Market Trends: A Golden Opportunity in the Transportation Management System Market, 2012-2016

Key Findings

• Pressure is growing for more-adaptive and dynamic IT infrastructures that yield greater agility, flexibility, transparency and responsiveness, especially given the more-virtual supply chain nature inherent with transportation.
• Top-line market growth will continue despite the emergence of software as a service (SaaS) transportation management systems (TMSs) that will shift revenue from license to subscription pricing models. However, SaaS TMSs will be a source of new customer growth, especially in the bottom tiers of the TMS market.
• Although TMS demand has increased in the small or midsize business (SMB) market, no vendor has made SMBs a strategic priority. SMB TMS growth will not deliver its full potential until at least one vendor focuses on building a high-volume go-to-market business model.
• Gartner expects TMS solutions to continue to see higher-than-market-average growth for the next three to four years, driven by lower penetration and adoption rates, regional expansion, capacity constraints, and volatile freight costs.

Recommendations

• Focus sales on targeting departmental budgets that will increase in 2013, avoiding departments and businesses that have capital-centric budgeting preferences in part to circumvent IT departments and longer sales and implementation cycles.
• Offer transportation managed "value-added" services (for example, freight procurement or freight operations support) to help customers beyond implementation, such as transitioning to freight procurement or freight benchmarking.
• Focus on the value propositions of improved customer service, driving growth and improving innovation, which are now top priorities for many businesses.
• Build an SMB go-to-market strategy that focuses on building a channel, SaaS and high-volume business model addressing sales and implementation within North America.

Defining the Scope

TMS refers to the category of software within Gartner's grouping of software within supply chain execution (SCE) that deals with the planning and execution of the external physical movement (transportation) of products across the supply chain (see "Market Definitions: Software"). Multiple subcomponents create a comprehensive TMS across planning and optimization — load consolidation, routing, mode selection, carrier selection and execution — tendering loads to carriers, shipment track and trace, freight audit and payment (as well as visibility and performance management), global visibility, event management, business activity monitoring (BAM), and analytics (see "Gartner's Model for Holistic Multimodal Transportation Management Suites").

Vendors offering TMS have continued to invest in expanding the capabilities in their TMS suites to include all transportation management functions, including basic functions of planning, execution, and audit and payment. Many vendors have also incorporated newer areas, such as strategic planning and strategic sourcing of freight, visibility and event management, as well as improving support for the planning and execution of contract carriers and owned/dedicated fleets, and richer capabilities to handle multicarrier parcel shipping.

Hence, TMS suites are a major tool in helping enterprises control, manage and, in most cases, lower transportation costs. TMS suite users report that transportation cost savings represent one of the most effective means to achieve overall supply chain cost savings. A TMS suite provides users with the tools to take control of freight spending, ensure that the money is being spent wisely, increase customer satisfaction, and ultimately, cut costs.

The Market for TMS Suites Contains Stronger Opportunities Than Many Other Supply Chain Markets

The broader market for supply chain management (SCM) technologies has experienced two years of double-digit growth, with 2011 growing 12.3% over the rebound year of 2010. The markets for SCE and TMS specifically have outpaced the broader market growth, with each growing 15%. Within TMS, we see growth and demand in market segments such as parcel manifesting and fleet routing and scheduling, which, while mature and deeply penetrated, are experiencing a resurgence in demand driven by technology and functional innovation. New emerging technologies and applications are helping businesses challenge conventional enterprise and "value chain" thinking. This wave of innovation is helping generate revenue and growth for providers of TMS solutions. Buyers also have numerous options in how they can deploy a TMS — from traditional on-premises applications to using a managed service — as well as having more TMS vendors to choose from.

A number of forces are impacting the TMS market, and these forces will likely shape it moving forward:

• Globalization in terms of international TMS deployment and multileg, multimodal international shipment support is a bigger issue for buyers as leading TMS vendors continue to invest in more-global transportation capabilities.
• Demand for agility and flexibility is increasing demand for applications that meet point-in-time requirements, as well as those that adapt to the changing needs of the business without extraordinary costs.
• The need to better manage the entire transportation life cycle — from sourcing through planning and execution and on to audit and payment — further improves the value proposition of TMSs, which expands the market to shippers of all sizes.
• Growing complexity and cost volatility are making traditional manual and simplistic approaches to managing transportation insufficient to meet the demands of the current marketplace. This complexity could shift more businesses toward logistics outsourcing providers.

