Despite the global recession, the worldwide market for Warehouse Management Systems (WMS) shrank just under one percent in 2008. ARC is forecasting a much more substantial downturn in 2009, before the WMS market begins to grow again in 2010. Because of the two-year downturn, the market is only projected to grow by a CAGR of 2.2 percent through 2013. The market was $1,247 million in 2008 and is forecasted to be $1,388 million in 2013, according to a new ARC Advisory Group study.

A Tale of Two Markets: Warehouse According to Steve Banker, Service Director for Supply Chain Management, and author of ARC's Warehouse Management Systems Worldwide Outlook: Market Analysis and Forecast through 2013, "Many WMS suppliers told a similar story of woe about 2008. The year started good. Selling cycles began to lengthen in the third quarter. And many suppliers, particularly mid-size and smaller vendors, were not able to close any new software deals in the fourth quarter."

Based on the global economic turmoil, it is not surprising that the WMS market shrank in 2008. What is surprising is just how well the top five suppliers performed last year. All five of the top suppliers grew. Four of the five vendors posted double-digit revenue growth (year-over-year), and one of those five grew by more than thirty-five percent.

According to Mr. Banker, "I was surprised the WMS market shrank by only one percent in 2008. However, when I looked at the data and realized that the top five suppliers account for just over half of the total market based on revenues, that result became understandable. Without the strong year the top WMS vendors had, the market would have contracted far more severely."

Market Consolidation Looms: ARC has conducted the WMS study for over a decade. In most years, almost all of the larger WMS suppliers gain market share. According to Mr. Banker, "That trend can't continue forever. 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." Next year may be that year. Banker says, "ARC expects that at least ten WMS suppliers will go out of business."

Smaller WMS suppliers have always faced questions about their ongoing viability. Will this vendor be around in a few years to provide support? How much can they continue to invest in product development? These are some of the questions prospective customers tend to ask, and it is not uncommon for them to review a vendor's financials for reassurance that a vendor is financially viable. In the coming year, more small suppliers are going to be asked to open up their books, and many will fail that test.

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