The supply chain management (SCM) IT services market is expected to expand from US$26.1 billion (in 2002) to some US$40.5 billion in 2007, representing a five-year compound annual growth rate (CAGR) of 9.2%, according to a new study from industry analysts, IDC.
Following the economic downturn and geopolitical concerns, IDC's research shows that, in 2002, buyers were less receptive to large-scale SCM investments that required complex and lengthy implementations and internal changes.
Instead, the market demonstrated a clear preference for smaller-scale projects that would address immediate problems, have a much nearer return on investment (ROI), and which can be more clearly monitored and measured.
New opportunities
"Although 2002 was a turbulent year for the worldwide SCM IT services market, opportunities do remain," said Romala Ravi, manager of supply chain and logistics services research for IDC. "But unearthing them will require a tight focus on ROI and cost containment. Building strong and lasting relationships with clients will lay the groundwork for success further down the road."
IDC believes that as long as economic and geopolitical uncertainties continue to prevail, clients of SCM solutions will continue to take an incremental and modular approach to enhancing their SCM technologies and processes for 2003.
This means there will be interest but that companies will continue to focus on areas that can yield a rapid ROI, and those which are more easily implemented. This also bodes well for SCM segments such as supply chain execution (SCE), and procurement and sourcing.
Longer term
At the same time, companies are expected to begin to demand that their service providers help them create a larger, long-term framework to steer their modular SCM initiatives toward more strategic goals.
IDC says that the common 'not wanting to be left behind' mentality will cause companies to explore new areas such as supplier relationship management (SRM), product life-cycle management (PLM), and emerging technologies such as radio frequency identification (RFID). These explorative initiatives provide a positive outlook for the consulting segment of SCM in the near term.
Recommendations
Among the key recommendations IDC's study offers service providers are the following:
- Deliver on what's promised, on time, within budget, and with the resources allocated to the project.
- Be responsive to clients' questions and concerns.
- Do what you do best rather than trying to be everything to everyone.
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