Report says global WMS market to hit $1.8 billion by 2012

Much of the growth in the warehouse management system market is driven by customers replacing old systems.

By Staff -- Modern Materials Handling, 4/8/2008

A recent report from supply chain consultancy ARC Advisory Group notes that the global market for warehouse management systems (WMS) is expected to expand at a compounded annual growth rate of 7.5% over the next five years.

The new report, titled “Warehouse Management System Worldwide Outlook,” states that the global WMS market was nearly $1.3 billion in 2007 and is projected to exceed $1.8 billion by 2012.

A major driver for the sustained growth in the global WMS market is what report author Steve Banker calls a “technology refresh” among customers with older systems, coupled with the emergence of WMS in new verticals and parts of the world that have historically not bought into WMS.

Technology refreshes come about for several reasons, Banker says. A company may need a new WMS supplier because its current supplier has gone out of business or because its supplier has been acquired by another company that’s not investing much into the WMS platform. In other situations, says Banker, a supplier is still in business but has an older system and is putting most of its R&D into newer platforms. In that case, explains Banker, if the customer wants to gain access to the newest WMS functionality, it has to switch platforms—and that requires a new implementation.

About half of all WMS deals are driven by these “refreshes,” explains Banker.

“Historically, when people bought a WMS, they were told it was an off-the-shelf solution, but it can be a lot of money and a lot of pain [to get acclimated and up and running],” he says. “Most companies would keep a WMS for about 11 years and not upgrade it. When it came to the time to think about an upgrade, they would consider it and then say, ‘it’s going to cost us as much to buy a new WMS, so let’s see what’s out there.’”

In terms of WMS offerings that are driving growth in the global marketplace, part of the growth is sustained by WMS that are driven by a modern architecture, such as a software-as-a-service (SaaS) model. SaaS systems can handle quick upgrades and provide adaptability and flexibility.

But Banker adds there are also WMS that are not functionally rich that are basic systems and very inexpensive, which are driving “huge growth” in Eastern Europe, China and India.

Jeff Berman of Logistics Management provided the reporting for this story.