Report shows sourcing apps, on-demand model growing most
By Staff -- Purchasing, 9/7/2006 2:00:00 AM
Growth for sourcing software and technologies outpaced procurement applications in 2005, according to AMR Research's Procurement and Sourcing Applications Report, but both saw slightly less revenue growth than 2004. Sourcing technologies grew 13% in 2005, representing 34% of the market. Based on a more strategic role of supply management, AMR expects procurement and sourcing business application growth of at least 9% in 2006.
“This is good news for buyers, as they will see more dynamic competition, hopefully leading to better application functionality,” AMR says in the report. “ERP providers will continue to broaden their suites with more sourcing capabilities, while best-of-breed application providers will add innovative functionality to differentiate their products in the market.”
One of the trends clearly identified in the report is the growth of on-demand or hosted sourcing and procurement applications. AMR says the hosted/subscription market grew 125% in 2005 compared with 44% in 2004. “Though the total market share is only 12% compared to application license market share of 32%, this does represent a major shift in buying patterns,” the report says.
Midmarket companies represented 28% of the market with a much larger growth rate of 22%. And small market companies (less than $30 million in revenues), constitute 11% of the market but have a growth rate of 40%.
“We find small companies are now spending money in the supply management market as applications are hosted, requiring little or no IT infrastructure assistance and offering a lower price, subscription-based model,” the report says.
Another trend outlined in the report shows the growth of supplier scorecarding applications. AMR says they grew 64% last year. “Our performance management spending studies indicate that scorecards and dashboards are on fire. Watch for scorecards to expand even more dramatically in the next few years. We may even see an acquisition in this area.” AMR expects that supplier portal technology with procurement, sourcing, collaboration, execution, and performance management capabilities will become the norm going forward.
Other areas of the market expected to see strong growth include supplier risk management tools and services spend tools.
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