It's a good time to be a supply chain management (SCM) software vendor. That's according to a May 2008 Gartner report, "Market Share: Supply Chain Management Software, Worldwide, 2007" (subscription required).
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Revenues at the supply chain vendors increased 17.6 percent from 2006 to 2007, from $5.1 billion to $6 billion, according to Gartner estimates. (Gartner defines total software revenue as revenue generated from new licenses, updates, subscriptions and hosting, technical support and maintenance. Professional services revenue and hardware revenue are not included in total software revenue.)
The larger force at work, notes Chad Eschinger, research director at Gartner, is that supply chain systems are perfect business solutions for the current economic constraints facing global enterprises. (See "Fraud and Theft Risks in Global Supply Chains Are Everywhere" and "How ConAgra's Pot Pie Recall Bakes In Hard Lessons for Supply Chain Management" for more on today's top supply chain issues.)
"SCM technologies are well-positioned to address the economic realities facing worldwide markets where costs are skyrocketing while competition and customer demands are intensifying," notes Eschinger, in the report. "During the past 18 months, we've witnessed businesses rediscovering the criticality of supply chain technologies to drive greater customer and supplier satisfaction through better visibility and planning." (See "Study: Apple, Nokia, Dell Tops Among Global Supply Chains" for AMR Research's list of the top 25 supply chains.)
Demand for SCM vendor services from companies such as SAP, Oracle, JDA Software, Ariba and Manhattan Associates is also on the increase. "There is greater need for vendor services to help support, improve or tune applications to meet business needs, environments and processes," Eschinger states. (Going green with your supply chain? See "Can You Build a Carbon-Efficient Supply Chain?" Read about how four CIO 100 honorees plan for unexpected events in their supply chains in "The Supple Supply Chain.")
The Gartner report also notes that industry consolidation was steady among business application and SCM vendors. There were 25 "significant acquisitions" in 2007, and more than 85 since 2005, according to the report.
"Given the market's fragmentation of vendors and solutions, and the continued expansion of suite vendors' capabilities within supply chain technologies, we expect consolidation of vendors and share to mimic what's occurred in the enterprise resource planning (ERP) market," Eschinger states. "However, unlike the ERP market, we expect a longer timeline with more activity with new entrants, given the breadth of needs across supply chains and functional domains."
SAP held the top spot with 22.4 percent of SCM software revenue in 2007, and Oracle was the only other vendor to have double-digital market share, notes the report. See below for more details.
The Top Five Supply Chain Management Vendors in 2007
These five software vendors own the top five spots in the SCM market
|The Top 5||SCM Revenue / Market Share|
|1. SAP||$1.3 billion / 22.4%|
|2. Oracle||$955 million / 16%|
|3. JDA Software||$230 million / 3.9%|
|4. Ariba||$160 million / 2.7%|
|5. Manhattan Assoc.||$152 million / 2.6%|
|(Note: 2007 Gartner estimates)|