Volume 3, Number 37 -- October 5, 2006

Supply Chain Software Sales Still Growing, According to AMR

Published: October 5, 2006

by Timothy Prickett Morgan

Back at the end of the 1990s, sales of enterprise resource planning (ERP) software, which integrated the factory floor with front office functions like sales and back office functions like accounting, were one of the key drivers of the entire IT industry. But eventually, everyone who wants or needs ERP software gets it, and that leaves software makers looking around for other markets to chase.

One of the areas all of the big ERP players immediately latched onto was supply chain management, or SCM. With SCM software, companies extend the control they get from ERP software out to their suppliers and channel partners, which means they can automatically order parts in a just-in-time fashion, and the supply chain partners only manufacture the parts that their upstream customers need. It is a win-win for both sides of the transaction. Which is why the SCM software market is still growing.

According to AMR Research, which watches the enterprise application software market like a hawk, the worldwide market for SCM software managed to grow a bit in 2005, up 3 percent to $5.6 billion in total sales. AMR says that companies are running leaner supply networks, employing more mass customization in their products, and coping with more variability in the demand for their products, which is compelling companies to either deploy SCM software for the first time, or deploy more rich configurations of it if they already have been using it.

The SCM software market has a lot of players, and many of them are tied to specific industries. Deep knowledge of an industry and its partner networks is a key factor in the creation and support of SCM software. But, because of lots of acquisitions, some of the big names in ERP are also the big names in SCM. In almost all cases, these vendors bought their way into the market.

The big exception in the top five vendor listing supplied by AMR is, of course, i2 Technologies, one of the early innovators in the SCM field that has somehow remained independent. The company accounted for 5 percent of the market in 2005, but AMR said its sales actually fell 7 percent that year, and is projecting that i2 will shrink 6 percent this year and lose a point of market share.

The top vendor on the SCM list is SAP, which accounted for 12 percent of the SCM software market and which grew at 6 percent. Oracle was ranked second on the list, with 10 percent of the market, but that was nearly double tis previous year market share due to acquisitions in 2005. Manhattan Associates is another free agent in the SCM market, and it ranked fourth in AMR's 2005 list, accounting for 4 percent of the market and growing sales by 15 percent. ERP conglomerate Infor, which includes the former SSA, Geac, Mapic, Baan, and other suites, nearly doubled in 2005 thanks to acquisitions, getting about 3 percent of the SCM last year.

The top five SCM vendors only account for 34 percent of the market, or about $1.9 billion in sales. It is unusual for there to be so much diversity in a market that has been around for more than a decade. But, that just goes to show you that supply chains are not as standard as accounting and sales.

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Editor: Timothy Prickett Morgan
Contributing Editors: Dan Burger, Joe Hertvik,
Shannon O'Donnell, Timothy Prickett Morgan
Publisher and Advertising Director: Jenny Thomas
Advertising Sales Representative: Kim Reed
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