A Race To Critical Mass

Critical mass. If you live in the cold Northeast and have few opportunities to exercise, then you probably reached critical mass sometime in mid-January. If you're talking about the WMS (warehouse management system) market, critical mass takes on a whole new meaning.

When I spoke with a WMS vendor at ProMat 2001 this past February, this very subject came up. The controlling thesis of the conversation was: there is a point when customers focus less on minor technology differences among products and begin to look at the number of installations under each vendor's belt. After all, customers don't agonize over the merits of Microsoft Explorer versus Netscape. Granted, we're not talking about browsers here. But, the functionality found in tier one WMS products is fairly similar. If that's the case, then aren't we simply talking about price points and ease of implementation?

Well, that's the thesis at least.

What Are Your WMS Choices In The Future?
If the race to critical mass theory is true, then that might explain some of the acquisitions taking place in the WMS space - with acquisitions, come customers. If, as predicted, the WMS market dwindles to a handful of key players, then having the largest customer base will be critical. Companies are not unlike people in that most tend to follow the crowd and make path-of-least-resistance choices. If no one ever got fired for buying IBM, then your job would be safe if you chose the largest WMS provider.

The WMS vendor I spoke with continued to outline his argument by saying, "The choice between Microsoft Word and Corel's WordPerfect is the result of a decade-long distillation of word processing technology. There were plenty of other players along the way. In the end, however, consumers basically have two very good choices. A similar evolution will take place in the WMS market."

If we assume this to be true, then a handful of large companies will control the WMS space within a few years. The smaller WMS vendors will be swallowed up or struggle to survive. End users will be left with a handful of large vendors and products from which to choose.

Customer Success Is Critical
With any logical argument, you can't assume that the propositions are true. For example, the WMS space is much different from the word processing and browser markets. With WMS purchases, customers still expect a great deal of hand holding - at least with the first few implementations in a rollout. Also, browsers and word processors are understood by almost every employee at a company. This is hardly the case with WMS solutions.

Technology, which is arguably similar between vendors, may not ultimately be the deciding factor for customers. Also, I don't believe that the size of the vendor will be a critical differentiator in customers' minds. Sure, customers will want to see a generous list of references. But, they are not going to simply choose the vendor with the longest list.

In the end, I believe, WMS vendors will separate themselves from the pack based on two critical factors. The first, not surprisingly, is quality references. The second is support services. If a vendor has a long list of unhappy customers, how can it leverage that?

Now, show me a company with money to spend on development and a long list of happy customers, and I'll show you a company that is positioned to be one of the main players in the WMS space for years to come.