GTM’s small fraction

   I was pretty caught by surprise when I read that Thomson Reuters and KPMG had inked a partnership in early 2014 to offer global trade management software and services in the South America market.
   To my mind, the number of providers of such software and services could fit in a pretty tight circle, but clearly, that circle needs to be expanded.
   That Thomson Reuters—known in the mainstream as much for publishing as for providing trade compliance and free trade agreement consultant services and software—sees this market as a growth opportunity perhaps shows that it is really coming of age.
   To a different degree, so too did Amber Road’s decision to go public last year. It wasn’t a blockbuster initial public offering in the context of, for instance, Alibaba, but consider this:
   Analysts from Gartner and ARC Advisory Group peg the total trade compliance software market at between $390 million and $420 million. Factor in the “GTM” market that could include logistics and/or trade finance functions, and the number goes up to around $700 million, according to Gartner.
   If that number sounds like a lot, let’s put this in some perspective. As analyst Adrian Gonzalez astutely pointed out last year, that number is a miniscule fraction of total global trade.
   “Here’s what I’ve always found perplexing about the GTM software market,” he wrote in a March 2014 post on his Talking Logistics blog. “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.
   “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?”
   These are great questions. Gonzalez, after dialogue with a host of shippers, attributes it mostly to a persistent philosophy that views global trade management as just paperwork. It’s making sure customs requirements are being met. It’s seen as administrative in the most dismissive sense.
   If you’re reading this column and have any sort of compliance responsibility, you probably know it’s much more than paperwork. But then again, think about this number: 0.0000002. That’s the percentage of international trade that goes toward global trade management software. That’s six zeros after the decimal point.
   Clearly, the message of trade compliance automation is getting lost somewhere, whether it’s from the providers to compliance managers, or from those managers to the people inside their company who dole out the budget for such projects. I tend to think it’s the latter.
   Any half-decent GTM software salesperson can show the benefits of a system in seconds— increased filing accuracy, more comprehensive and up-to-date restricted party screening lists, and reduced man-hours associated with filing documents. Then in the next few minutes, that salesperson could spell out the advantages to be gleaned through an automated free trade agreement and foreign trade zone strategy. Through the ability to link compliance processes with transportation processes, as if they actually have something to do with one another (which of course, they do).
   Our research in 2014 showed that fewer than one in three compliance managers felt they had the budget to buy a GTM system or upgrade an existing one.
   Perhaps the problem is not just that GTM is considered a compliance administrative function, but that most companies fail to see the overlap between the so-called “pillars” of GTM and other core supply chain functions, like sourcing and transportation.
   GTM really comprises so much more than compliance—everything from order management through to the financing of the supply chain—and yet GTM systems are often lumped into the simple “electronic compliance” bucket. Sure, there are some software providers that focus solely on automating the filing of documents. Others expand into more strategic compliance areas (like free trade agreement management), but still fence themselves inside the particular discipline of compliance.
   But as Gonzalez put it, GTM solutions have evolved 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.”
   There is plenty of room to run within that more specific market—imagine if every shipper even had a simple tool to automate import or export filing—but the big bucks will come for the GTM software market when companies adopt holistic systems that give them a view into compliance, transportation, and finance. When visibility is seen not just as “where’s my stuff,” but “what is the state of my vendor payments?,’ and “is my shipment clearing customs with no problems?”
   That companies beyond the usual group of rock-solid GTM systems providers see this as a market rife with potential is now clear. Beyond Thomson Reuters and KPMG, other major consulting giants have expanded their trade management capabilities, and are eyeing niche markets where there is a perceived void for compliance software and services. 
   At some point, GTM software has to become a multibillion-dollar market and not a multimillion-dollar one.
   At some point, the technology and consulting universe swirling around global trade management will compel every company to join in the fun.
   At some point, the inflection point will arrive after which every international shipper—small, medium, or large—will be using some form of electronic global trade management. And then they’ll all look back and wonder how they did it the old way, sort of the way we shake our heads and try to think how things got done before email and the internet.

This column was published in the January 2015 issue of American Shipper.