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China’s enterprise application solutions market revenue (including ERM, SCM and CRM software and services) amounted to $1.752 billion in 2005, maintaining steady growth into 2006, with a 5-year CAGR predicted at 17.4[%], says IDC’s latest China Enterprise Application Solution Report Series. IDC found that there are over 5.5 million enterprises in China, 63[%] of which are small and medium sized businesses (SMB) and among these, 62[%] have yet to deploy IT infrastructure. IDC therefore expects that competition in the mid-to-low-end enterprise application (EA) solution market will further intensify in China as the international software vendors begin penetrating into the lower ends of this market segment, while the local vendors remain focused on the upper end of the segment. Local application software vendors have become more mature in terms of technology, sales systems, channel development, and service support over the past 30 years. According to Grace Han, IDC's China Software and Service Research Manager, the China enterprise application solution market has the following three characteristics: 1. The enterprise application solution market continues to grow rapidly but the demands for specific software variesIDC sees different market growth for the major types of software. For instance, finance and manufacturing applications are among the top priority for ERM customers. Business Performance Management (BPM), HR Management (HRM), and Enterprise Assets Management (EAM) will therefore enjoy a fast rate of growth. Platformization, applications integration, and software customization will drive enterprise application solution development, along with the alignment of software with network. As the SMB market matures, more and more vendors will focus on the development of industry-specific applications and strategic channel partners. Future application software solutions will further focus on industry applications. 2. Increasingly fierce competition in China’s SMB EA Solution Market
Both the ERM and SCM markets posted around 100[%] growth in 2005 over the previous year. Fast-growing SMBs became the target customers for major solution providers in 2005. However, the needs of SMBs are very different compared to medium and large enterprises in terms of products, solution delivery models, and service. SMBs need specialized industry-specific solutions rather than simplified or scaled-down high-end products. SMB users are generally more concerned about the flexibility and user-friendliness of the applications, as well as how fast they can implement business management through EA solutions. 3. Local EA Solution Vendors Continue to Emerge
More local vendors have become major industry players in terms of product technology, implementation capability, sales network and service support in the China EA Solution Market. Local vendors have done well in the manufacturing, government and SMB sectors. Compared to their multinational peers, local vendors have distinct advantages in product localization and sales and channel networks. Moreover, they are more familiar with the local demands of specific users and market industries. Ms. Han also revealed that the manufacturing sector accounted for the largest EA market share in 2005, contributing far more than half of the market as a whole. Impacted by government policies and market development, the retail industry and telecom industry were the second and third largest respectively. IDC believes that the manufacturing sector will continue to drive the China EA solutions development in the future. In terms of product, ERM and SCM accounted for the majority of the EA solutions market. The share of CRM software accounted only for less than 10[%] of the whole market, which consist primarily of call center software and sales applications. Leading solutions providers have been aggressively targeting the SMB market through channel and partner expansion and customizing their products to meet the specific needs of the SMB. Partners who can value add have become the favorite for solution vendors. 
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