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Logistics Software Deep Dive – History & Market Dynamics

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Michael Brown

April 02, 2017
Logistics updated

We at Bowery Capital released the 2016 edition of Opportunities In Vertical Software in November, which laid out our point of view on ten specific verticals and the potential for various software solutions to dominate each of these ten verticals in the coming years. For ten weeks, we are releasing content focused around the impact of software on these ten industries. We covered the Agriculture vertical last week. For our ninth week, we feature the Logistics vertical. Our first post discusses Logistics software and in particular the market history and dynamics of software on the vertical.

History of Logistics Industry Software

The logistics software industry really took shape in the 1970’s and 1980’s. One of the earliest market entrants was Trimble, founded in 1978. When Trimble first started, they focused on developing innovative positioning and navigation products. In the same year that Trimble was founded, the first GPS satellite, the NavStar was launched. In 1989, Trimble acquired the Navigation Systems division of TAU Corporation and began developing differential GPS technology to provide increased accuracy for the fleet management market. Trimble started to make headway into new markets by acquiring a New Zealand company, Datacom Software Research Limited, which enabled Trimble to offer new survey and mapping software. In 1990, Trimble was the first GPS company to go public. In the same year as their IPO, Trimble integrated its GPS technology with its communications technology which enabled users to share information and messages at the same time. The company then went on to develop real-time kinematic (RTK) technology allowing moment by moment updates. Over the years Trimble has been acquiring many businesses to continue growing its large suite of products. As communication standards, computer technology and applications software rapidly evolve, Trimble keeps pace through constant innovation. One such innovation is the pairing of GPS information and other positioning technology data to other data sources to create deep insights for clients. Another company that entered the space in 1999 was LeanLogistics. LeanLogistics’s LeanTMS transportation technology is a true software provider of transportation management system (TMS) applications and supply chain services enabled by the industry’s largest transportation network. Over the years we have seen many companies entering the Logistics software space, and we have also seen a shift in the type of services that the customer base requires. Customers are now requesting systems that can handle multi modal delivery as well as regulatory and multi-carrier coordination for global sourcing which were not included in the early entrants to the space. The market is now also seeing major new shifts in IoT connected devices taking a role in the logistics industry.

Market Dynamics Of Logistics Industry Software

Opportunities in the logistics software space will continue to grow in the upcoming years. Industry experts say that companies are constantly looking for new and emerging services to help improve their processes. According to Markets and Markets, the digital logistics market will be worth ~$13B by 2019 and the transportation management system (TMS) market will reach ~$19B by 2020 as the industry swaps old technology for new solutions. Companies are continuing to switch from on premise to cloud software solutions and are beginning to buy more technology for process improvement. A hurdle in the market has been the fragmented nature of the customer base, making it harder for companies to attain scale and acquire new customers without significantly increasing their sales expenditure. Funding going into logistics technology has increased from $150MM in 2014 to $384MM in 2015 which could be viewed as a positive as new company formation drives innovation. All in, this remains a very large and open market with a fair amount of tailwinds helpful to the next crop of founders building software companies in the space.

Make sure to check out the 2016 edition of Opportunities In Vertical Software for the full report and we will be back tomorrow with some more information on the logistics industry and the software that powers it.