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  Supply Chain Trends and Issues : Our Weekly Feature Article on Important Trends and Developments in Supply Chain Strategy, Research, Best Practices, Technology and Other Supply Chain and Logistics Issues  
 
 
  - May 19, 2008 -  

Supply Chain Software: AMR Research Remains Bullish on Supply Chain Software Spend

 
 

Uptrend that Began in 2005 should Continue this Year, Driven by Legacy Application Replacement and Interest in Collaborative Technologies; More Companies Going for Custom-Built Solutions?

 
 

 

SCDigest Editorial Staff

SCDigest Says:
The AMR Research found that across a wide number of supply chain software categories, there was still a small but important percentage of companies that believe that “custom-built” applications were the best choice for their companies – and that this perception was even stronger in the Europe than the US.

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The supply chain software market in North America and Europe should continue the uptrend that began in 2005, according to a study by AMR Research. While there are many factors driving this growth, the interest in replacing legacy applications with more current, packaged apps, and strategies to become more collaborative stand out as investment drivers.

In AMR Research’s Supply Chain Management Spending Study for 2008, the company projects a total increase in supply chain software spending of 12%, including implementation and other costs, and 7% in software spending alone – good news for supply chain software providers. The data was based on a survey of more than 300 IT and supply chain managers in North America and Europe.

Replacement of existing legacy supply chain applications is a key focus. AMR said that half of the survey respondents plan on retiring legacy applications for new packaged solutions in 2008. However, on average, companies’ supply chain technology spend will be about evenly split between replacing existing applications and deploying new technologies, according to AMR.

On the replacement side, AMR found upgrading order management applications due to high maintenance costs and difficulty integrating the older technology with other applications was the most prominent strategy.

For deployment of new technology, “Applications, technologies and services that facilitate collaboration, not only with external trading partners but those within the boundaries of the enterprise, lead the list for net new functionality that enterprises will adopt over the next year,” according to AMR researchers John Fontanella and Eric Klein. “Vendor managed inventory (VMI) and collaborative forecasting top the list,” there, they add.

ERP, Best-of-Breed – or Custom Built?

The ERP versus best-of-breed software provider wars are at something of a stalement at the moment in terms of market share and adoption.

“The demise of the best of breed supply chain technology vendor is not imminent,” AMR notes. “In fact, it's likely that gains will be made against ERP vendors in areas that require multi-enterprise integration and leading edge functionality.”

(Supply Chain Trends and Issues Article - Continued Below)


 
 
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Interestingly, the AMR Research found that across a wide number of supply chain software categories, there was still a small, but important, percentage of companies that believe that “custom-built” applications were the best choice for their companies – and that this perception was even stronger in the Europe than the US.

“European companies do report a much higher number of custom-built applications to manage their supply chains than their U.S. counterparts. Half of the categories listed had at least 20 percent of applications that were neither ERP nor commercial off-the-shelf software,” the AMR Research found. It adds that “even in the U.S, there is a thirst for custom-built applications, particularly in areas like VMI, collaborative forecasting, and inventory optimization.”

While adoption of “on-demand” applications, sometimes referred to as “Software as a Service” (SaaS) is still relatively low, it’s a trend that should accelerate, AMR says. However, that trend needs to be considered in the light of the other trend towards increased customization to meet specific business needs, which is, in many respects, the opposite concept of that behind the rise of SaaS.

Does anything in the AMR supply chain technology research surprise you? Are you seeing a trend towards custom-built supply chain applications? Why? Let us know your thoughts at the Feedback button below.

 
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