Expansion Seen For Supplier Relationship Management Market

Increases in globalization and outsourcing will increase demand for Supplier Relationship Management applications, according to a new ARC Advisory Group study.

The market for SRM should expand at a compounded annual growth rate of 8.2 percent in the next five years, going from $1.56 billion this year to over $2.3 billion in 2011, the research shows.

According to the study, M&A activity within the four groups of ERP vendors offering SRM functionality, SRM suite vendors, point-solution providers and PLM providers offering SRM functionality has affected the market.

“Point-solution vendors have merged, resulting in a smaller number of providers offering integrated suites of supplier relationship management, or ‘spend management,’ solutions,” said Clint Reiser, Analyst for Supply Chain Management at ARC and principal author of the study. “In addition, Product Lifecycle Management (PLM) solution providers have recently begun offering SRM solutions integrated with their PLM solutions.”

With the growth of outsourcing, companies will rely more heavily on suppliers for commodities, production, sub-assemblies and services. In turn, sourced goods will be a larger section of the cost of goods sold. With sourced goods and services accounting for a larger piece of overall costs, there will be a greater demand for software applications to enable the management of the sourcing, supplier performance and contract compliance processes, as well as facilitating cooperation between suppliers, purchasing and product development.

The shift of providers from perpetual licenses to subscription on-demand licensing will push market growth by reducing implementation costs and risk of adoption, but still allow spend management suite providers to compete differently than ERP providers.