i2 getting acquired is not a surprise, since the company effectively announced it was up for sale several months ago. The list of potential acquirers included SAP (who recently settled a patent dispute with i2), Oracle, Infor, JDA, IBM, and a few others. Two years ago, JDA acquired Manugistics, i2’s biggest rival back in the late 90s and early 2000s, when both companies were at the height of their success. On the surface, it appeared unlikely that JDA would emerge as the acquirer, considering the overlap in functionality between Manugistics and i2 solutions. But as JDA’s CEO commented during a conference call this week, the amount of overlap is not as great as the amount of new capabilities i2 brings to JDA, especially in Discrete Manufacturing. And that’s the main reason for this acquisition. Just like Oracle and SAP have been making inroads into Retail over the past few years, JDA is aiming to grow its presence in Manufacturing. Manugistics gave JDA a foothold in Consumer Packaged Goods (CPG), and now i2 gives them a portfolio of solutions and clients in Semiconductors, Electronics, and other discrete industries.
It’s important to note, however, that i2 also has capabilities and clients in the Retail and Process industries, as well as the Third Party Logistics (3PL) space. The 3PL market has been a differentiator for i2, especially with its Transportation Management System (TMS) solution. Although JDA already has a TMS via its Manugistics acquisition, i2’s solution is arguably a better choice to standardize on due to its 3PL capabilities, architecture, and hosting experience (i.e., FreightMatrix). The 3PL industry wasn’t mentioned in the conference call, but it would be a mistake for JDA to ignore this industry and focus its R&D, sales, and marketing activities primarily on Retail and Manufacturing, especially when Oracle and SAP are aiming to grow their presence in the 3PL market too.
Another thing that wasn’t mentioned during yesterday’s call was i2’s managed services business. As I highlighted in last year’s “Supply Chain Geek Squad” report, i2 was transforming itself from a software company that provides services to a services company that provides software. The company exemplified a broader trend occurring in the industry, naming the merging of software with Knowledge Process Outsourcing (KPO). At i2 Planet in April 2007, Steve Bandrowczak, Senior Vice President and Chief Information Officer at Lenovo, gave a keynote presentation on how i2 helped Lenovo transform its end-to-end value chain. “The best software does not always equal the best solution,” Bandrowczak commented, explaining how i2′s domain expertise and managed services are critical components of the value they’re achieving. Panasonic, another i2 managed services customer, made similar comments at a previous conference.
Will JDA continue to invest and grow i2’s managed services business? The answer is unclear at the moment. Based on this week’s conference call, it’s obvious that JDA views itself as a traditional software company, where growth in license and maintenance revenues (along with EBITDA) are the primary measures of success. While it’s important for JDA to retain this focus, it should also continue to invest in the managed services business i2 had been cultivating. If JDA is looking for a competitive weapon against Oracle and SAP, supply chain managed services are it.
The Bottom Line
Although i2’s financial situation had improved in recent years, there was always a cloud of uncertainty hanging over the company. This acquisition marks the end of an era for a trailblazer in the supply chain software market, but the beginning of a more promising and stable future for its customers and employees. For JDA, this acquisition allows the company to serve a broader set of manufacturing companies, and it opens the door to exploit other opportunities, such as serving the 3PL industry and providing managed services. We have to wait until the end of the year to learn JDA’s product roadmap and strategy. But we expect the company will consolidate its solution portfolio, replacing some of its existing applications from Manugistics with i2 solutions and vice versa. From a technical standpoint, the task won’t be as challenging for JDA as when it acquired Manugistics because i2 applications are also based on J2EE. Although the Manugistics acquisition introduced JDA into Manufacturing a couple of years ago, and now i2 expands its presence in this sector, JDA still has to strengthen its brand among manufacturers, many of whom still view the company as a retail-centric software vendor.
