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SAP remains the supply chain management software leader

The supply chain management (SCM) software market continues to grow and SAP and Oracle remain the market leaders.

SAP claimed the largest share of the supply chain management software market last year, with Oracle running second, according to new research from Gartner.

The two software giants grew at roughly the same rate, according to Chad Eschinger, research director at Stamford, Conn.-based Gartner. SAP now holds 22.4% of the supply chain management (SCM) market, totaling $1.3 billion in revenue, up from 20% last year. Oracle holds 16%, totaling $955 million in revenue, up from 15% last year.

Overall, the market for SCM software vendors is very good, growing by 18% to total $6 billion worldwide in 2007, according to Gartner. Much of that growth can be attributed to emerging markets and the growing availability of Software as a Service (SaaS). Companies are moving off spreadsheets, and SaaS is making SCM accessible to companies that otherwise couldn't afford it, Gartner says. Companies can also approach SCM by adopting modules specific to their needs.

"Part of what we're seeing is folks that had been using spreadsheets are starting to get into the game. Software as a Service is starting to take hold," Eschinger said. "It's emerging markets. It's what we would call the tactical supply chain."

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While SAP and Oracle continue to dominate the market – holding nearly 40% of it -- there were bright spots for some of the smaller, niche vendors. Scottsdale, Ariz.-based JDA Software, which ranked third with nearly 4% of the market, grew 67% between 2006 and 2007. HighJump Software, based in Eden Prairie, Minn., grew 82%.

Some of the biggest growth came in supply chain planning – specifically in modules like service, parts and planning, domestic and global transportation, and areas around supply visibility. For instance, when Mattel Inc. had problems with the lead paint in its toys last December, there was a rush to buy software that gave companies a better understanding of where the supplies were coming from and what was getting into the products.

"During the past 18 months, we've witnessed businesses rediscovering the criticality of supply chain technologies to drive greater customer and supplier satisfaction through better visibility and planning," Eschinger said.

SAP's Richard Howells, director of global solutions marketing, said supply chain planning is still the single largest segment of their supply chain business. SAP's offerings this past year included, among others, enhancements for tracking shelf life data related to consumer products, contract manufacturing for the high tech industry, and campaign planning for chemical and processing industries. They also added transportation management that addresses shipper and complex carrier requirements.

"The focus has been on increasing network visibility and improved collaboration and planning across the business network," Howells said in an e-mail. "This collaboration across end to end business processes that span traditional company, department and software boundaries are now being demanded by customers."

Yet, with much of the growth in the market deriving from smaller companies moving off spreadsheets and adopting tactical SCM modules, rising energy costs could bring that growth to a grinding halt.

"It could potentially cripple a lot of projects moving forward," Eschinger said. "Where is the tipping point?"

If the price of oil gets too high, he said, a company that works in a distribution environment might just start stockpiling inventory rather than investing in a lot of expensive software to manage it, because it could be cheaper than trying to move it along.

That said, Eschinger is encouraged by this year's growth.

"There was a lot of good growth last year," he said. "After years of looking at this market and seeing it sort of in the murk…things have started to click."

As for who will win more market share next year, SAP or Oracle, Eschinger was diplomatic.

"I think both companies are offering better solutions; they're making the solutions available to a broader audience," he said. "I think that their presence and their push is forecasting a greater drive for innovation within the industry."

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