2009: Top 20 supply chain management software suppliers

The supply chain software business posted stable numbers in 2008, but the speed of future growth remains uncertain.

By Bob Trebilcock, Executive Editor, and Lorie King Rogers, Associate Editor -- Modern Materials Handling, 7/1/2009

Status quo was the watch word for 2008. The market for supply chain management software applications and services, or SCM, topped $6.68 billion in 2008, a 4% increase over 2007, according to the most current estimates from AMR Research (617-542-6600, www.amrresearch.com).

Looking forward, the picture isn't much better. AMR is predicting a 6% decline in 2009, according to Noha Tohamy, AMR's vice president of research. "Q4 in particular was bad for SCM vendors," says Tohamy. While last year AMR expected the market to top $8 billion by 2010, Tohamy now predicts that it will take at least five years for the market to recover and reach that high water mark.

"Because of the economy, companies weren't making major investments in supply chain software unless it was mission critical," says Tohamy.

The leaders in 2008 look much the same as in 2007. Once again, No. 1 SAP with $942 million and No. 2 Oracle with $715 million top the list. In a tough year, both posted significant percentage gains, with SAP up nearly 12% and Oracle growing by nearly 9%. JDA Software with $390 million, Manhattan Associates with $337 million and RedPrairie with $293 million rounded out the top five.

All of the SCM categories showed few mergers and acquisitions of note and few technological breakthroughs. Those categories include supply chain planning and network design (SCP) applications as well as supply chain execution solutions like enterprise resource planning (ERP), warehouse management (WMS), manufacturing execution (MES) and transportation management (TMS).

The most notable news was the deal that didn't happen between JDA and i2 Technologies. Instead, most SCM providers concentrated on improving existing offerings, serving customers, and fighting it out for market share.

Making the list

Modern has been tracking the supply chain software market for nine years. We originally began by looking at the top providers of WMS solutions, but our focus has evolved along with the interests and job descriptions of our readers, as well as the supply chain software market. While the lines between supply chain execution and supply chain planning providers were once clearly drawn, that is no longer the case; ERP providers supply WMS and supply chain execution providers supply planning and optimization solutions.

To make our list today, a company has to supply more than one of the major categories of supply chain management software—planning solutions along with WMS, TMS and MES execution systems. This is strictly a numbers game and not a value judgment. The ranking is based on our best estimate of a provider's annual sales for 2008. Where a company will not break out its SCM revenues from its total revenue, as is the case with ERP providers Oracle and SAP, we provide educated estimates based on annual reports, industry growth and our contacts at research firms.

Notable trends

Although there was little in the way of business news, several trends were very much at work in each of the categories.

In the ERP market, the most important trend was a slow down in the applications that had been growing the fastest. In 2007, several niche applications including service parts planning, inventory optimization and supply chain network design, grew at double-digit rates that far outpaced the market in general. In 2008, says Tohamy, they came back down to earth.

The TMS market was essentially flat, coming in at $1.2 billion, up from $1.1 billion in 2007, according to Adrian Gonzalez, director of the logistics executive council for ARC Research (781-471-1000, www.arcweb.com). The high price of fuel continues to be the most important factor driving the TMS market, according to Gonzalez. "Record oil prices through the first nine months of 2008 helped the market post an overall respectable number for the year."

The WMS market, meanwhile, was also flat, at $1.2 billion, according to Steve Banker, ARC's service director of supply chain management. The most important development in the market may be that big players like RedPrairie, Manhattan Associates and HighJump continue to take market share from the small to mid-sized providers. As Banker looks at the market, he sees as many as 20 small players that are on life support and may not survive in the current economy.

Last but not least, the MES market continues to expand, says Simon Jacobson, research director for AMR Research. "The MES market remained relatively steady last year, including some vendors that showed growth," says Jacobson. The MES market remains the least studied and least quantified of the supply chain management markets. AMR's best estimate is that it generates about $1 billion a year in revenue and is growing at a compound annual growth rate of 5% to 6% a year.

Part of the challenge is that as the MES market consolidates, and as small players are scooped up by larger vendors who don't break out their MES sales, it's harder to quantify the market. For example, the most significant development in the MES market was the purchase last July of Visiprise (800-953-5606, www.visiprise.com) by SAP, as the ERP giant expands its presence in manufacturing.

The most significant trend may be the emergence of new models, like on-demand, software-as-a-service, and by-the-transaction subscription models, for delivering and pricing supply chain management solutions. In the TMS market, for instance, the hosted model already represents about one third of the implementations, according to Gonzalez. While it has been slow to expand to the other applications, vendors are experimenting with new models. One idea that is emerging would deliver and price software services based on the number of transactions similar to the way a 3PL charges for order fulfillment services. Both Banker and Jacobson have had conversations with WMS and MES providers that are talking about this concept. Whether it will catch on or not is too early to tell.

"The on-demand market is about 1% of the WMS market," says Banker. "But vendors are looking at ways to reduce the upfront cost of implementing a solution."

Also see:
Top 20 supply chain management software suppliers for 2008
Top 20 supply chain management software suppliers for 2007

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