Cannabis Software Stack: Who Leads the Back Office Sector?

What does the Back Office sector of the cannabis software market look like, and which company is the market leader in 2020? Cannabiz Media dove into the data in the Cannabiz Media License Database and shared the answers to those questions and more in the Cannabis Software Stack report last month.

Let’s take a closer look at some of the data from that report and see what the Cannabiz Media research team learned about the back office sector.

Defining the License Opportunity in Each State

The Cannabiz Media team found 332 unique companies that connect to METRC or Leaf Data Services in Washington, and using the Cannabiz Media License Database, we determined how many licenses they can connect to in those states (i.e., the “license opportunity” or potential addressable market in a state).

To determine this license opportunity, we added Active, Pending, and Applied licenses for the appropriate activity. For example, to come up with the license opportunity for point-of-sale software, we included Active, Pending, and Applied dispensaries and retailers.The four software sectors are:

  1. Back Office (95 companies) – This sector includes solutions designed for complex operations that could be used by different types of license holders like ERPs, seed-to-sale, compliance, and supply chain/logistics.
  2. Activity (68 companies) – These are characterized as solutions designed for specific license holders like point-of-sale, grow software, delivery, and lab information management systems.
  3. Transactional (31 companies) – These solutions revolve around B2B and B2C transactions and include financial institutions, financial compliance, marketplaces, and payment processing.
  4. Advisory (60 companies) – This group is comprised of consultants who may advise on how to technically integrate and data analytics firms.

Based on the above findings, the market map looks like this:

Market Map

The Back Office Cannabis Software Breakdown

The Back Office sector is the largest we found in our research. It includes those companies that provide ERP, seed-to-sale, and supply chain/logistics solutions. We grouped these together because the solutions tend to be comprehensive and are used by license holders in different parts of the value chain.Key Findings for the Back Office Sector:

  • We identified 95 companies in the Back Office sector.
  • They make 419 connections to 15 states.
  • 77 of the 95 companies (81%) connect in California.
  • Back Office is comprised of the following categories:

             • Seed-to-Sale

             • ERP

             • Supply Chain/Logistics

             • Compliance

             • Regulatory Solutions

The Back Office Leaderboard contains the most connected companies we found. By the nature of their products, these seed-to-sale and ERP providers benefit from serving customers in many states. Their solutions are robust and complex, and this makes them attractive to multi-state operators that have to manage far-flung operations.  Leaderboards for the Transactional, Activity, and Advisory categories can be found in the Cannabis Software Stack Report.

Back Office Sector Leaderboard

Why This Information Matters

The information in our report is useful for a variety of stakeholders in the cannabis economy:

  • Regulators can gain insight into the size and scope of the software landscape and learn about many of the companies they may be working with.
  • Existing vendors can use the information for both competitive and business intelligence – and to find future partners and acquisition candidates.
  • Investors can use it as a roster of potential acquisitions or partners for their portfolio companies.
  • Existing license holders can use it to gauge the footprint of software vendors. With this data, they can see which companies are one-state-wonders.

Another key factor in our analysis is that since Cannabiz Media tracks the number of licenses in each state, we can generate some sense of competitive intensity. For example, if there are 40 point-of-sale vendors chasing 400 license holders, there will be a lot of competitive infighting. Bottom-line, this information can be extremely valuable to stakeholders across the industry.

What’s Next?

In the coming weeks I’ll share the Sector Leaderboards for the remaining three sectors (Transactional, Activity, and Advisory), so stay tuned to the Cannabiz Media blog.

Cannabiz Media customers can stay up-to-date on these suppliers and other new licenses through our newsletters, alerts, and reports modules. Subscribe to our newsletter to receive these weekly reports delivered to your inbox. Or you can schedule a demo for more information on how to access the Cannabiz Media License Database yourself to dive further into this data.

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