While other industry sectors have spent the past two years bemoaning the weakness in IT spending, the overall Supply Chain Planning & Collaboration (SCP&C) market has surged, exceeding $1.9 billion in 2003. And a surprising 85 percent of that spending came from the industrial manufacturing sector, which bought $1.61 billion worth of supply chain software and services in 2003.

What's going on? Market analysts at ARC Advisory Group of Dedham, Mass., believe the investment reflects a desire to cut costs and boost efficiency. As they see it, many companies have taken advantage of the sales lull in the past couple of years to step back and invest in systems that will make their operations more cost effective. "Industry today is facing a significant need for change due to the substantial increase in business transaction costs over the past few years. As a result, companies are investing primarily to make the value-added chain from supplier to end customer more efficient, while at the same time they're reviewing relevant internal processes," says ARC Analyst Steve Clouther, the author of ARC's SCP&C Software & Services Worldwide Outlook market study.

Don't expect a slowdown in that spending anytime soon. ARC projects that the SCP&C market focused on industrial manufacturers and retailers will grow to $2.2 billion by the end of 2008.