A New Era for Global Trade Management Software?

On the television show Survivor, there’s a tradition where the final four tribe members hike a long trail to their last challenge. Along the way, they walk past markers engraved with the names of all the competitors that were voted out before them. If Survivor was about competitors in the Global Trade Management (GTM) software market, the names on those markers would be Vastera, NextLinx, ClearCross, Arzoon, and many others.

Last week, Amber Road, a cloud-based GTM software vendor, went public on Nasdaq, raising $96 million by offering 7.4 million shares at $13. Will this IPO mark the beginning of a new era for GTM software?

I started covering the GTM software market almost 15 years ago, and it’s been a long road for software vendors in this space, especially best-of-breed providers. Here’s a brief history of the various twists and turns in the vendor landscape:

Vastera was acquired by JPMorgan Chase in 2005, and then sold off again in 2012 to Livingston International.

ClearCross (previously Syncra) was acquired by TradePoint in 2002, which was then acquired by Kewill in 2004.

Arzoon was acquired by SSA Global in June 2004, which was then acquired by Infor in 2006.

Management Dynamics (which changed its name to Amber Road in 2011) was acquired by Celarix in February 2000. Less than three years later, Jim Preuninger and John Preuninger, the founders of Management Dynamics (and the current leaders of Amber Road) bought the company back. In 2005, Management Dynamics acquired NextLinx (it also acquired Bridgepoint earlier that year).

Along the way, SAP and Oracle also launched their own GTM solutions, winning their fair share of clients and business. And there are other notable solution providers in the market today, including Descartes, Integration Point, and Precision Software.

The scope and capabilities of GTM solutions have evolved significantly over the past two decades, from simple desktop applications focused on generating and printing export documents to cloud-based, enterprise-class solutions focused on a broad spectrum of import and export processes.

Compliance — i.e., automating customs and regulatory compliance activities — is what most people associate with a GTM solution, but it’s only one component of a best-in-class global trade management solution. The other two critical components, which many companies overlook, are content and connectivity. For more details, watch last July’s Talking Logistics episode, The 3 Cs of Global Trade Management.

But here’s what I’ve always found perplexing about the GTM software market. According to the World Trade Organization, total merchandise trade more than tripled from 1995 to 2012 — from $10.4 trillion to $37 trillion. Yet, after more than 15 years in existence, the total GTM software market remains relatively small — less than $390 million in 2012, according to ARC Advisory Group.

Why isn’t this a billion dollar market already? Why is Amber Road, in business since 1990, only a $52.5 million company when global trade has been growing so robustly?

There are several reasons why, which I won’t go into today, but I’ll summarize it this way: for a long time, GTM solutions were relatively expensive and complex to deploy, which limited the addressable market to a small number of companies (the very large), industries (those heavily involved in global trade, especially automotive and high-tech), and countries (the US and a few countries in Western Europe).

But in my opinion, the biggest reason why the GTM software market isn’t larger today is that many manufacturers and retailers still view global trade management as just paperwork.

This was true more than a decade ago, when in a think tank I conducted with supply chain executives, a VP of Customs Compliance at a large pharmaceutical company expressed her frustration with the group: “You would never hire someone off the street to manage your finance operations. But that’s exactly what we do to manage our global trade operations. It’s just viewed as paperwork at our company.”

And it remains true today, as I wrote about last November about the two industry-leading companies that are managing free trade agreements with Excel spreadsheets.

Are we entering a new era for Global Trade Management software? Only if more companies ditch their outdated perspective and spreadsheets and start recognizing the strategic value and importance of global trade management.

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