Modern’s 9th-annual survey of the leading SCM suppliers finds that the market for supply chain software took a hit last year, but things are beginning to look up.

The market for supply chain management software applications, maintenance and services, or SCM, came in at $6.2 billion in 2009 including applications for procurement software and $4.2 billion without procurement.
That represented a decline of 1.9% from 2008, according to Chad Eschinger, an analyst with Gartner. While most businesses would have been proud to only show a 1.9% drop in revenues last year, it’s a far cry from the growth this industry has been used to posting.
In fact, it’s the first time the market has declined since Modern began publishing our annual Top 20 list in 2001. Just two years ago, AMR Research, now part of Gartner, was forecasting the total supply chain management market to reach or exceed $8 billion by 2010. That just isn’t going to happen. “It was a very difficult year,” says Eschinger.
Last year was a year for the status quo. The market leaders look much the same as they did in 2008, with SAP ($820 million) and Oracle ($715 million) at the top of the list, with numbers that were essentially unchanged from last year. They were followed by JDA Software ($385.6 million), RedPrairie ($261 million) and Manhattan Associates ($247 million).

Notable trends

In the ERP market big deals were oh so 1999. "Companies are not buying into big projects," says Eschinger. "They're buying smaller components with a quicker time to value, like demand planning and sales and operations planning. These are applications that you can get up and running in months and not a year."
What's   more,   he   adds,   the   aver age deal size carried a lower price tag than in the past. Still, it was not all doom and gloom. By the third quarter of 2009, Gartner saw confidence—and growth—return to the market. The research firm is expecting 4.5% growth for 2010, 5.7% market growth in 2011, reaching 6.1% compound annual growth by 2014 with a market at $5.6 billion without procurement.
The WMS market, one of the most mature of the supply chain management and execution applications, also took the biggest hit in 2009. While the market still topped $1 billion, according to Steve Banker, service director, supply chain management, for ARC Advisory Group (www. arcweb.com), revenues contracted by between 15% and 20% last year.
"We did forecast that the market would shrink, but not to that extent," says Banker. What surprised him the most was that despite these difficult times, there was no merger, acquisition or bankruptcy of note. "I expected a whole lot of market consolidation, and that did not happen," he says.
The TMS market did not escape the effects of the recession, says Adrian Gonzalez, a director at ARC. But it outperformed the market compared to other software applications. "We did not do a market study in 2008, but we saw a modest decline between 2007 and 2009," says Gonzalez, who pegs the TMS market at about $1.3 billion. "But we do have a five-year forecast for 5.4% compound annual growth." Why did TMS hold up? "It has a strong ROI and is aligned with cost reductions, which is an important corporate strategy," says Gonzalez.
What are the trends Gonzalez watching? The first is a movement toward a holistic TMS footprint. In the past, he says, fleet management, parcel management, carrier solutions and global trade management came from different vendors. Today, leading providers like Oracle and RedPrairie are developing end-to-end TMS footprints.