Digital Commerce, IoT To Drive SCM Market, Says Gartner

by CXOtoday News Desk    Jun 22, 2017

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The supply chain management (SCM) market will exceed $13 billion in total software revenue by the end of 2017, up 11 percent from 2016, said research firm Gartner. It is on pace to exceed $19 billion by 2021, as software as a service (SaaS) enables new revenue opportunities.

 ”Between 2017 and 2021, Gartner forecasts nearly $6 billion in total software revenue will be added to the SCM market,” said Chad Eschinger, managing vice president at Gartner. “Digitalization is increasing demand for agility and forcing new business models, which is boosting spending in the SCM market.”

SCM providers are already differentiating themselves from competitors and driving revenue growth by incorporating new digital business technologies, such as mobile, machine learning, in-memory technologies, multienterprise visibility and the Internet of Things (IoT), into their offerings.

Eschinger added that to remain competitive in this environment, end-user organizations are seeking to discover and exploit value in the huge amounts of data generated throughout an ever-extending network of businesses and connections that make up a modern supply chain.Moreover, the move to SaaS delivery shifts costs from capital expenditure (capex) to operational expenditure (opex), which makes investment in SCM technology more attractive to small and midsize businesses (SMBs) and organizations in emerging markets, therefore expanding the addressable market and increasing overall spending.

The SCM market forecast is made up of three categories: supply chain planning (SCP), supply chain execution (SCE) and procurement. Adoption and associated revenue for SaaS are moving through the market at different rates, with procurement leading the move to cloud, and SCP trailing.

Overall, SaaS revenue growth is driven by a combination of factors: vendors moving to cloud-first or cloud-only deployment models, and end-user organizations becoming more comfortable with issues such as cloud security and appreciating the capabilities and innovation of leading-edge SaaS solutions.

By 2021, SaaS deployments are forecast to account for more than 35 percent of total SCM spending (see Figure 1). Sales of on-premises licenses will decline to less than 20 percent of total spending. Hybrid SCM environments with coexisting cloud and on-premises applications are becoming more commonplace, with information hubs and supplier networks dominating the move to cloud.

SCM Software Forecast by License, Maintenance/Support and SaaS Spend, 2015-2021

Source: Gartner (June 2017)

“To help support next-generation supply chains and real-time business requirements, we expect consolidation of existing solutions into broader, multidomain suites, but also a continued stream of new point solutions that will support innovation, address specific needs and offer new value,” said Eschinger.

“The growing impact of digital commerce will drive greater investment in supply chain analytics, and the lure of faster decision making and eradicating inefficiencies will drive investment in smart machines and IoT and the associated SCM software.”