Dedham, Massachusetts: The overall Supply Chain Planning & Collaboration (SCP&C) market exceeded $1,903 million in 2003 despite the weak macroeconomic environment over the past two years. This is particularly interesting since the recession in the United States had substantial reductions in capital spending, especially spending on information technology. And, the industrial manufacturing sector, at $1,615 million, accounted for 85 percent of this market.
Despite the slow, challenging market, many companies regard the current business climate as a good opportunity to take decisive steps aimed at revamping their operations and making them more cost effective. Therefore, the SCP&C market focused on industrial manufacturers and retailers will grow to $2,190 million by the end of 2008 on a Cumulative Annual Growth Rate (CAGR) of 2.8 percent during this forecast period., according to a new market study by ARC Advisory Group.
Sales Driven by User's Cost Savings
"The biggest difference between the situation a couple of years ago and now is that companies are investing almost exclusively to generate greater cost effectiveness. Despite the weak economy, 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 are reviewing relevant internal processes," according to ARC Analyst Steve Clouther, the author of ARC's SCP&C Software & Services Worldwide Outlook market study.
Geographically, North America accounted for most of the 2003 SCP&C revenues for software and services, followed by Europe, Middle East & Africa. "In 2004, the European Union expands by ten countries, and as a result, it will be the region of growth opportunity for the SCP&C vendors," said Clouther.
Services Are the Cornerstone of Success
SCP&C services account for the majority of this market and are forecasted to increase their portion. The software license ASP (Average Selling Price) has been steadily eroding, as has the number of million dollar plus deals, so the SCP&C vendors are aggressively going after more service revenues. This is putting pressure on third party service providers. This new element of the SCP&C vendor's strategy is to provide clients with comprehensive solutions for their internal and external supply and demand chains by offering implementation services for their products. When implementing the software, users typically make changes to their business processes and overall operations, including their planning and pricing functions. To assist users in making these changes, vendors now offer a wide range of implementation services. Some of the new services help clients redesign their operations to take full advantage of the SCP&C software.
ERP Vendors Are Offering SCP&C Solutions
There are four suppliers in the group of top ten SCP&C vendors. While they represent only 20 percent of the market, they are increasingly taking market share away from the smaller best-of-breed vendors. Those that are also ERP suppliers can offer solutions for processes such as Procurement-to-Pay and Order-to-Cash, while providing the enterprise with the capabilities to monitor and analyze the extended supply chain. This is preferred rather than dealing with supply chain problems that are more limited in scope (the traditional best-of-breed approach). The larger suppliers should continue to gain a larger percentage of the market over the forecasted period of this study.
Founded in 1986, ARC Advisory Group has grown to become the Thought Leader in Manufacturing and Supply Chain solutions. Further information can be obtained from ARC, Three Allied Drive, Dedham, MA 02026, 781-471-1000, Fax 781-471-1100, E-mail [email protected], Web ARCweb.com.
