WMS Subscription Model Finds Footing in Complex Operations

Companies have historically licensed warehouse management system (WMS) software, with pricing based on a combination of the number of distribution center sites and user counts. WMS products were installed directly on servers located within the D.C., and managed by the company’s internal I.T. staff. Over the last decade, a marked trend toward centralized hosting of WMS in the cloud has gained footing in the market. Today, WMS subscription-based pricing is rapidly evolving and changing the customer-vendor dynamic.

WMS subscriptions have traditionally been offered by vendors catering to lower-complexity environments and smaller, e-commerce-focused customers. In 2019 and 2020, this approach expanded, and is now a standard option for almost all WMS vendors in the market. Vendors are not only offering WMS subscriptions, but are also adding order management system (OMS), transportation management system (TMS) and other modules to their software-as-a-service (SaaS)-based arrangements. Should potential buyers with moderate to complex operations embrace this model?

Some key thoughts on this trend:

• Total cost of ownership. Recent data points show that subscription total costs offered by larger WMS vendors may cross over traditional licensing in as short a timeframe as two to three years, assuming pricing holds. Once reliant on a subscription arrangement, will that subscription cost change substantially over the lifetime of an application? Vendors are promoting environmental monitoring, database-administration services and the reduction or elimination of upgrades as examples of reduced I.T. hardware and administration costs. TCO should be analyzed fully based on a company’s unique operations and growth plan.
• Extensibility. Today, companies have more ability than in the past to modify how their WMS software works, without having to ask for vendor modifications. Workflows, configurable data views, plug-in options and scripting provide more options, but can more complex operations avoid modifications and move to a more version-less WMS?
• Responsiveness and control. WMS vendors will rightfully tout security and a disciplined approach to all aspects of interacting with the modern WMS environment. More complex operations with investment in internal expertise may bristle at the additional overhead and need for coordination with vendor support.

Outlook

In 2021, subscription-based pricing becomes even more widely proposed by vendors, and considered by prospective customers. Subscription-based WMS implementations expand into larger, more complex D.C. environments. Savvy distribution operations will recognize this move toward cloud and subscription models, and will thoroughly evaluate future options. These operations should take a fresh look at the WMS market now, to avoid hitting higher-risk “end of product life” or product-support scenarios.

 Cal Petty is Vice President with Tompkins International.