Supply chain management industry sees surprise decline

By Dawinderpal Sahota
17 Jun 2010 View Comments
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Supply chain management software has taken a slight hit over the last year as Gartner reports that worldwide revenue for the industry has declined, with new licence revenue dropping by more than seven per cent.

The research firm reported that total revenue in the industry was $6.2bn (£4.2bn) – down 0.7 per cent from 2008. New licence revenue fell by 7.4 per cent in 2009; however, recurring revenue associated with subscriptions and maintenance kept the industry ticking over, growing by 10.8 per cent and 0.2 per cent, respectively.

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Gartner explained that it was difficult for supply chain management solution vendors to drum up new software sales in 2009. Vendors that succeeded in growing their business did so by switching their offering wholly, or in part, to subscription delivery of their solutions.

Chad Eschinger, research director at Gartner, claims that despite the slight dip in overall revenue, the market for supply chain applications seems to have largely weathered the recent financial storms.

Ariba generated 8.8 per cent growth. Oracle too experienced growth with a best-of-breed approach, with Gartner estimating it was a modest 0.2 per cent growth. The remaining four market share leaders all experienced a decline in revenue from their supply chain management solutions in 2009.

“While suite vendors are typically well-positioned within organisations to stall emerging-application purchases, there are significant opportunities for specialised vendors that offer differentiating domain and vertical solutions that are "blind spots" in a suite provider's offering,” said Eschinger.

“Current sentiment with buyers is to explore best-of-breed solutions to augment or extend ERP investments, and Ariba’s transition to offering its solutions as a service has definitely aided its cause and success."

He added that the economic climate of the past few years, and the maturity and saturation of implemented business applications, has proven difficult. This stressed environment has forced many vendors to increase maintenance rates and explore various channel, delivery and pricing options.

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