Warehouse Management System Market Brutally Pummeled by the Recession

Market outlook from ARC Advisory Group finds WMS space back to where it was in 2005; on-demand market a bright spot in otherwise glum market, analyst suggests

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Dedham, MA — July 20, 2010 — The global recession brutally pummeled the warehouse management systems market in 2009 as backlogged projects that had carried solution providers through 2008 began to dry up and new projects were put on hold, according to a recent report from ARC Advisory Group.

In its report "Warehouse Management Systems Worldwide Outlook Study," ARC says that the first signs of the recession in the WMS market began to emerge in 2007, but the sales of warehouse management systems dipped only slightly in 2008 against the previous year, thanks to previously initiated projects.

By 2009, the backlog was gone, says Steve Banker, service director for supply chain management at ARC and principal author of the report. "The market has lost five years of market growth. The global 2005 WMS market was bigger than the market in 2009."

Consolidation Fails to Occur

Despite the woeful performance of the WMS market, there was little consolidation in the market. Maintenance revenues served as a key firebreak in this market, helping to keep the market afloat. For a software company, the largest costs are in labor. The combination of maintenance revenues, downsizing and wage reductions kept suppliers financially solvent, according to ARC.

Even in bad markets, it is often possible to find segments that are continuing to grow. In the WMS market, software-as-a-service (SaaS) multitenant and hosted solutions continue to be an area of growth. This niche is experiencing double-digit growth, albeit from a small base.

The good news, ARC adds, is that the global recession is coming to an end. But much uncertainty remains, including the risk of a double-dip recession. Questions also remain as to whether growth will return to prerecession levels or remain lower than the global growth seen before the recession. On the other hand, will there be a surge in pent up demand?

In laying out its macroeconomic and market specific analysis and model, ARC forecasts growth in the WMS market, although at lower than average historical rates.

More information on this study is available at www.arcweb.com/res/wms.