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.