Inventory management software prices have been increasing at an estimated annualized rate of 0.2% during the three years to 2017. Growing demand for the product has encouraged increases in market prices. However, lower supplier costs have mitigated software price growth. Furthermore, low price volatility has benefited buyer power by allowing them to more accurately anticipate future financial spending. As a result of the marginal rise in prices, buyers have not been pressured into rushing the procurement process or engaging in long-term contracts.
In the three years to 2017, demand for inventory management software has been rising. Private investment in computers and software has been increasing, indicating rising demand among buyers seeking to integrate software, including inventory management software, into their daily operations. Additionally, as more businesses have used the internet in their operations, demand for cloud-based business software solutions has risen, resulting in an increase in demand for inventory management software in general. Rising demand for the software has, in turn, driven up market prices.
However, falling supplier production costs have been placing downward pressure on inventory management software prices during the past three years. Purchase costs have been falling as prices of key inputs, such as computers and peripheral equipment, have fallen. Declining input costs have helped restrain price growth in the market. Furthermore, vendors have continued to release newer versions of their software, driving competition and placing downward pressure on prices. Moreover, multiple industries, including manufacturing, retail and wholesale, seek innovative inventory management software as a means of more efficiently tracking inventory levels, orders, sales and deliveries. As demand for inventory management software has risen, new companies have entered the market, which has further boosted price-based competition and limited software price growth.
Growing demand for inventory management software is anticipated to continue driving market price growth in the three years to 2020. During the period, inventory management software prices are forecast to increase at an annualized rate of 0.4%. Fortunately for buyers, competition among vendors is expected to continue placing downward pressure on prices for inventory management software in the three years to 2020. The increasing adoption of cloud-based solutions will continue to intensify competition among vendors as demand for this service grows and attracts more new entrants into the market.
In the next three years, forecast growth in private investment in computers and software indicates that businesses will continue to integrate computer technology into their operations, which will boost demand for inventory management software. Corporate profit is also expected to increase, providing companies with the resources to purchase software and lead to higher market demand. Additionally, as companies move business operations online in an attempt to lower internal IT costs, the percentage of services conducted online will grow. This trend will also boost demand for inventory management software, particularly cloud-based subscription models. Although improving economic conditions and technological change will lead to higher demand, high competition among suppliers will continue to keep prices from drastically growing.
Although inventory management software firms are expected to consolidate in the coming years as large vendors seek to acquire smaller operators that provide niche services like cloud-based SaaS, low barriers to entry will continue to encourage new suppliers to enter the market. The rising number of suppliers will promote price competition and place further downward pressure on prices, so market prices are expected to grow at a slow rate in the next three years.
Low price volatility will also continue to benefit buyers through 2020, allowing buyers to plan for future expenses and relieving them of the pressure to enter into long-term contracts. Buyers that have few resources to allocate toward large capital investments may want to consider purchasing on a subscription basis.