ARC Advisory Group conducts an annual analysis of the global transportation management systems (TMS) market. The research process includes the analysis of large amounts of information and interviews with executives from numerous TMS software companies. The process concludes with the publication of ARC’s TMS Global Market Research Study, which analyzes the market shares across numerous categories of the leading TMS suppliers. Aside from the market share analysis, the study looks at the trends that are driving and/or inhibiting growth in the TMS market. This year’s study will be publishing in the next week so I wanted to give a sneak peek at some of the high-level trends around the TMS market.
One of the biggest trends in the TMS market is the rise of cloud and SaaS solutions. While SaaS revenues grew significantly this year, software revenues declined. With more supplier turning to cloud-based solutions, this is a trend that will continue. When companies make the commitment to SaaS, there is a learning curve. Generally, companies see that for every percentage in growth in SaaS revenue, their software revenues to shrink by 3 to 5 percent. Cloud solution providers generally discourage customization, at least within the base code, resulting in faster implementations, which causes a decline in implementation revenues. The lack of customization means maintenance revenues will also decline.
SaaS solutions are becoming increasingly popular in the TMS market, with more small suppliers selling SaaS solutions to Tier 3 customers. For those companies selling software licenses, especially smaller companies, the out-look is not good. Unless a strategy is in place to transition to a cloud solution, these smaller companies likely will not be around for many more years.
Aside from the SaaS megatrend, below are a few regional, industry, and complementary market trends:
- North America is by far the largest buyer of TMS solutions. The dollar value of solutions sold into Asia and Latin America is significantly lower than for North America or EMEA (Europe, Middle East, and Africa).
- The Asia market is also primed to grow. With China leading the way to introduce new cutting-edge technologies to handle the e-commerce boom, this market is expected to grow rapidly. However, some of the infrastructure impediments will make growth somewhat problematic.
- The Latin American market is also poised for growth. Cross-border trade and shipping is becoming more common, and companies in this emerging market are now more reliant on a TMS application rather than performing these tasks in-house.
- The retail, food & beverage, and logistics industries have historically been the stronghold of TMS adoption. In each of these industries, the Tier 2 companies are becoming more global, as they are able to purchase less expensive, but still function-heavy, TMS applications. All of these industries are poised to continue to grow at a rate of 6 percent or more over the next five years.
- TMS is sold into many industries, but aside from the three cited above, the other industries will see slowing growth. Machinery manufacturing, mining, and metals will all see slowed growth, which is tied to each of these industries decline in capital expenditures.
Complementary Market Trends
- The “Amazon Effect”: Customers have a changed expectation of fulfillment, which is driving new means of transportation. This applies to both B2B and B2C. Companies view transportation and the overall supply chain as a competitive differentiator rather than a cost center.
- The Uberization of freight: This can be called digital freight matching as well. Hundreds of millions of dollars are pouring into startups looking to disrupt the transportation industry by matching contract drivers to loads.
- Global visibility: There is a continuing shift toward global supply chain planning and visibility away from regional execution. This coincides with the desire to consolidate inbound and outbound visibility.
- Driver shortage: The driver shortage is not going away. As companies have used optimization to be more efficient in their loads, there are less trucks on the road, which is a good thing based on the shortage. Autonomous trucks may not be the solution, but are generating a lot of interest.
If you are interested in the complete report, which analyzes the growth of the TMS market in multiple segments, please contact Conrad Hanf (firstname.lastname@example.org). The report includes market share data and a five-year growth forecast of the overall market and specific segments and industries.
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