The challenge in the TMS market is for vendors to build a strategy that enables them to expand the depth and breadth of their offerings while meeting the requirements for agile functionality, increased intelligence and usability. Vendors' strategies vary dramatically on this scale, and we expect the vendors' ability to respond to this strategic shift in the market to be a key factor that determines their capability to deliver attractive offerings to the market.

Transportation management solutions are a vibrant element within the SCE segment, and while the TMS segment is exhibiting significant growth (15% in 2011 and 13% in 2012), the larger SCM market is estimated to exhibit slower annual growth between 8% and 9% through 2013 (see "Forecast: Enterprise Software Markets, Worldwide, 2011-2016, 3Q12 Update").The TMS market is estimated to outpace the larger market, with a five-year compound annual growth rate (CAGR) of 12% (see Figure 1). We forecast a slight slowing in growth in 2012, but it is still 30% above the SCE average. The slowing is in part due to the increased adoption of on-demand/SaaS TMS solutions, which is slowing annual growth and affecting the perception of greater adoption.

Source: Gartner (September 2012)

Cloud and SaaS TMS Accelerating Traction

Our estimated revenue growth for SaaS within SCM markets remains resilient through 2016. In a recent survey (see "User Survey Analysis: Customer Experience Critical According to SCM Software Buyers, North America, 2012"), supply chain practitioners indicated that they would source twice as many supply chain solutions through a SaaS model than they had three years prior. This finding, coupled with the performance of many established and emerging specialized vendors offering their solutions via SaaS, provides confidence in a 21.2% five-year CAGR, from 2011 revenue estimates of $1.3 million to $3.4 billion by 2016. Greater traction from existing vendors, more new vendors incorporating SaaS, and growing competition increase the SaaS opportunity for supply chain solutions and are positive influences on the SaaS forecast.

Adoption of SaaS varies by the supply chain market segment and application. Within the TMS segment, SaaS represented more than 20% of the $650 million in total software spending during 2011, with 22% estimated for 2012 (see Figure 2). While SaaS represents 20% of the TMS software spend, it represents a greater percentage of new customer investments, with nearly 50% of new TMS deals being SaaS versus on-premises. During the last three to four years, SaaS TMS solutions have moved from an option to a preference for customers as they struggle through the tough economic climate. Several providers are leading the charge with pure SaaS TMSs, but competition is expected to increase rapidly beyond companies such as IBM-Sterling Commerce, inet-logistics, LeanLogistics, MercuryGate, Transplace and Transwide, as companies such as JDA Software, RedPrairie, Oracle and Manhattan Associates offer less "pure-play SaaS" but subscription models none the less.

Although SaaS TMS vendors sometimes overstate long-term lower cost of ownership, there is a significantly lower upfront cost in terms of the software subscription compared with a traditional on-premises TMS license and some reduction in implementation costs, principally in the areas of installation and carrier onboarding. However, the longer-term cost differential between on-premises versus a SaaS TMS is less favorable to the latter; beyond five years, it can favor an on-premises TMS. Even so, the market pendulum is swinging from on-premises TMSs to SaaS TMSs, with smaller shippers acquiring these transportation solutions. We estimate that TMSs delivered as SaaS could represent 30% or more of new transportation management revenue and more than 50% of new deals by 2016. There is also an opportunity for logistic business process outsourcers to erode traditional software vendor opportunities by offering more software and services via a SaaS model.

Source: Gartner (September 2012)

Importance of the Trading Partner Network

The need to integrate with a large number of external trading partners (carriers, suppliers and customers) makes TMS a multienterprise business process that demands a platform that enhances value by enabling users/organizations to more easily communicate with their trading partners. Adding value to TMS solutions is the emerging notion of trading partner networks. These networks are composed of numerous carriers and are expanding to include suppliers and customers.

Various specialized carrier and trading partner networks already exist, but they are limited in many ways:

• First, networks today are often mode-specific, focusing individually on over the road, ocean, rail or air.
• Second, networks are typically geographically specific; for example, North American versus European over-the-road or rail carriers.
• Third, networks are incomplete, with only a fraction of the trading partners in an area participating in any one given network.
• Fourth, some of the most capable, although still limited, networks are tightly integrated into some SaaS TMS applications, but all the previous limitations still exist.

While there are some advantages in having the network embedded within applications today, this can force users to choose between the best network and the best application if they are not one and the same, which today, they often are not. Furthermore, because networks are incomplete, large users that span multiple modes and geographies will need to develop and maintain their own networks.

Over time, we believe that specialized networks will merge, creating broader and more-comprehensive independent networks. Given the complexity and cost of creating these networks, numbers will be limited. Electronic data interchange (EDI) remains the predominant business-to-business communications mechanism in transportation, and this will not diminish soon. However, it is not the most effective or time-sensitive mechanism for shipper and carrier collaboration or freight visibility.

The value of creating a network is nascent, and we anticipate more-innovative capabilities to emerge. To date, building a network has fallen on the TMS vendor, although buyers would welcome an alternative ubiquitous network they could access independent of their TMS vendors'. Oracle and E2open are leading a possible move in this direction: They have formed a partnership in which E2open is building a prepackaged, independent, carrier network integrated to Oracle Transportation Management (OTM). This is exclusive so far, but it could lead to a separation of the network and the TMS application, which could allow the flexibility to switch TMSs while keeping the carrier network or selecting the best TMS independent of the network.

Pure SaaS TMS vendors, such as LeanLogistics with IBM, have built strong and growing, although still incomplete, North American over-the-road carrier networks but have yet to replicate across other modes of transport or internationally. Some other vendors, such as MercuryGate and inet-logistics, are also building some of their own networks but also integrating their applications into other well-established networks where available.

Opening the TMS Market to Smaller Shippers

Until recently, TMSs were primarily used by large shippers (with more than $100 million in annual freight spend) because they had the sophistication and complexity to fully exploit the robust planning and optimization capabilities offered by leading solutions. The SaaS TMS deployment option is gaining in popularity and increasing the market opportunity to smaller, less-complex shippers (with as little as $10 million up to $100 million in annual freight spending), which will drive growth in adoption and revenue, becoming the favored platform for smaller shippers. The SaaS model helps businesses minimize the upfront capital needed to invest in TMS, but that is not all that is fueling SMB TMS growth. Smaller shippers often lack the complexity and need for highly sophisticated planning and optimization capabilities, but they can now benefit from the breadth of holistic TMS suites where they can get some (albeit smaller) benefits across multiple TMS functional areas. For example, a SMB shipper can receive benefits in procurement, least-cost carrier selection, e-tendering, and freight audit and payment, which, when added together, can drive 10% or more in freight spend reductions. While SMB TMS demand is growing, only a few TMS vendors are investing time and energy in this market space, which include LeanLogistics, MercuryGate and RedPrairie.

TMS Not Just About Cost Reduction

Within the array of SCM applications, TMS remains one of the easiest to cost justify. TMSs are high-impact investments with significant influence on key cost levers, such as base rates, routes, load consolidation and freight bill audit. Savings can be obtained from straightforward enforcement of least-cost carrier selection, which can have a notable impact on transportation costs, with paybacks normally achieved within a year postimplementation. A reasonable rule of thumb is a 10% or more reduction in transportation costs. The competitive nature within the TMS market also helps keep TMS costs in check.

While transportation cost control remains critical, the overall importance of effectively managing transportation remains strong. Gartner found in its most recent SCM user study that improved customer service, driving growth and improving innovation are now top of priorities, surpassing cost reduction and enhancing productivity (see Table 1). While cost abatement will remain important, transportation is an area of innovation, and users continue to evaluate new tools to assist them in managing operations more effectively and improve operational/logistics performance. Achieving these benefits will contribute to enhancing customer service as well as top-line revenue growth.

Source: Gartner (September 2012)

TMS Suite Expanding Breadth and Depth

TMS vendors continue to invest in expanding the breadth and depth of their TMS suites. During the past several years, vendors have expanded their TMS portfolios to the point where buyers can potentially source most, if not all, of their needs from a single vendor. However, notable differences in the application breadth and depth of various TMS offerings exist.

Some vendors have expanded their product footprints to support transportation functions, such as:

• Network design and optimization
• Freight procurement
• Audit and payment
• Load design
• Asset-based/fleet-based routing and scheduling
• Appointment scheduling
• Multileg/multimodal international shipping
• Intermodal and rail
• Multicarrier parcel management
• Performance management
• Visibility/event management (track and trace)

Additionally, a few vendors have expanded the scope of their TMSs to support global deployments and international logistics.

The evolutionary expansion of the depth and breadth of TMS offerings listed above improves the existing value proposition for TMS and adds to the value of TMSs beyond the traditional boundaries of better load planning and electronic freight tendering. During the past several years, Gartner has also seen notable investments in areas such as the integration of asset-based and for-hire freight management on a single platform, improvements in the depth and flexibility of transportation performance management, continued expansion of capabilities to support global logistics, and more capabilities to support logistics service providers (LSPs) and third-party logistics (3PL).

A number of forces are influencing the market for TMS and will likely shape it, moving forward, including:

• Expanded support beyond just planning and mode selection for multiple modes of transportation on a single platform, including truck, ocean, air, fleet and parcel/express. Although mode selection remains valuable, newer solutions support the entire functional flow of these additional modes of transportation, such as multicarrier parcel manifesting, rail management or fleet dispatching.
• Improved freight efficiency, as well as reduction of outbound costs, is driving demand for more robust logic that is needed to address concepts such as pool point or hub-and-spoke distribution; continuous moves; evolution from prepaid to collect on inbound; merge in-transit; flow-through distribution; and in the most forward-thinking organizations, "co-opetition," in which two or more shippers collaborate to gain efficiencies.
• Sustainability considerations, while currently most compelling in Europe and Australia, are driving TMS acquisitions and influencing TMS functional requirements. Sustainability needs are driving interest and growth in use of hub-and-spoke distribution networks, 3D load design, and inclusion of carbon as a planning variable.
• Globalization, in terms of international TMS deployment and multileg, multimodal international shipment support, is a bigger issue for buyers. Leading TMS vendors continue to invest in expanding global transportation capabilities.
• Demand for agility and flexibility is increasing the demand for applications that not only meet point-in-time requirements, but also have the architectural flexibility to adapt to the changing needs of the business without extraordinary costs. This is placing more importance on the technical structures of TMS suites where buyers demand more agile and adaptive architectures.
• Enhanced usability and embedded analytics that support improved performance management will further enhance the value proposition by providing to more users (and more-diverse users) access to TMSs, delivering more-usable information to make better decisions.

Globalization

Since their initial inception almost 20 years ago, TMS applications have focused primarily on large North American non-asset-based shippers. Regionally, 56% of the total TMS market share today resides within North America, with 24% for Europe and 20% for the rest of world. However, over the next five years, demand will slowly accelerate internationally, with demand in Europe, Latin America and Asia increasing significantly from the current low baseline. We already see growing demand for specialized routing and scheduling tools for managing owned fleets but anticipate greater interest in holistic multimodal TMS. First, we anticipate increased buyer interest; however, as historically North America-centric vendors expand their capabilities and international sales capacity, this will help fuel additional buyer interest.

Growing Demand for Visibility and Control Towers

Global visibility within TMS is commonly referred to as "track and trace" and improves connectivity and visibility across facilities, transportation modes, carriers and related trading partners. It allows businesses to monitor shipments across an entire shipment itinerary by either order or shipment number, and to detect event-driven problems early enough to notify recipients of problems. True end-to-end supply chain visibility that spans transportation, inventory, orders, multiple modes of transport (such as land and ocean) or multiple functions (such as transportation and trade compliance) often requires that multiple applications be stitched together or, at the very least, that disparate data sources are pulled into one visibility application. For example, several vendors of visibility offerings partner with other solution providers to build a holistic, interfaced, solution.

Event management applications are maturing, despite some remaining data quality issues. Also, connecting to carriers and other constituencies — such as suppliers, forwarders, brokers and governments — is still difficult, but getting easier. Capturing movement information beyond large constituencies that are typically enabled via EDI remains problematic because of the lack of a single unified logistics network. However, EDI continues to dominate how companies connect with trading partners. Yet, beyond large, sophisticated trading partners, such as ocean carriers and 3PL companies, and some large freight forwarders, EDI has limited worldwide adoption. Vendors now offer trading partner portals (such as carrier or supplier), where trading partners can use the Web to receive and update movement information such as ready-to-ship notifications or in-route status. Simplified trading partner portals make it easier to capture data from less sophisticated or automated trading partners.

Supply chain event management (SCEM) first emerged at the turn of the century, and at that time, these solutions were generic toolkits that could be used to model and monitor anything for shipments, orders, inventory, people, assets and so forth. Users were not ready for this emerging technology, and most were unclear what they would use these systems for, let alone how they would justify a purchase. Initial vendors were also overly aggressive in stating how easy these would be to implement. Consequently, the first generation for vendors largely exited the marketplace. Tracking shipments was one of the first successful use cases where SCEM concepts and value were proved, and adoption has increased over the last several years. We believe that stand-alone transportation visibility will be subsumed inside broader SCEM offerings, where users can track shipments and anything else they wish to monitor.

Gartner's Nexus of Forces' Impact on Transportation

Of Gartner's Nexus of Forces (see "The Nexus of Forces: Social, Mobile, Cloud and Information"), next to cloud, mobility is the most obvious and highest demand area in transportation. Because transportation by definition is a mobile business process, both shippers and fleet operators are increasingly interested in exploiting mobile technologies. This drive is to enhance performance, improve transparency and comply with increasingly arduous government mandates (see "Hype Cycle for Transportation, 2012"). Fleet operators, whether private or carriers, are under pressure to enhance internal operations, as well as being under increased pressure from customer demands and government rule changes to improve safety, provide better information about the operations of their vehicles and drivers, and provide near-real-time access to information about shipments. Today, the mobile solution space for transportation is highly fragmented, with numerous solutions and vendors available to buyers. In certain categories, such as electronic onboard recording, telematics and in-cab mobile platforms, the market for freight transportation is dominated by a small number of vendors — Qualcomm, Trimple-PeopleNet, XRS (formerly Xata) and Cadec — with a handful of other vendors. However, in other areas, such as proof of delivery, mobile asset optimization, asset tracking and navigation, there are dozens of specialized mobile application vendors. Leading platform vendors continue to expand the breadth of their solution portfolios and, where necessary, form partnerships that will benefit them through growth and expansion.

If a Rigid Installed Base Opts to Stay With On-Premises Implementations, These Trends Change

Today, both suppliers and buyers are moving along a learning and development curve. Major drivers and inhibitors have been taking form and are contending the pace at which a major shift in SaaS implementation will occur, as well as which vendors are likely to benefit the most if and when a shift occurs.

Key factors that could slow down the pace of adoption include the following:

• Failure to address real enterprise-class requirements, along with appropriate contracting and service levels to match and surpass current ones
• Deferral in finding the sufficient balance between standard requirements and custom ones to unlock larger-enterprise adoption
• Limited full multinational product features and customer support from the vendors
• Buyers choosing to outsource transportation operations to third parties due to the complexities and costs of continuing to manage these functions in house
• Talent constraints hampering the ability of companies to effectively exploit and maintain TMS applications long term

Given the overall modest market penetration of TMS in North America (the dominant market for TMS) and the nascent penetration internationally, there remain significant market growth opportunities that will delay consolidation for at least five years (possibly longer). We expect more activity with new entrants, especially within the SaaS TMS segment, given the breadth of needs across supply chains and functional domains, especially internationally.

Given the overall breadth of TMSs, the technology provider landscape remains fragmented (see Figure 4). Despite 60% of total 2011 TMS software spending residing with 10 vendors, ERP suite vendors held 32%, while a geographically diverse SCM suite and niche vendor community represented the balance of 68%.

ERP suite vendors were late to introduce TMS products, but they now have a more compelling position and are becoming forces in basic TMS solutions. Oracle, SAP, Manhattan, JDA Software, IBM-Sterling Commerce and Descartes have made significant investments in TMSs and have become viable contenders in many TMS deals. Of these, Oracle continues to outpace much of the competition in terms of market growth and functional breadth and depth, and OTM remains a TMS leader, while other vendors continue to play catch-up.

Note: The revenue share distribution data is based on total software revenue.

Source: Gartner (September 2012)

Vendors of interest are listed in alphabetical order in the following paragraphs.

IBM-Sterling Commerce

IBM's Sterling Transportation Management System (Sterling TMS) is a SaaS-based multimodal TMS that covers core transportation capabilities of planning, optimization, execution, freight audit and payment, carrier collaboration, collaborative inbound freight management, and analytics. Sterling TMS is a component of the Commerce family of solutions, which covers multichannel selling, fulfillment and logistics management. Prior to the acquisition, logistics was not top of mind under Sterling; however, IBM renewed its focus and energy around transportation management as part of its Smarter Commerce initiative.

Sterling TMS remains best-suited to North American shippers of modest complexity, but IBM is investing to make the product more global by investing in global expansion with a few customers now outside North America. Prior to the IBM acquisition, Sterling had formed a partnership with IBM Ilog to add more-advanced planning and optimization capabilities. Now, these two capabilities are part of the same organization within IBM.

inet-logistics

inet-logistics is an emerging Europe-based/focused TMS provider. The vendor has been in business for several years, but it is only recently becoming better known in the TMS market. It is the only pure SaaS TMS that is well-positioned in the European marketplace. The vendor offers a broad portfolio of transportation capabilities, with a strong focus on international multimodal logistics, in addition to strong competency in the intricacies of European logistics.

JDA Software

Although JDA Software has two TMS solutions in its portfolio, it has now chosen to use the former i2 Technologies' TMS as its go-forward TMS platform. It intends to selectively consolidate some functionality from the previous Manugistics TMS onto this platform. While JDA intends to continue support for both products, over time, existing clients will be encouraged to move to the new platform.

JDA is one of the few TMS vendors that offer the same TMS through multiple delivery models, including on-premises, SaaS and managed service. JDA now has one of the most sophisticated and functionally deep SaaS TMS offerings, although its trading partner network is not as comprehensive as those of other pure SaaS TMSs.

LeanLogistics

LeanLogistics is a focused provider of multitenant SaaS TMS solutions. It is owned by Brambles, a financially strong, large Australia-headquartered organization with global operations. LeanLogistics has been on the forefront of recent innovations that take advantage of the SaaS platform to extract additional value from the information flowing across its network of shippers and carriers, and to package self-service capabilities in a manner that is more consumable by a wider audience of users — most notably, small to midsize shippers. For example, the vendor is aggregating data that flows across its network to offer benchmarking data to shippers and carriers, and it is offering self-service, rate-bidding software in an "App Store"-style format on the network.

Logility

Logility offers a broad portfolio of SCM applications, including TMS. Although the vendor's TMS is mature and proven, it represents a small percentage of the vendor's revenue, which is concentrated in supply chain planning (SCP). Logility's conservative management has allowed it to remain an independent, financially solid (although modestly sized) vendor, while many of its competitors have been forced out of the market or acquired. Logility has a tenure of more than 30 years in transportation, solid domain expertise and a solid product, but it lacks global TMS presence and investments.

Manhattan Associates

Manhattan Associates is a vendor of SCM solutions, with deep roots in warehouse management systems (WMSs) that go back almost 20 years. The vendor has added many new capabilities to its portfolio, such as transportation management and SCP, and several years ago it built a common business process platform, called Supply Chain Optimization, Planning Through Execution (SCOPE). SCOPE aids in converging all its solutions onto a common technical architecture, such as transportation, warehousing and planning.

While Manhattan hasn't made many acquisitions, rather focusing on internal innovation, it did acquire Logistics.com in 2000. Although having a TMS on SCOPE has advantages, it has taken the vendor longer than hoped to leverage the value of the carrier-centric capabilities that Logistics.com also provided. Although the vendor has global operations, the majority of its TMS focus and business continue to come only from North America.

MercuryGate

MercuryGate is a focused and rapidly growing TMS vendor. While the vendor came to market later (in October 2000) than some other TMS providers, the founders have deep roots in logistics and transportation, and they were able to apply their experience with modern Internet-based development platforms to rapidly bring to market a more than competitive TMS offering. MercuryGate initially targeted small 3PLs but has taken this initial focus and expanded its market to shippers and larger 3PLs. It offers a broad suite of TMS capabilities but also offers one of the lowest total cost of ownership in the TMS market. The vendor has been growing its customer base at more than double the industry average and continues to operate profitably. MercuryGate is a financially sound and conservative company, generating profits above industry averages.

