Starting the Upswing?

ARC study: warehouse management system market emerges from recession - but North America faces slowing growth

Dedham, Massachusetts  April 3, 2002  Last year was a tough year for the Warehouse Management System (WMS) market. The overall market shrank by 6 percent between 2000 and 2001, while the North American market shrank by almost 12 percent. Total software and service revenues for the WMS market was over $738 million in 2001, and will grow to $1.17 billion by the end of 2006, according to a newly revised study from ARC, 'Warehouse Management Systems Worldwide Outlook'.  While North America will emerge from its recession in 2002, and growth will resume, ARC nevertheless believes the market in North America is mature. ARC is forecasting over the next five years a Cumulative Average Growth Rate (CAGR) of almost 10 percent, but most of that growth will occur outside of North America. 

Between 1998 and 2001, the CAGR in North America was about 6 percent. This was over 2 times slower than the EMA region and about 4 times slower than in the Asia Pacific and Latin American regions. North America is the region that the great majority of WMS suppliers hail from and where a majority of the sales occur. However, while it still dominates, that presence is waning, according to ARC Director of Supply Chain Research, Steve Banker, the study's author. North America accounts for about 63 percent of worldwide WMS software and service revenues, down from 67 percent last year.  Long-term growth will only be modestly higher than inflation in North America. This has several implications, particularly for North American suppliers. 

Steve continued, The most obvious implication is that many companies need to develop global sales, implementation, and support capabilities. This is not easy to do. There is no other market as homogenous as North America. You cannot open one office in Europe or Asia and expect to have success across those regions. 

In a mature market, the importance of indirect channels also increases. As industry solutions become more standard and easier to implement, there is a movement away from the high cost direct sales channel to lower cost indirect channels. The final implication of a mature market is that the product footprint may need to change. Add-on modules will grow considerably faster than the core solution.