There's been considerable speculation of late about the number of supply chain execution software vendors. Quite simply, are there too many? Based on several acquisitions that occurred in the final quarter of 2002, the answer appears to be yes.

In October, Manhattan Associates, the largest provider of warehouse management and supply chain execution software, agreed to purchase Logistics.com, a transportation management provider. Following that: SynQuest merged with Viewlocity and Tilion; MAPICS bought Frontstep; venture capitalists Symphony Technology Group bought Industri-Matematik; and investment firm Supply Chain Holdings bought Cambar Software.

These deals came as no surprise to the consulting community: they've been predicting a shakeup for months. "There are simply too many software companies," says Gerald McNerney, senior research analyst in the supply chain service at AMR Advisory. "And too many of those still in business today have financial situations that are questionable at best. A lot of these vendors have been surviving for years on maintenance and service agreements."

And the trend isn't over yet—supply chain software suppliers are likely to continue disappearing through mergers, acquisitions and even bankruptcies, he adds.

That, says McNerney, is because industry leaders like Manhattan continue adding order execution and fulfillment functionality to their suite of applications through selective acquisitions. And that will make it even more difficult for struggling software providers to close new deals.

McNerney's advice to anyone planning to implement a new warehouse or transportation management system in 2003: Before going forward with an untested vendor, make sure your contract allows you to acquire the code and manage the product if your supplier goes under.

"This market really bodes well for the bigger established players," he says. "IT folks would prefer to keep the number of vendors they're working with to a minimum anyway. The thinking now is: I may not be getting all the functionality that's available from that one vendor, but I'm getting enough from someone who will be there for me going forward."