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Feeding Frenzy in Supply Chain Technology Markets

IBM acquires ILOG for $340 Million–July 28, 2008

JDA acquires i2 for $346 Million–August 11, 2008

 

The acquisition spree continues in the supply chain technology space as early pioneers opt to tie in with bigger partners.  IBM's acquisition of ILOG is clearly focused on adding the capability to manage complex supply chain outsourcing projects that IBM, Accenture and others are pushing hard in the marketplace.  JDA's acquisition of i2 caps the end of a long downfall by one of the early leaders in discrete manufacturing and supply chain technology and adds these applications to complementary consumer product ones acquired from the Manugistics deal last year.

What does it mean for competition in this market?  Frankly, not much.  The underlying software will continue to be sold and supported for as long as enough clients are attracted to the offerings.  The acquisitions clearly "throw in the towel" for certain, stand alone best of breed companies.  But many other healthy supply chain technology players still exist, such as HighJump (now owned by Battery Ventures), Descartes (which is enjoying record sales and profits), Sterling Commerce (still owned by AT&T!) and Infor.

Is best of breed software a bad bet in supply chain?  Hardly.  The rapid adoption of SOA software architecture will create infinite numbers of best of breed solutions–customized supply chain processes and procedures driven by underlying optimization and rules engines, such as those owned by ILOG and Fair Issac.  Savvy investors such as IBM are acquiring the building blocks of future supply chain software in these acquisitions.  The big difference between yesterdays and tomorrow best of breed software development is that it will be faster, cheaper, modularized and highly customized–while being easy to change and reconfigure without extensive and expensive version upgrades.

And let's not forget the data!  SAP and Oracle have honed their focus on owning the enterprise data.  Note the emphasis on enterprise.  A good strategy for managing inside the four walls, but obtaining real-time information on supply chain visibility and sharing data across supply chains continues to be a nightmare.  The emerging future strategy in supply chain management is decision making based on visibility of supply chain partner data, on a real-time basis.  This will give new supply chain technology entrants, such as LeanLogisitcs, a major advantage over competitors, since they collect and manage data on transportation moves that is not resident in enterprise data repositories.

So, if you ask for whom the bell tolls, think "old school" supply chain technology embodied in i2 and Manugistics.  The revolution is just beginning for the next generation of supply chain technology.

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One response to “Feeding Frenzy in Supply Chain Technology Markets”

  1. JB Perrin Avatar
    JB Perrin

    Dear Sir,
    I always read your posts with interest.
    As a prior user, participant vendor, sometime panellist and commentator of the supply chain technology arena, I agree that fundamental change is starting to sweep through the market. However, such change has been also been ‘predicted’ regularly over the past 15 years – so far to little effect!
    Why then, might it be true now? Perhaps because some of the following fundamentals are at work in a market that has become very dynamic. e.g.
    – Supply chains ‘are’ now networks
    – Ubiquitous data communications via low cost bandwidth
    – Information technology available even in the smallest organisations
    – The recognition of the true cost and inflexibility of ERP systems
    Many of the incumbent vendors have also been slow to grasp the implications of the impact of the so called Web 2.0 evolution. The ability to develop applications built for the world wide web, that are also inherently collaborative and able to integrate with other similar systems very easily, is profound. This, combined with the growing acceptance of business software delivered ‘as a service’ (SaaS), raises some interesting questions for customers.
    Given that supply chains should become more efficient with greater visibility, the requirement to capture, comprehend and then share data with all relevant parties is obviously easier in a collaborative environment. Unfortunately, many of the existing tools seek to enforce the imposition of standard processes which may only suit some of the participants in any community. What is required, is a ‘process agnostic’ environment which supports the free flow of data and gives the participants the ability to determine who they share data with on an equal basis. This is similar to the principles exhibited by social networks.
    In these environments, ERP solutions are simply nodes. Significant repositories for their owners, but of much less significance in a distributed network where a small supplier in one supply chain, may well be a much larger company than the chain master and a very significant player in others.
    Attempting to replicate the functionality of ERP, WMS, TMS and other specific systems within a supply chain visibility application is inappropriate. By the same token, seeking to extend the functionality of these systems to provide supply chain visibility is also unsatisfactory, as they will reflect the bias of their original designs.
    The answer may be found by focussing on identifying where the money sits in any supply chain, (usually the value of any inventory moving through it) and also the mechanism for moving that inventory – the orders. Monitoring orders and inventory and allowing the participants to view and update their status as they move through the chain is very powerful, seemingly trivial, but fiendishly difficult to achieve.
    Providing such a solution as a service may be the best way forward, as it should have the ability to evolve in line with users expectations. The frequent release cycles that characterise Web 2.0 solutions should also encourage participation and feedback from the users.
    To return to my initial comment, despite the frequent, unfulfilled, claims of change about to transform the industry, this time it may well turn out to be true. However many of the existing incumbents may find it’s not just the competition that has changed, but the rules themselves.
    With the Olympic games in progress, it’s appropriate to recall the ancient Chinese curse “May you live in interesting times”. For many companies they are about to discover how interesting things can be.
    Regards,
    JB Perrin
    http://www.bitlogistics.com/

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