Finance & Investment Club Fall 2012 Supply Chain Management Software and Services.
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Transcript of Finance & Investment Club Fall 2012 Supply Chain Management Software and Services.
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Supply Chain Management Software and Services
Industry Rating:
Industry Summary
Positive
Key Factors:• Cloud based software is a new field that is experiencing rapid growth• The cheap costs and growing security of cloud servers are drawing in more customers• Supply chain management is a key component in the growing internet retailing sector
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Industry Definition Firms in this industry specialize in supply chain management (SCM) solutions that provide
strategic planning, optimization, and execution for business processes across a wide range of industries.
These firms develop, deploy, and maintain a variety of software and services that are highly tailored and industry-specific.
Key Companies of Focus
Descartes Systems Group(NASDAQ: DSGX)
Market Cap: 558.95M
Aspen Technology, Inc.(NASDAQ: AZPN)Market Cap: 2.31B
SciQuest, Inc.(NASDAQ: SQI)
Market Cap: 411.06M
American Software, Inc.(NASDAQ: AMSWA)Market Cap: 227.94M
Manhattan Associates, Inc.(NASDAQ: MANH)Market Cap: 1.17B
JDA Software Group, Inc.(NASDAQ: JDAS)Market Cap: 1.42B
E2open Inc.(NASDAQ: EOPN)
Market Cap: 438.47M
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45% 22%
7%6%13%3%
4%
Breakdown By 2011 RevenueJDAS MANH AMSWA DSGX AZPN SQI EOPN
Technology Goods and Services Sector Summary Breakdown
Technology77243.6B(100%)
Information Technology10477.9B(13.6%)
Business Software and Services4253.1B(5.5%)
Application Software and Services640.0B(0.83%)
Industry Breakdown by Market Cap ($BN)
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5
SaaS SubscriptionProfessional Services
FY2011 Revenue Segments
16%
74%
9%20%
74%
6%
27%
73%
7%
93%
69%
31%
Software Licensing Other
81%
19%
62%
38%
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Revenue Generation
Develop Provide Maintain
Software Package
Software-as-a-Service
Customer
License Fee
Subscription Fee
Additional Fees
Training and support
Technical Maintenance
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Trends
IT and Software Spending Growth
Rising E-Retail Sales
Increasing Adoption of Software-as-a-Service (SaaS)
Platforms
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Trend I: SCM Software Spending Forecast
2008 2009 2010 2011 2012e 2013e 2014e 2015e0
5001,0001,5002,0002,5003,0003,5004,0004,5005,000
IT and Software Spending Forecast
Total IT Spending ($BN) Software Spending ($B)
($BN)
CAGR 2.8%
CAGR 5.4%
IT2011: 3.6 TN2015: 4.1 TN
2008 2009 2010 2011 2012e 2013e 2014e 2015e0
2
4
6
8
10
12
Worldwide SCM Software Spending($BN)
CAGR 7.5%
SCM software prime consumers include North America and Western Europe with nearly 79% or market revenue.
Asia/Pacific IT spending is on pace to reach US$743 billion in 2013, a 7.9% increase from 2012.
Shift towards diversified suppliers
Increasing complex and fragmented supply chains due to globalization and outsourced manufacturing
Software2011: 268 BN2015: 334 BN
SCM Software2011: 7.7 BN2015: 10.33 BN
IT
Software
SCM Software
Source: Gartner Research – Worldwide Supply Chain Management software growth
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Trend II: SaaS-based Technology Expected to Gain Momentum
2008 2009 2010 2011 2012e 2013e 2014e 2015e0369
1215182124
SaaS Growth Worldwide
CAGR 19.37%
($BN) Low cost of installation
Larger audience outreach including small and medium-sized enterprises
High demand for productivity in developing countries
Eastern Europe CAGR: 25.02 %
Latin America CAGR: 26.76 %
2008 2009 2010 2011 2012e 2013e 2014e 2015e100.00
1000.00
10000.00SaaS Growth in Asia/Pacific($M)
CAGR 27.8%
Source: Research and Markets: Global Supply Chain Management Software
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2009 2010 2011 2012e 2013e 2014e0
200400600800
100012001400160018002000
917 1,021 1,115 1,229 1,356 1,495
155173
192213.690883166286
237.832258064516264.700964954367
US Online and Web-influenced Retail SalesWeb-influenced Retail Sales Online Retail Sales
Trend III: E-Retail as a Growing Channel of Sales
6% 7% 7% 7% 8% 8%% of total US retail Sales
$BN
Consumers rely more and more on online research before purchases.
Consumers use Brick-and-mortar stores to sample and then buy online at a lower price.
Three product categories (computers, apparel, and consumer electronics) represented more than 45 percent of online sales($67.6 billion) in 2011
Convenience, Cost, and Speed are important strategies for online retail
90 percent or more
75-89 percent
75 percent or more
50-74 percent
30-49 percent
15-29 percent
1-14 percent
None
Online Research as Part of Overall Shopping
2010 2011
21%
35%29%
24%
15% 17%13%
8% 8%
1%
29%
(% of respondents)
15%
2005 2006 2007 2008 2009 2010 2011 2012 -
200 400 600 800
1,000 1,200 1,400 1,600
Cyber Monday Revenue
Source: Forrester Research - Forecast Online Retail Sales; Marketing Charts
$M
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Risk Heavy Competition from large ERP vendors developing new SCM technologies − ERP vendors can devote more resources to creating SCM software and services− Oracle and SAP are slowly developing SCM technology which increases buyout risk for smaller companies
Highly complex and sophisticated software may contain defects and errors that are hard to detect and may lead to software inaccuracy
− Defects or errors in software lead to inaccuracy and hurt both the customer and company’s revenue and reputation.
Research and Development activities may not generate significant returns− Product development activities are costly and recovering investment in product development may take a
significant amount of time.− Cannot estimate with any certainty the revenue from R&D investments.
Large portion of revenue comes from professional services, which is very reliant on prior sales of software
− If software sales stagnate, professional services revenue will consequently suffer.
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Industry Porter Five Forces
RivalryHigh
SuppliersLow
New EntrantsHigh
BuyersLow
SuppliersLow
Low Cost of Production
In-house production of software Difficult for customers
to drive down prices on very specialized software
Complex software for superior supply chain results
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Supply Chain Management Software and Services
Industry Rating:
Industry Conclusion
Positive
Key Factors:• Cloud based software is a new field that is experiencing rapid growth• The cheap costs and growing security of cloud servers are drawing in more customers• Supply chain management is a key component in the growing internet retailing sector