April 1997, Volume 14, No. 4 Manufacturing Software Market Report: Half-Empty or Half-Full?

A year ago we predicted a shakeout for the manufacturing software industry (see cover story, Intelligent Manufacturing, June 1996). Now comes independent confirmation of that shakeout, pointing to a definite "rich get richer, poor get gobbled up" trend.

Advanced Manufacturing Research (AMR), a Boston, Mass.-based market research firm, tracked 33 players in various manufacturing software areas (supply chain management, enterprise resource planning (ERP), manufacturing execution systems (MES) and electronic commerce. This software segment as a whole grew at a 16% pace in 1996, AMR estimated, while companies in the top third grew at 94% clip.

The 16% overall growth represents a significant drop from the 68% growth AMR estimated for 1995, and the firm sees this trend as an indication that the top players are "firmly emerging." Of the publicly-traded companies, the top stock performers last year in the enterprise applications area were Ross (up 220%), Manugistics (up 169%) and Aspen Technology (up 137%). For the ERP vendors, the best performers were Oracle (up 47%) and Baan (up 53%).

As with all market studies and estimates, the trends have to be taken with a few large handfuls of salt. For instance, one of the largest players in the manufacturing software arena -- SAP -- is not even factored into AMR's analysis because its stock is traded on the German stock exchange, rather than on Wall Street. Furthermore, some of the best run and most profitable software companies are privately held, and do not publicize their quarterly revenues.

With that caveat, it is nevertheless fascinating to compare notes with AMR's findings. The firm believes that emerging companies may find it difficult to close the gap between themselves and the most successful players, especially in the ERP segment.

AMR's Bruce Richardson expects to see "the first real surge for supply chain management applications, since more companies are beginning to understand the impact that new distribution planning, forecasting and transportation management improvements can have." Of course, AMR is heavily involved in promoting supply chain software through its Supply Chain Council (see Intelligent Manufacturing, October 1996), so Richardson's remarks sound a bit more like a wish than a prediction.

Be that as it may, other areas to watch, according to AMR, will be advanced planning and scheduling, plus front-end systems such as sales configuration and customer service systems. On the down side, companies specializing in plant operations may find demand for these applications moderate at best.