If you want a good example of a David versus Goliath situation, look no further than the battle between on-demand and on-premises Warehouse Management System (WHS) solutions providers.
Just to illustrate how tough it is for on-demand vendors to compete in this market, here is a pie chart illustrating the market share by deployment model:
On-Demand vs. On-Premises WHS Solutions
Both these models have certain advantages such as increased visibility, more accurate inventory management, and minimal shipment errors.
An on-premises WMS is installed and runs on systems in an organization. The major advantage of an on-premises WMS is that enterprises have complete control over their critical business data. The on-premises WMS model may be preferred by companies that process 50-100 transactions each day.
The on-demand WMS model allows customers to deploy a WMS without the actual installation of the software in their enterprises. This model is mostly preferred by SMEs.
On-Premises Market Projections
The main reason for the steady growth of this market is that there are many companies that do not prefer third-party vendors handling their data in the cloud or using SaaS-based technology. This is because of the increased complexity and interface difficulties faced while using on-demand systems.
The high popularity of on-premises software is attributed to the high level of data security offered by on-premises WMSs, as data are stored on premises.
The market is expected to grow at a rate of 15.89 percent during the period 2013-2014. However, the increased demand for SaaS-based solutions is affecting the demand for on-premises solutions. Several companies, particularly SMEs, have begun to deploy on-demand solutions to manage their warehouse operations. Therefore, the Global On-premises WMS market is expected to grow at a steady rate during the forecast period.
On-Demand Market Projections
One of the key drivers is the low cost of an on-demand WMS. The market is expected to grow at a rate of 18.52 percent during the period 2013-2014, and this is expected to increase to 22.78 percent during the period 2017-2018. Cost-effectiveness and the flexibility to handle data on the go are some of the other factors driving market growth.
The market for on-demand WMSs continues to improve as the availability and use of SaaS-based solutions become more prevalent. Competition in the market and increased focus on SaaS-based solutions by vendors have led to the development of appropriate and reliable on-demand software.
This has reduced the initial concerns of end-users about the security and availability of data. Vendors of SaaS-based solutions are reacting to the growing demand for WMSs by incorporating access to innovative platforms in SaaS-based solutions.
Emergence of SaaS-Based On-Demand WMS
SMEs and large enterprises with small warehouses need WMSs because they face similar operational challenges to their larger counterparts. The on-premises deployment of WMS requires a higher investment, which is detrimental for firms with a lower headcount.
Hence, suppliers are looking toward blue ocean strategies and have started to provide SaaS-based models. These rented systems are shared between users and provide greater flexibility. Their demand is on the rise even though data security remains a concern. Less manpower is needed on the premises leading to a reduction of labor costs.
Increase in Use of Cloud Computing and RFID Technology
High-end advances in technology in other fields have affected the Global WMS Market. The adoption of cloud-based on-demand models makes vendors the IT equivalent of a 3PL. Cloud-hosted virtualized information reduces the investment required for tangible systems.
WMS vendors are also partnering with RFID providers to develop integrated solutions because they have made R&D investments without much return. RFID systems increase efficiency by reducing manual input and broadcasting signal information about the location and specifications of the product they are attached to in a warehouse.
Hence, labor costs are reduced, and multiple operations are streamlined simultaneously. Improved accurate shipping and dispatch, warehouse activity control, and monitoring lead to greater customer satisfaction.
