customer count rose from 102,000 to 138,000 over the 12 months.

SAP's fully owned New Zealand subsidiary reported revenue of $121 million last year, up from the previous year's $118 million. ERP is usually seen as software used to run large organisations. Auckland Council is a key SAP customer.

IDC's chart also saw MYOB overtake a close competitor, Microsoft, to claim the third-highest share in the ERP category.

Overall, IDC found the New Zealand software market grew 6.5% in 2014, close to its predicted 6.6% forecast. The market is set to grow by a five-year compound annual growth rate of 6.5% to reach $1.791 billion in 2019.

The ERP market was the major growth engine for the New Zealand software market in 2014, IDC says. Mainly driven by cloud solutions, the financial application and human capital management market (HCM) grew 29.8% and 25.9% respectively in the second half of the year.

Although only offering financial application software in New Zealand, Xero overtook the market leader SAP in terms of market share. Xero held a 20.7% market share in 2014, just ahead of SAP’s 19.4%.

 “The local ERP market has been widely disrupted by Xero, which is driving most of the growth in the local ERP market. Although Xero only offered financial applications in New Zealand so far, it managed to sneak up to the top of the New Zealand ERP market. It will be interesting to watch what happens this year as Xero starts offering payroll applications and Inventory functionalities in New Zealand,” says Melanie Disse, an IDC associate analyst covering the Australasian software market.