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Digitalization Boosts Demand for Supply Chain Software

The market for supply chain software has risen to $13 billion, thanks in part to a rising demand for agility.

If big numbers impress you, try the number $13 billion on for size. That’s how big analyst firm Gartner says the supply chain management (SCM) market will be by the end of this year, or at least that part of the market comprised of software revenue. That’s a gain of 11% from 2016.

In fact, the SCM software market is on pace to exceed $19 billion by 2021, as software as a service (SaaS) enables new revenue opportunities. By way of comparison, back in 1999 when we first started following the SCM market in the pages of the late, great Supply Chain Technology News (which was absorbed into what’s now MH&L), the total market size was said to be $2.6 billion (according to AMR Research, which itself was absorbed into Gartner), and was projected to grow by a whopping 50% that year—remember those heady days before the Internet bubble burst?

“Between 2017 and 2021, Gartner forecasts nearly $6 billion in total software revenue will be added to the SCM market,” says Chad Eschinger, managing vice president at Gartner. “Digitalization is increasing demand for agility and forcing new business models, which is boosting spending in the SCM market.”

Gartner’s researchers point out the many different ways that SCM providers are trying to carve their own niches, whether it be in mobile offerings, machine learning-based features, multi-enterprise visibility, Big Data analytics, and the Internet of Things. Again, those with long memories might recall that at the turn of the century, the various analyst firms of the time were tracking new offerings from SCM providers in such areas as artificial intelligence-based features, extended enterprise visibility, data science, and machine-to-machine communications. The more things change, the more new names are applied to the same old ideas.

One thing that hasn’t changed much over the past couple decades is the way the SCM market is broken down, with the main categories being supply chain planning, procurement and supply chain execution (basically, the PLAN, SOURCE and DELIVER legs of the SCOR Model). According to Gartner, the procurement solutions are moving most rapidly towards SaaS delivery to the cloud, while supply chain planning is lagging.

Overall, Gartner reports, SaaS revenue growth is being driven by vendors moving to cloud-first or cloud-only deployment models, while end-users are becoming more comfortable cloud security and more knowledgeable about the capabilities of SaaS solutions. By 2021, SaaS deployments are forecast to account for more than 35% of total SCM spending (see chart).

“To help support next-generation supply chains and real-time business requirements, we expect consolidation of existing solutions into broader, multi-domain suites, but also a continued stream of new point solutions that will support innovation, address specific needs and offer new value,” Eschinger says. “The growing impact of digital commerce will drive greater investment in supply chain analytics, and the lure of faster decision making and eradicating inefficiencies will drive investment in smart machines and IoT and the associated SCM software.”

The top five SCM companies, by revenue, are:

1. SAP ($2.9 billion)

2. Oracle ($1.5 billion)

3. JDA Software ($476 million)

4. Infor ($243 billion)

5. Manhattan Associates ($219 million).

By point of comparison, SAP’s supply chain software sales are nearly twice that of Oracle’s, and Oracle’s are roughly three times larger than JDA’s. So it’s still very much a market dominated by comprehensive solution suite providers and numerous smaller point solution providers.

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