Don't count the big software guys out just yet. That's the word from Gartner analyst C. Dwight Klappich with regard to the supply chain software market.
The "big software guys" in question are the giant megasuite vendors like SAP, Oracle, and Infor that offer enterprise resource planning (ERP) systems along with vast suites of add-on modules. While they have long competed in niche markets like warehouse management systems (WMS), these "Big Three" vendors have yet to make the kind of headway here you might expect. Right now, for example, the WMS market is split among three types of players: the megasuite vendors, some small upstarts, and large "best-of-breed" players that specialize in feature-rich supply chain execution systems. For the past decade, two of these best-of-breed players, RedPrairie and Manhattan Associates, have dominated the WMS space, according to Klappich.
But now, it appears the Big Three are poised to give RedPrairie and Manhattan a run for their money, says Klappich. All three are adding "bells and whistles" to their WMS packages to make them more competitive with the best-of-breed offerings, he notes. Klappich is pretty confident they'll succeed in their quest. "I believe within the next five years, they [the megasuite vendors] will have upward of 50 percent market share in terms of [WMS] customers, though not dollars," he says.
Why is Klappich so bullish on the megasuite vendors? There are a number of reasons, but they mostly boil down to advantages that arise from the breadth, scope, and scale of their operations.
First off, there's the ability to parlay advances in other areas of software development to their warehouse offerings. Klappich cites the example of already-developed mobile frameworks, which the vendors can simply extend to their warehouse software. This would allow them to offer customers the option of receiving alerts and performance reports on their tablets instead of relying on their desktop computers. Likewise, the large vendors can build on work they've done in the area of decision support to provide "smarter" WMS solutions. A WMS enhanced with decision-support functionality can offer such extras as recommendations for ways to get more productivity out of a facility's labor and equipment.
Another advantage enjoyed by the megasuite vendors is that their applications are expressly designed to work with one another. Since vendors like SAP and Oracle often provide the information technology backbone for the entire company, integrating their warehouse management solutions with other company systems is a snap. "Because it can be integrated right out of the box, it's a winning combination for them," says Klappich.
Although some of the upstart WMS providers tout their products' ease of customization (see "Buying a WMS? Have it your way," TechWatch, December 2012), their competitors are quickly catching up in that regard. Klappich says the Big Three have devised ways to tailor their offerings to a customer's needs without having to rewrite lines of computer code. "SAP and Oracle are just as customizable as the best-of-breed vendors," Klappich asserts.
Finally, the megavendors are in the best position to take advantage of a software trend that Klappich dubs "supply chain execution convergence." In the past, a company might buy an ERP system from one vendor, a warehouse management solution from another, and a transportation management system (TMS) from yet another. One result of this piecemeal software acquisition was that functions were managed independently, with no coordination among activities. The TMS, for example, would plan shipments without regard for how much labor the WMS had allocated to a shift.
As more companies seek to orchestrate their supply chain operations from one end to the other, this approach will no longer fly. Buyers will start to demand solutions that can bridge functions and work in concert for enhanced supply chain coordination. "The megavendors are in a better position to build a platform that will support a higher level of convergence," says Klappich.
