Gartner: Medium-sized companies are embracing cloud-based software

The adoption of supply chain software accelerated significantly worldwide in 2017, according to research and advisory firm Gartner. The total market grew by 14% last year to reach a total revenue of US$12.2 billion, compared with a growth rate of 11% in the previous year. The key driver of this growth is the strong rise in the use of cloud-based supply chain software by medium-sized companies.

Medium-sized companies are implementing supply chain software to support the development of digital business models, states Gartner. Such software is a crucial component of delivering digital business strategies by optimizing the flow of products and related information. The reason that more and more medium-sized companies are implementing supply chain software is because, unlike the big multinationals, they are not bound by the replacement and upgrade cycles of legacy software.

“Cloud solutions typically have lower barriers to entry and are more easily scalable,” says Balaji Abbabatulla, Research Director at Gartner. “This type of software is therefore a better fit for midsize organizations looking at supply chain software for competitive advantage. We expect that software vendors offering a well-defined, vertical-industry-oriented strategy for midsize organizations will grow rapidly over the next five years. Smaller cloud-native vendors enjoyed an average revenue growth of over 40% in 2017.”

The annual survey conducted by Gartner in partnership with Supply Chain Media – publisher of this magazine – revealed that half of all the companies worldwide use cloud-based supply chain software. 64 of the respondents were big companies with more than a thousand employees. Companies that are already (in the process of) using cloud-based solutions do so because of the convenience, speed and costs compared with on-premise implementations. The large majority of respondents are considering cloud-based solutions but are somewhat hesitant due to security concerns. Solutions for activities such as customs clearance (Global Trade Management), transport management (TMS) and supply chain collaboration are often already in the cloud. These will increasingly be joined by solutions for analysis and performance management.

Artificial intelligence

Another source of growth for suppliers of supply chain software is the effective incorporation of artificial intelligence (AI) into their solutions. “While adoption levels of AI vary across sub market segments, we expect it to drive revenue growth in the software market as AI technologies and tools mature,” predicts Abbabatulla. “This is because AI can bring productivity and user experience improvements by automating routine tasks and providing more effective support to complex decisions.”

Reasons to opt for the cloud

Companies are using/planning to use cloud-based supply chain software in the next 12 months for the following reasons: