AMR Research Predicts SCM Market Will Reach $18.6 Billion by 2003
SCM Market on Track to Rival the Impact of ERP Systems
BOSTON, JULY 12, 1999 – AMR Research, Inc., the leading industry and market analysis firm specializing in enterprise applications and enabling technologies, predicts that the Supply Chain Management (SCM) market will grow at a compound annual growth rate (CAGR) of 48 percent over the next five years. According to the firm's Supply Chain Management Software Report, 1998-2003, total company revenue will reach $18.6 billion by 2003. Currently market penetration is low, but as supply chain concepts become more pervasive, SCM systems could rival the impact of Enterprise Resource Planning (ERP) systems and are expected to provide substantial strategic benefits to users.
"New trends and market opportunities, including the addition of customer-facing, Internet-enabled, and optimal decision-support functionality, are now emerging to shape the SCM market. With these developments, ERP vendors are promoting the SCM market and generating greater user interest in purchasing SCM applications," said Larry Lapide, vice president and service director, Supply Chain Strategies.
The SCM Market in 1998
Total 1998 SCM company revenue hit $2.6 billion, with Supply Chain Planning (SCP) vendors accounting for $1.1 billion and Supply Chain Execution (SCE) vendors accounting for $1.5 billion of total revenue. In 1998, SCM revenue grew at 46 percent, a decrease from 1997's growth rate of 56 percent. AMR Research attributes this revenue drop to a slow down in IT spending for business applications as companies completed implementations in preparation for Y2K, and extended evaluations of broader product offerings from multiple competitors, including ERP vendors. To differentiate themselves in an increasingly crowded arena, SCM vendors positioned products and honed marketing and sales strategies, added new functionality and modules to product offerings, and focused on specific niche markets.
The SCM market, as defined by AMR Research, includes application software maintenance and licenses, hardware, implementation, services, training, consulting, custom development,
hardware, OEM royalties, and system integration. The top five SCM vendors, based on 1998 total company revenue, were i2 Technologies, Inc., Manugistics, Inc., IBS (International Business Systems), IMI (Industri-Matematik International, Corp.), and EXE Technologies, Inc.
SCM Market Projection and Trends
AMR Research predicts that the SCM market will regain its course in the second half of 1999 as Y2K projects wind down and ERP vendors expand supply chain offerings. SCM revenue growth is expected to hit $3.9 billion by year-end, and will reach $18.6 billion by 2003, a CAGR of 48 percent.
Total Supply Chain Management Revenue, 1998 – 2003 Forecast
1998
1999
2000
2001
2002
2003
5 Year CAGR
$2.6B
$3.9B
$5.8B
$8.8B
$12.9B
$18.6B
48%
Source: AMR Research, 1999
The SCM market will continue to evolve as leading ERP vendors extend offerings in this space, and mergers and acquisitions take place. SCM will evolve as thousands of companies that have installed ERP systems are looking to generate increased return on their ERP investment. AMR Research predicts that many 1998 trends will continue throughout 1999, including the integration of product suites as backbones to support real-time supply chain decision-making, the alignment of applications to ERP systems to allow easier integration, and product and marketing strategies focused on key market segments.
Conclusion
AMR Research predicts that the SCM market will reach $18.6 billion by 2003. In the years ahead, the invasion of ERP vendors will shape the landscape of this dynamic space, as well as mergers, acquisitions and partnerships. As supply chain concepts become more pervasive, more ERP customers will turn to supply chain applications and, in time, SCM could rival the impact of ERP systems. |
