The consolidation among supply chain technology providers has accelerated at a more rapid pace.  In part one, I commented on the IBM-ILOG acquisition. In this part two post, we touch upon another major announcement.

JDA Software Group Inc. has announced the signing of a definitive agreement for that company to acquire supply chain technology vendor i2 Technologies, in a net cash deal valued at $346 million.  JDA is expected to finance this acquisition issuing additional debt, and further indicates that it is expecting approximately $20 million in annual cost savings through consolidation in operations, combined infrastructure and general and administrative expenses.

This announcement should come as little surprise to our community since speculation related to an acquisition of i2 have been prevalent for many months and i2′s Board had openly formed a strategic options committee back in November to seek other options for the company.  

Since 1988, i2 has been delivering highly sophisticated planning applications primarily to its core vertical, the high tech industry.  Customers such as Dell Computer, IBM, ON Semiconductor, Texas Instruments, TSMC and others were cited as customers.  The company to its credit has also expanded presence to other verticals.  Retail industry customers included the names of Best Buy and Barnes and Noble, and Aerospace included customers such as Bell Helicopter and Boeing.  While analysts at AMR Research in 2001, Larry Lapide and myself met with Bell Helicopter management and advised them to evaluate i2 as a potential vendor for their complex planning needs.

But alas these last few years have been rather challenging for i2 as it continued to find a more growth-oriented revenue model. License revenue sales had been struggling, with i2′s latest six month revenues coming in 3% below last year, which in-turn was not a stellar year.  The company of late has been refocusing itself toward more of a custom software and planning services vendor, leveraging its investment in a supply chain development center located in Bangalore India.  Many talented supply chain technologists cut their stripes during their tenure at i2, and I am pleased to continue to know them as they assumed other roles in our function.

Readers will recall that JDA is the same company that acquired Manugistics, another prominent supply chain planning applications vendor in July of 2006. Manugistics was also struggling to grow revenues, and ultimately placed itself in play for acquisition.  In that JDA acquisition, infrastructure redundancies were eliminated, and the former Manugistics applications, built on a Microsoft .NET architecture were consolidated onto JDA’s  J2EE architecture platform.  Since that acquisition, there has not been much to comment on in terms of newer functionality, while sustaining maintenance revenues continue to add to the JDA cash position. I recall that on the briefing call that announced the Manugistics acquisition, there was no presence from the then Manugistics senior management team.  Interesting enough, the same lack of presence from i2 senior management occurred today in JDA’s acquisition briefing

If you are an existing i2 customer, I would urge you to both listen to the replay of JDA’s management briefing, and insist upon an individual briefing of the long-term product roadmap and support plan. JDA’s CEO has indicated that he expects this product roadmap to be available in six weeks after the acquisition closes.  In the meantime, you may want to explore what are other long-term technology options, particularly if your ERP backbone is Oracle, SAP, or Microsoft, who continue to narrow functionality gaps for industry unique planning needs. Firms such as ours and others can help with your assessment.

Feel free to also provide your comments relative to this acquisition in the comments section of this post for others to observe.

It is unfortunate that the best-of breed vendor landscape continues to consolidate, and choices are getting to be narrower.   For now, let’s all reflect on the fact that yet another brand name departs the community.

 Bob Ferrari

Supply chain technology acquisitions have been in the news of late.  On July 28 there was a surprise announcement that IBM intends to acquire French software provider ILOG, and today JDA Software announced that it was acquiring supply chain planning technology vendor i2 Technologies, a fairly well known player in the industry.  In this Part One post, I will share my thoughts and observations regarding the ILOG acquisition, and in part two, the i2 acquisition.

IBM intends to acquire ILOG for an aggregate purchase price of approximately $340 million, subject to a series of approvals from both organizations. ILOG is essentially a software tools and custom applications provider. Over 500 software OEM’s embed ILOG business rules, optimization, and visualization technologies within their applications.  When speaking to my clients about ILOG’s role in software, I often use the 1800′s California gold rush analogy.  Who benefited more by the rush to discover gold, the individual miners panning for gold, or the makers of the picks, pans and shovels?  In software, ILOG serves as the optimization or business rules engine for many software vendor and internally developed applications, including supply chain planning and analytics.  ILOG serves as the “picks and shovels” for sophisticated software needs.

According to documents filed with the U.S. Securities and Exchange Commission (SEC), IBM’s WebSphere software group intends to assimilate ILOG into their Business Process Management and SOA Suite of offerings.  ILOG joined the IBM SOA Specialty Program in October of 2006, and the two vendors have been jointly collaborating on customer implementations, as well as internal scheduling and other planning applications to support IBM’s internal manufacturing and supply chain processes. IBM’s Websphere group has been quick to recognize the growing importance of both business rules components and visualization as key components of a client’s overall SOA strategy.

Of added note is that in February of 2007, ILOG acquired supply chain network design and inventory optimization vendor Logic-Tools, and assimilated that company into a newly formed supply chain applications business consisting of ILOG’s custom production planning and Logic-Tools applications.  This particular group grew 35% in year-over-year revenues, thus far in 2008.

After reviewing current SEC and other briefing documents, I found no specific mention of plans related to the supply chain applications group.  I find that interesting since the LogicNet Plus 6.0 XE supply chain network design application has been positioned as a carbon footprint analysis tool to support green supply chain initiatives, and has been garnering a lot of attention of late. IBM has also been on the forefront of garnering attention to its green and sustainability initiatives. IBM currently offers its own inventory optimization application, and also partners with SmartOps, a competitor to ILOG in the inventory optimization area.

The acquisition transaction is not expected to close until mid to late September.  More specifics should hopefully emerge relative to plans related to plans for the supply chain business applications division of ILOG.  If your company is a user of Logic-Tools applications, I would encourage you to seek more specifics regarding longer term product support and development plans. IBM has often been a customer-responsive vendor and I would expect no less in the consolidation of ILOG’s supply chain applications business.

In the meantime, you can provide your comments, desires, and/or concerns relative to this acquisition in the comments section below this post. Call or email if you require specific assistance.

 Bob Ferrari