BY JAMES COOKE, EDITOR AT LARGE
techwatch
WMS market headed for a split
REDPRAIRIE CORP.’S RECENT ACQUISITION OF SMARTTURN
signals the growing importance of on-demand software applications
in the warehouse management systems (WMS) market. In case you
missed the news, RedPrairie, a developer of traditional supply chain
execution solutions, in May bought SmartTurn, a provider of on-demand warehouse management applications. Smart Turn is one of a
handful of players in this niche market. Others include Vigna (which
markets an application called HWY905 WMS), Four Soft Ltd. (4S
eLog WMS), 7Hills Business Solutions (eBizNet WMS), and Synergy
Logistics (Snapfulfil WMS). By adding the Smart Turn app to its portfolio, RedPrairie can now offer a WMS solution to DC operations of
all sizes and levels of complexity.
The Web-based approach to software delivery provides a sharp
contrast to the traditional way of doing business. Historically, WMS
vendors sold licenses to customers for the use of their software, which
the customers then had to install on their own servers.
In addition to licensing fees, customers had to pay for
maintenance and software upgrades whenever the
vendor issued a new release. And in many cases, they
had the added expense of systems integration work
needed to get the WMS to “talk” to any other applications they were using. Given all the costs, it’s no surprise that only large companies have been able to
afford these solutions.
Under the on-demand model, by contrast, vendors
“rent” their software to customers for a modest
monthly fee. The advantages to companies with limited budgets are obvious. For one thing, they avoid a
huge upfront capital outlay for software licenses. For
another, deployment is quick and easy. The vendor
hosts the application on its own servers; all a user
needs to gain access to an on-demand application is a Web browser—
there’s no need for a lengthy software installation or for systems integration work. On top of that, the software vendor usually maintains
the application and provides updates as part of the service, which is a
big selling point for small and medium-sized customers that lack in-house IT resources.
Despite those attractions, the on-demand WMS vendors have yet to
capture more than a fraction of the overall WMS market. Chad
Eschinger, an analyst at Stamford, Conn.-based Gartner Inc., estimates that sales of hosted WMS solutions accounted for a mere 5 to
6 percent of the $800 million global WMS market last year. Part of the
problem, says Dwight Klappich, another Gartner analyst, is that on-demand WMS solutions are simply not competitive with the more
elaborate licensed packages.
Klappich has a point. On-demand WMS solutions tend to be basic
applications; they keep tabs on the receipt and
disbursement of stock, interface with RFID and
bar-code scanning equipment, and not much
else. The licensed WMS packages, on the other
hand, offer features that go well beyond invento-
ry management to include functions like slotting
optimization and labor management.