Oracle

OTM has been part of Oracle since its 2005 acquisition of G-Log. Oracle has continued to enhance OTM by adding significant new functionality, expanding global capabilities and developing several strategic alliances. The vendor continues to maintain market momentum, growing its OTM customer base globally. Furthermore, it has expanded its marketing and sales presence, and has grown its consulting capacity with internal and partner resources. Consequently, today the vendor has one of the largest and most mature ecosystems of system integration and consulting partners. Oracle has more new TMS customers than most of its competition: Gartner estimates that at least half, if not more, of OTM sales are outside Oracle's installed base and that at least a third of its customers are international. OTM has a mature and stable product development team that Oracle inherited when it acquired G-Log.

RedPrairie

RedPrairie is a long-tenured provider of SCE and, more recently, retail solutions. In 2010, it underwent a change in ownership and is now held by private equity firm New Mountain Capital. With a deep history in WMS, RedPrairie has roots in SCM that go back two decades, over which time it has added capabilities such as TMS and retail applications through multiple acquisitions. During the past several years, the vendor has primarily bought innovation through acquisitions, enhancing its offerings in transportation by adding parcel management and acquiring a specialized fleet management provider that it rewrote onto the same architecture as its core multimodal TMS.

RedPrairie's TMS is strongest in North America, but it has been working with several European companies to enhance its capabilities. In early 2011, RedPrairie bought the assets of Shippers Commonwealth, which had been a small reseller partner of RedPrairie's TMS, primarily targeting the SMB shipper market. Shippers Commonwealth provided a hosted single-instance deployment option for the RedPrairie TMS, as well as transportation procurement and bid collaboration.

SAP

SAP completed ramp-up on TM 8.0, announcing a mass shipment in June 2011. Then, SAP executed ramp-up for TM 8.1, which brought new functionality for logistics service providers. There were approximately 40 clients in SAP TM 8.0 and TM 8.1 ramp-ups. So far, there are about 12 live operational clients using notable pieces of the TM 8.0 and 8.1 products, and the rest are in various stages of implementation. TM 9.0 ramp-up started in August 2012, and the 9.0 version brings new functionality to further address the needs of LSPs and shippers. Also new in 2011, SAP has addressed carrier connectivity with its SAP Information Interchange OnDemand solution, which it acquired with its purchase of Crossgate.

Others

Other vendors include C.H. Robinson Worldwide, Descartes Systems Group, McLeod Software, One Network Enterprises, Transplace, Transwide, TMW Systems and Varsity Logistics.

The market for TMS is evolving. Broad offerings from TMS suite vendors are typically less mature, while solutions such as planning are not. While the narrowly focused point solutions (such as parcel manifesting, fleet routing and scheduling) are more mature, after several years of consolidation, fewer vendors remain in these niche areas, which are undergoing an evolution as companies move to second- and third-generation solutions. Gartner finds increased demand for newer and more-innovative solutions in these areas.

For example, in high-volume direct-to-consumer distribution environments, multicarrier parcel manifesting is a mature solution, while interest is growing in Web-based solutions that could be used in mail-room-like settings in less-traditional shipping environments, such as in banks and universities. Given the TMS suite market's vendor and solution fragmentation, as well as the continued expansion of suite vendors' capabilities, we expect consolidation of vendors and shares to mimic that of ERP and other supply chain market segments, such as WMSs.

Market and transportation economic and business conditions are driving companies to the use of more transportation modes, which now places greater emphasis on a TMS's ability to handle more than just over-the-road freight. Some of these conditions are:

• Increased consideration of private or dedicated fleets to allow shippers more control over freight capacity
• Growth in use of intermodal freight, especially in Europe, to lower costs and add long-haul capacity
• Rethinking the value of rail to lower costs
• Use of hub-and-spoke networks to improve efficiency
• International ocean and air to support global trade
• Higher volumes of parcel and small-package shipping, especially in retail, due to growth in direct-to-consumer commerce and e-retailing

Gartner finds continued expansion in the sophistication, functional breadth and depth, and geographical scope of the TMS market. While shipper requirements grow, there remains notable differences across TMSs in their ability to address the most complex requirements and deploy outside North America, as well as TMS native support for modes other than over the road.