Gartner, Inc. says revenue from supply chain management software is on track to reach $10 billion in 2014, a 12.2% increase from 2013 and the highest annual growth rate since 2011.

The North American supply chain professionals polled cited inaccurate product demand forecasts and demand variability as leading concerns.

Through 2018, Gartner estimates that nearly 70% of businesses will pursue a single-platform (underlying architecture) strategy to integrate disparate systems, to improve supply chain visibility.

Although the SCM software market is nearing the point at which over 60% of its revenue will derive from existing implementations, in terms of new spending in 2013 approximately 16% of SCM investments were by companies adopting this software for the first time.

Gartner expects this figure to fall to less than 10% by 2018, and that the vast majority of “new” spending will come from organizations that already have SCM and are purchasing add-on functionality.

“Through 2018, 40% of new spending and 80% of recurring end-user spending will focus on advancing and extending foundational supply chain capabilities,” said Gartner research vice president Chad Eschinger..

Customers still prefer hosted or on-premises applications, largely because software-as-a-service (SaaS) SCM solutions have not reached functional parity with leading on-premises SCM offerings.

“The market for SCM solutions is influenced by a climate that continues to make large capital expenditure difficult for many organizations. This environment will drive many organizations to adopt solutions that are deemed ‘best of breed’ and often delivered as a subscription, which provides more focused capabilities and typically enables less expensive and quicker deployments,” said Eschinger.

“We expect that, through 2018, twice as many organizations will purchase private cloud and hosted offerings each year as those that purchase multitenant SaaS offerings.”