Forecast: Consolidation Likely in WMS Market

May 4, 2009
A report by the Dedham, Mass.-based ARC Advisory Group predicts that the global market for warehouse management systems (WMS) is headed toward a period of consolidation.

ARC's "Warehouse Management Systems Worldwide Outlook: Market Analysis and Forecast Through 2013" reports that all five of the top WMS suppliers (HighJump Software, Manhattan Associates, Oracle, RedPrairie and SAP) grew in 2008 -- with four of those vendors posting double-digit revenue growth. Over the past decade that ARC has been issuing the report, almost all of the larger WMS suppliers have been growing their market share.

Still, the party may be over soon.

"That trend can't continue forever," says Steve Banker, service director for supply chain management at ARC Advisory Group and author of the report. "Eventually the market will reach a point where in order for a large supplier to gain market share, they will have to take it away from another major vendor."

This year may be the year, Banker adds.

"ARC expects that at least 10 WMS suppliers will go out of business [in 2009]," Banker notes.

While smaller WMS vendors always have faced questions about their viability, more and more smaller suppliers will be asked to open up their books in the coming year. According to Banker, many of those suppliers likely will fail that test.

The good news for stronger suppliers is that there should be some bargains out there. Suppliers that are adept at acquisitions will be able to pick up dying WMS companies' maintenance revenue streams for low acquisition prices, according to ARC.

"In a smaller, consolidated market, the major suppliers will find that the WMS market is much more of a zero-sum game," Banker concludes. "One vendor's growth will come at another's expense."

Despite the worst global recession since the 1930s, the worldwide WMS market suffered only a minor contraction in 2008, shrinking by a modest 1%, according to the ARC report. However, that comes with an asterisk.

"Without the strong year the top WMS vendors had, the market would have contracted far more severely," Banker explains.

The report projects that the worldwide WMS market will grow from $1.25 billion in 2008 to $1.4 billion in 2013, which is a CAGR of 2.2%.

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