Today marks a significant announcement concerning service management and service parts planning software technology. Service Lifecycle Management provider Servigistics today announced that it has completed a merger with MCA Solutions, a provider of service parts optimization technology.  Some readers may argue whether this is a merger or a takeover, but regardless, the deal is done.

Both companies are private and obviously no financial details have been disclosed regarding this merger. Obviously, the investors behind MCA were looking to execute an exit strategy.

The other headline related to this news is that it was no secret that both of these vendors were previously fierce competitors in the market, with different cultures.

According to statements in the press release and a Q&A document provided on both companies’ web sites, Servigistics plans to integrate various existing MCA’s software offerings into the existing Service Lifecycle Management portfolio provided by Servigistics.  The original founders of MCA, both Dr. Morris Cohen, a member of the faculty at The Wharton School at the University of Pennsylvania, And Dr. Vipul Agrawal will remain with the combined company.

MCA Solutions, which was founded in 1999, is best described by its concentration on aftermarket service parts planning and optimization. MCA’s software is primary directed at durable manufacturing industry sectors that included aerospace and defense, automotive, high tech, consumer electronics, medical equipment and others.  Existing named customers include among others, Airbus Military, Boeing, Bombardier, Briggs and Stratton, KLA Tencor, Lockheed Martin, Panasonic Avionics, Pratt and Whitney, Rockwell Collins and Tellabs. The software itself originated from the concepts, algorithms and methodologies advocated by its original founders, Dr. Cohen and Agrawal, and are currently offered in both a traditional behind-the-firewall and one-demand platforms.

For one of the most comprehensive overviews of MCA’s capabilities, readers can review the March 2011 profile analysis penned by fellow industry analyst colleague and friend, P.J.Jakovljevic published by Technology Evaluation Centers.

Supply Chain Matters had the opportunity to speak with Mark Vigoroso, Senior Vice President, Global Marketing and Alliances at Servigistics and we were able to ascertain some further background.  General conversations regarding the bringing together of both companies began about 90 days prior but accelerated in the last 30 days.  The intent of this merger is to capitalize on the best of both companies in terms of intellectual property, people and services for customers.

In July of 2009, Supply Chain Matters commented on potential market consolidation within the service parts planning software area.  The catalyst at that time was Marlin’s acquisition of both Servigistics, and three operating units of Click Commerce, which included Service Network Solutions (SNS) and Contract Service and Management (CSM).   The Click SNS business consisted of the aggregation of many former service parts planning providers, the most notable being the former Xelus. Other former names included World Chain and Optum. At the time, Marlin noted that the CSM business would be integrated with Emptoris, a strategic sourcing and procurement vendor that Marlin acquired in December 2008. Emptoris has since been acquired from Marlin by IBM.   Marlin has also orchestrated for Servigistics an acquisition of post-sales service knowledge management vendor Kaidara in April of 2010, and a strategic partnership with Genpact In April 2011, a major business process services provider. That partnership was targeted to combine Servigistics technology with Genpact’s aftermarket services operations expertise.  Our 2009 commentary was premature in timing but that is more of a reflection of the tenaciousness and attractiveness of MCA Solutions in the current market.

This newly announced merger has the potential to add deeper and broader industry coverage and establishes Servigistics as a formidable competitor to existing service parts and management technology offerings being provided by major ERP providers such as SAP and Oracle, or other best of breed vendor Baxter Planning Systems.

As with many of these announced acquisitions, existing MCA customers will have to wait and observe how the two companies actually come together, especially since original buying choices may have opted to not select the Servigistics platform for various considerations.  A concerted outreach communications effort was initiated yesterday by Servigistics senior management to assure existing MCA customers that their existing software will be supported for as long as necessary. For its part, Servigistics is acknowledging an obvious overlap in solution areas and is further communicating that it will combine the strengths of each platform in a future offering.  Over the longer horizon, MCA customers will eventually be offered the option to move toward a broader, more comprehensive Servigistics service management platform. Also being communicated is that existing MCA customers have the opportunity to complement their existing software with other Servigistics offerings if they so choose.

MCA customers can also anticipate an upcoming town hall session, where Servigistics management will address longer-term strategy. This session to be held in conjunction with the annual Servigistics customer conference at the end of April.

