SCM Market Finds SaaS Beneficial in Otherwise Flat 2009
June 28, 2010 Dan Burger
There’s little argument that supply chain and operations management has been a focal point in cost-cutting measures at companies in the past several years. Process efficiency is tied to supply chain visibility. Again, little argument can be made. So why has the worldwide supply chain management (SCM) software market slipped when comparing revenue from 2008 with 2009?
Oh, yeah, that economic crisis thing. Company budgets were tighter than the handcuffs that should have been on some of the financial industry’s best and brightest.
Overall, SCM software revenue (including services and support) was $6.2 billion in 2009, a drop of 0.7 percent, but revenue from software licenses contracted 7.4 percent, according to the analysts at Gartner. Obviously software vendors looked to other areas to make up for the crippled sales of new licenses. Software as a service delivery benefited in a big way.
“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 percent 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.”
Transitioning business toward subscription-based solutions helped Ariba and Oracle stay ahead of the game, but SAP, JDA Software, i2 Technologies (now part of JDA), and Manhattan Associates each fell short of their 2008 revenue figures. Manhattan Associates took the biggest stumble, with revenue off more than 21 percent. SAP dropped 9 percent, JDA slipped 2.5 percent, and i2 scuffed off 2 percent of its revenue from a year earlier. Ariba’s gain was nearly nine percent. Oracle’s was 0.2 percent.
“The economic climate of the past few years and the maturity and saturation of implemented business applications has proven difficult,” Eschinger said in a press release. “This stressed environment has forced many vendors to increase maintenance rates and explore various channel, delivery and pricing options. Competition between enterprise suite and specialist, best-of-breed vendors has heightened. Although suite vendors are typically well-positioned within organizations to stall emerging-application purchases, there are significant opportunities for specialized vendors that offer differentiating domain and vertical solutions that are ‘blind spots’ in a suite provider’s offering.”
Eschinger went on to say vendor fragmentation and the continued expansion of suite vendors is expected to bring market consolidation and the SCM market will eventually mimic the enterprise resource planning (ERP) market in its evolution.
“Unlike the ERP market,” he says, “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.”
For additional information and statistics, see the following Gartner reports: Market Trends: Supply Chain Management, Worldwide, 2009-2010 and Market Share: SCM Worldwide, 2009.