The worldwide market for Warehouse Management Systems (WMS) has had its best year in several years. After several slow years, the market grew by over 5 percent in 2004. The market was $1,067 million in 2004 and is forecasted to be over $1,339 million in 2009.

Based on the number of acquisitions and mergers in this market (there were over 20 acquisitions or mergers of companies with WMS solutions), the market?s growth has been surprisingly strong. While some acquired companies with WMS solutions can expect to continue to grow their revenues, historically mergers and acquisitions have more often served as a drag on growth.

ARC classifies WMS suppliers as being in one of three types of camps: Best of Breed suppliers, ERP suppliers who sell WMS solutions that are based on the same code base and data model as their larger ERP solution, and suppliers who differentiate themselves based on their knowledge of material handling and often sell WMS and Warehouse Control Systems (which control material handling equipment) as an adjunct to a much bigger material handling consulting or equipment sale.

Some prominent Best of Breed companies were acquired as well, like RedPrairie acquired LIS, HighJump Software was acquired by 3M, Catalyst International was acquired by ComVest Investment Partners and Yantra was acquired by Sterling Commerce.

Acquisitions of Best of Breed vendors can also create questions. When Best of Breed companies are acquired by private investment houses or companies with few roots in the software industry, customers can question how well they understand software in general and their particular industry in particular. Depending on the research cited, 50 to 80 percent of acquisitions never produce the anticipated benefits. The WMS market withstood the surge in acquisitions this year; the true test will be to see how well the acquired companies? revenues hold up in coming years.

Read full article from Steve Banker ARC Advisory Group

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