How to play in the digital transformation space on the ASX

• A supercycle of enterprise resource planning upgrades is underway, with the US$220 billion global market growing at 17% annually
• Growth being fuelled by factors including AI, cloud migration, the phasing out of software provider support for legacy systems and even the energy transition
• Specialist ERP consultancies like StepChange Holdings provide robust potential for ongoing profitability and growth as the upgrade budgets roll out

Special report: The world’s biggest software giants may dominate the finance headlines, but an under-the-radar group of Australian-listed consultancies is quietly positioning itself to ride a multi-year wave of growth thanks to enterprise resource planning (ERP) upgrades and cloud migrations.

The ERP market is already enormous at US$220 billion and forecast to expand by an eye-popping 17% annually, says leading investment bank Morgan Stanley. AI-driven automation and cloud migration are creating what some analysts call an ERP “supercycle”.

Another key catalyst is global software leader SAP’s plan to phase out support for its legacy on-premises ERP Central Component (ECC) platform in 2027. In Australia alone, more than 250 large organisations will be forced to migrate to the newer cloud-based S/4HANA suite.

Capital projects in energy, mining and renewables are adding on further structural demand for upgraded ERP systems that can handle the greater complexity and regulatory scrutiny required by those sectors.

Consultants unlock IT factor

Beyond the big names like SAP, Oracle, Microsoft and Workday that provide the software, the smaller consultancies customising and implementing these systems can capture a major piece of the project budget pie.

Several ASX-listed players stand ready to benefit, especially given their deep resources industry expertise that gives them a head start in the rapidly expanding critical minerals and energy transition sectors.

A stack of business surveys from big consulting firms show that continuous digital transformation is a top priority for many businesses given how technologies such as AI and data analytics can unlock big improvements in productivity and customer experience.

Tightened up governance and compliance are other important flow-on benefits from a well-designed ERP system.

Shane Bransby, MD of StepChange Holdings consultancy group, said that with AI, data analytics and change management all advancing rapidly, more businesses were outsourcing their ERP optimisation projects to specialised service providers.

“This reduces the complexity for the business, ensures compliance with constantly updated regulations and achieves cost efficiencies,” Bransby says.

“By bringing in the expertise of external Smart Teams that can work side by side with internal teams or independently, companies can benefit from the economies of scale outside providers offer. That enables them to accelerate their digital transformation, while remaining focused on their central operations.”

Local players on a global wave

StepChange Holdings (ASX:STH) is the most recent ERP consultancy to join the ASX boards after years as a profitable private company.

The Perth-based company has carved out a trusted niche among Tier 1 customers in energy, mining, utilities and government, guiding ERP transformations for majors such as Woodside, BHP, Wesfarmers and WA State Government departments.

Its expertise is supporting organisations to optimise ERP software provided by globally leading German software company SAP.

Since its July listing, StepChange has outperformed IPO FY25 forecasts under the leadership of WA business figures Shane Bransby and Geoff Lewis – co-founder of ASG Group (ASX:ASG), which sold for nearly $350 million in 2016.

Adding further leadership and networking weight, the board also includes premiership-winning West Coast Eagles coach turned businessman Adam Simpson.

After lifting billable consultant numbers to 161 at June 30 (versus the 143 targeted), StepChange has maintained strong momentum into FY26.

With a track record of at least 15% compound annual revenue growth (FY22–FY25) and a robust balance sheet, the company stands well placed to pursue selective acquisitions in Australia’s highly fragmented SAP partner market.

Similar but distinct, Atturra (ASX:ATA) also supports large organisations with their digital transformations, but specialises in sectors including education, defence, manufacturing, finance, local government and utilities.

Spirit Technology Solutions (ASX:ST1)’s niche is delivering integrated IT and telecommunications services to enterprise, health, education and aged care sectors. Its digital sales platform, Spirit X, aggregates telco and IT products, and can provide a scalable channel to address market gaps and support future growth for Australian businesses.

Bransby says: “Cloud migration and ERP adoption is a key driver of business productivity, efficiency and scalability, which is helping drive the next wave of SAP demand.

“This and the mandated phase-out of SAP ECC on-premises systems is creating a multi-year wave of high-value projects where StepChange’s expertise is directly aligned.

“We’re looking forward to leveraging that expertise and our strong balance sheet to pursue inorganic growth over this financial year and beyond.”

This article was developed in collaboration with StepChange Holdings, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.