Cloud-first strategies underpin growth of SCM revenues in 2017

The latest market share data from analyst firm Gartner showed that adoption of supply chain management (SCM) software accelerated significantly in 2017. Total worldwide market revenue grew 13.9 percent to reach a total of $12.2 billion in 2017.

“The SCM market’s revenue performed well in 2017, continuing the trend of accelerating growth from recent years. This is happening because SCM technologies are a key component of delivering digital business strategies,” said Balaji Abbabatulla, research director at Gartner.

“SCM technologies create digital value by optimizing the flow of products, services and related information from source to customer and from customer to source.”

“The top five vendors in the SCM market all increased revenue, but only JDA and Infor grew their market share by outperforming the total market growth,” said Abbabatulla. “The ‘other vendors’ category is growing significantly faster than the top five market incumbents, but the top five rankings remained the same in 2017.”

Abbabatulla added: “Smaller cloud-native vendors enjoyed an average revenue growth of 41.4 percent in 2017. The top five vendors are defending their market share by pivoting toward cloud-first strategies and quickly introducing new products through development, acquisition or partnerships on their cloud platform.”

Cloud offerings are driving growth in the market partly because more midsize organizations are adopting SCM solutions to drive digital business models. Midsize organizations help bolster revenue growth because they are net new customers of SCM products and are not bound by replacement and upgrade cycles from legacy investment.

“Cloud solutions typically have lower barriers to entry and are more easily scalable, and are therefore a better fit for midsize organizations looking at SCM for competitive advantage,” said Abbabatulla. “We expect that vendors offering a well-defined, vertical-industry-oriented strategy for midsize organizations will grow rapidly over the next five years.”

Another source of competitive advantage for SCM vendors has been effective incorporation of artificial intelligence (AI) into their products.

“While adoption levels of AI vary across sub market segments, we expect it to drive revenue growth as AI technologies and tools mature,” said Abbabatulla. “This is because AI can bring productivity and user experience improvements by automating routine tasks and providing more effective support to complex decisions.”

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