While the total warehouse management system (WMS) market has until recently been growing at about 15% annually, Web application hosting (WAH) revenue is growing at roughly 57%, making it a new revenue engine for many WMS companies.

That's according to ARC Advisory Group (www.arcweb.com) director of supply chain research, Steve Banker, who authors a new study, "Warehouse management systems worldwide outlook."

By using WAH, users pay a recurring fee to access the application via the Internet or virtual private network (VPN). This is an alternative to paying a license fee and installing the application in-house.

Revenue streams for WAH, including transaction, subscription, and hosting fees, accounted for less than 1% of total WMS revenues in 2000.

Nevertheless, Banker says "these streams will become the fastest-growing component of total revenues over the next five years."

Banker believes WAH is at the beginning of the evolutionary curve. "However, this growth must be put in context. Only about $7 million in revenues were generated in the WAH area. Even with a 57% CAGR, only about 4% of WMS revenues will come from this revenue category by 2005."