These latest developments should also prompt firms who are still seeking or evaluating future implementation of service management and decision support software to evaluate Servigistics capabilities in the context of executing a broader market vision related to comprehensive service management needs.

Regarding the longer term outlook for both of these combined companies, Supply Chain Matters speculates that other future announcements related to Servigistics are still yet to come, given Marlin’s previous history with supply chain technology vendors such as Emptoris.  Marlin and Servigistics are obviously assembling comprehensive software, service management intelligence and business process services capabilities with powerful market leverage and this will capture the interest of many of the existing enterprise IT market players.

Manufacturing and service firms have long discovered the increasing critical importance that aftermarket services contributes to revenue, product and profitability business objectives. The bottom line takeaway from this announcement related to MCA Solutions is that your potential list of technology choices and associated bargaining power has just been narrowed.

Bob Ferrari

©2012 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog.  All rights reserved.

July is normally a quiet period in the world of supply chain technology as vendors and employees wind down from the Q2 quarter-end revenue push, as well as the need to take some summer vacation time.  This has not been the case in the service parts planning domain.

In case you missed the July 9^th announcement, Marlin Equity Partners acquired Servigistics, a prominent service parts planning and management software provider.  This acquisition is an obvious strategic follow-on to Marlin’s previous acquisitions related to Click Commerce. 

In May, Marlin announced the acquisition of three operating units of Click Coomerce, which included the Service Network Solutions (SNS) business and Contract Service and Management (CSM) business.  The Click SNS business consisted of the aggregation of many former service parts planning providers, the most notable being the former Xelus. Other former names included World Chain and Optum. Marlin also communicated that the CSM business would be integrated with Emptoris, a new equity partnership that Marlin established back in December. Supply Chain Matters has previously commented on the implications of the CSM assimilation within Emptoris.

If your brain is spinning trying to understand all of this, you may not be alone.  There has been some interesting commentary being generated in the blogsphere and among industry analysts, and I will add my perspective as well.  Bruce Richardson of AMR Research noted in his The Future of Enterprise Software blog that this combination of Servigistics and SNS will bring a stronger vertical industry presence and provides this market with a clear leader. On the other hand, competitor MCA Solutions penned on its Service Matters blog (no relation whatever to Supply Chain Matters) some very thought provoking comments that urge existing customers and prospects to exercise caution. While MCA is obviously protecting its own market interests, it does provide some pragmatic arguments.

There is no doubt in my mind that Marlin’s recent acquisition moves are opportunistic, taking advantage of strategic market opportunities to potentially consolidate the service management planning, services  and management software segment. Both Servigistics and SNS have been challenged of late in profitability and sales growth, in a market that provides a rather strong value proposition for investment. Both had initiated staff reductions and expense controls.

A significant evidence point for me supporting opportunism was the fact that in the May announcement, Marlin indicated that Dave Barboro will continue as President of the SNS group, yet in the recent announcement, Eric Hinkle, CEO of Servigistics, will assume the role of CEO, with Barboro assuming the role of Executive Vice-President. One could speculate that these two existing or former chiefs may not necessarily have the same views on future integration of customers, technology platforms, and strategic direction, and this new management team has to “flush out” direction.  The presence of Bill Atkinson of marlin in the role of Chairmen of the newly formed company is a critical one to watch.

My view for customers and prospective buyers tends towards caution as well.  If you are an existing Servigistics or Click SNS customer, you should be seeking clarity in the overall product integration and development strategy, and what that means to your existing investment  This is especially important since the web-native Servigistics platform is different than existing SNS software components, and decisions will have to be made regarding what scope of integration will be supported by the combined group.  Since profitability remains an objective, some structural decisions will be forthcoming.  I would also recommend you probe on levels of customer maintenance and service support, since its unclear whether this consolidation move is about purely consolidating customer maintenance revenues.

If you are contemplating a near-term investment in service parts planning software, you should step-back and take a second look.  The market landscape has clearly changed, and there is a bit more fuzziness related to composition of longer-term players. If you are seeking more specific assistance or counsel, let us know.  You can email bferrari at blog1 dot com.

Bob Ferrari