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SCM software income to touch $10 bn in 2014 : Gartner

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Revenue from supply chain management (SCM) software is on track to reach $10 billion in 2014, a 12.2 percent increase from 2013, according to Gartner. This would be the highest annual growth rate since 2011.

“The market for supply chain technologies is buoyant. Both supply chain execution and supply chain planning revenues are on course to grow at double-digit rates in 2014,” said Chad Eschinger, Research Vice President – Gartner.

In the fourth quarter of 2013, Gartner conducted a survey of 447 supply chain professionals across North America. When asked which obstacles hindered their progress toward achieving organisational goals, respondents identified inaccurate forecasts of demand for products and variability of demand as the leading ones. Both can be overcome with the help of supply chain initiatives and technologies.

43 percent of the supply chain professionals surveyed indicated that, to deal with rising levels of integration complexity, they were strongly committed to a single underlying technology platform that would improve the visibility of internal processes and enable more effective communication and collaboration with suppliers and buyers.

“This trend toward a unifying application platform is growing and will further drive sales of supply chain solutions as more companies adhere to a platform strategy,” said Eschinger.

Through 2018, Gartner estimates that nearly 70 percent of businesses will pursue a single-platform (underlying architecture) strategy to integrate disparate systems, to improve supply chain visibility.

Market Profile

Although the SCM software market is nearing the point at which over 60 percent of its revenue will derive from existing implementations, in terms of new spending in 2013 approximately 16 percent of SCM investments were by companies adopting this software for the first time.

Gartner expects this figure to fall to less than 10 percent by 2018, and that the vast majority of “new” spending will come from organizations that already have SCM and are purchasing add-on functionality.

“Through 2018, 40 percent of new spending and 80 percent of recurring end-user spending will focus on advancing and extending foundational supply chain capabilities,” said Eschinger.

Purchase Style

Organisations that adopt supply chain software still prefer hosted or on-premises applications. This is largely because software-as-a-service (SaaS) SCM solutions have not reached functional parity with leading on-premises SCM offerings.

According to Eschinger, the market for SCM solutions is influenced by a climate that continues to make large capital expenditure difficult for many organizations and this will drive many organisations to adopt solutions that are deemed ‘best of breed’ and often delivered as a subscription, which provides more focused capabilities and typically enables less expensive and quicker deployments.

“We expect that, through 2018, twice as many organizations will purchase private cloud and hosted offerings each year as those that purchase multi-tenant SaaS offerings,” said Eschinger.

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