Gartner says worldwide supply chain management software market contracted by 0.7% in 2009, as it gears up to discuss the future of supply chain management
Gartner says worldwide supply chain management software market contracted by 0.7% in 2009, as it gears up to discuss the future of supply chain management
Worldwide supply chain management (SCM) software revenue totalled $6.2 billion (£4.2bn) in 2009, a 0.7% decline from 2008 revenue, according to analyst firm, Gartner. New license revenue was down 7.4% in 2009, while recurring revenue associated with subscriptions and maintenance were the "life vest" of the market, growing 10.8% and 0.2%, respectively.
"Despite the slight dip in overall revenue, the market for supply chain applications seems to have largely weathered the recent financial storms," said Chad Eschinger, research director at Gartner. "Although the first nine months of 2009 contracted, the fourth quarter sustained 6% annual growth, driven by some pent-up demand, but more so from growth in subscriptions and the many maintenance renewals that were due in the fourth quarter."
Market loses pace with demand
The analyst research found new software sales were difficult to obtain in 2009, and vendors that have succeeded have transitioned part or all of their business toward subscription delivery of their solutions. This was evident within the top six vendors, where Ariba generated positive growth, but also where Oracle, with more of a best-of-breed approach, also generated slight growth. The remaining four market share leaders – SAP, JDA Software, i2 Technologies and Manhattan Associates – all experienced a decline in SCM software revenue in 2009.
"The economic climate of the past few years and the maturity and saturation of implemented business applications has proven difficult. This stressed environment has forced many vendors to increase maintenance rates and explore various channel, delivery and pricing options," added Eschinger. "Competition between enterprise suite and specialist, best-of-breed vendors has heightened. Although suite vendors are typically well-positioned within organisations to stall emerging application purchases, there are significant opportunities for specialised vendors that offer differentiating domain and vertical solutions that are 'blind spots' in a suite provider's offering."
The specialised segment of SCM software revenue totalled $3.5 billion (£2.4bn) in 2009, a 1.6% increase from 2008. The suites segment of SCM software revenue totalled $2.7 billion (£1.8bn) in 2009, a 3.7% decline from 2008 revenue.
Fragmentation and consolidation
Specialised vendors' sole or primary business is to market supply chain applications within defined markets. These vendors may offer a suite of supply chain solutions but typically do not provide solutions in other markets. Suite vendors compete with specialised vendors, but they market products in several markets, and revenue from supply chain applications is not their primary focus. Some suite vendors have acquired best-of-breed or specialised vendors, but because these are part of a larger application portfolio, they are included in this category.
"Given the market's vendor fragmentation and the continued expansion of suite vendors, we expect market consolidation and share in the SCM market to eventually mimic that of the enterprise resource planning (ERP) market," Mr Eschinger said. "However, unlike the ERP market, we expect the process to take longer, with less 'lock-out' and more activity with new entrants, given the breadth of needs across supply chains and functional domains."
Additional analysis is available in the Gartner report "Market Trends: Supply Chain Management, Worldwide, 2009-2010”.
Analysts will also gather to discuss the future of supply chain management at the AMR Research Supply Chain Executive Conference, from 13 to 14 September 2010, in London.
