Last night, Descartes announced its acquisition of Routing International, a privately-held provider of route planning solutions based in Belgium. Descartes has a long history in the route planning market, and several years ago it acquired Cube Route, a software-as-a-service vendor in this space. So, why acquire another related company?
I spoke this morning to Chris Jones, EVP Solutions and Service at Descartes, to get more details. Here are my key takeaways from our conversation:
- Routing International has optimization IP, such as for multi-compartment vehicles, that expands and enhances Descartes’ existing capabilities. Simply put, there is no single optimization engine that addresses every scenario or problem. The acquired IP will help Descartes better address the needs certain customers and vertical industries.
- Just as important, if not more, this acquisition strengthens Descartes’ direct sales presence and support capabilities in Europe for its routing and mobile solutions. Several years ago, as part of Descartes’ restructuring and turnaround plan, the company significantly downsized its direct presence in Europe and worked mostly with channel partners. Although Descartes will continue to work with channel partners, increasing its direct presence in the region will help the company accelerate its MRM 2.0 strategy. Descartes has been very successful selling its mobile and wireless solutions to existing clients here in North America; having additional feet on the ground in Europe will help the company do the same with its existing client base there, plus the additional 200 customers Routing International brings to table.
This acquisition comes on the heels of Descartes’ announcement earlier this month about its Mobile Resource Management 2.0 initiative, as well as its event a couple of weeks ago for analysts and investors that I attended. Simply put, Descartes sees an opportunity to unify, via acquisitions and partnerships (see the company’s “United by Design” program), what is currently a highly-fragmented market of different providers (routing and scheduling, automated vehicle location, wireless/GPS, etc).
Sound familiar? This is the same strategy Descartes has taken in the global trade management arena, which has resulted in numerous acquisitions over the past few years. Will the strategy succeed in this market?
Time will tell. But based on our research, the problem Descartes is trying to solve is a real one. The biggest inhibitor for companies to implement mobile technologies in supply chain, particularly in fleet management operations, is the perception (reality?) that it’s too complex to implement and manage (see preliminary results below from a web survey we are currently conducting).
Source: ARC Advisory Group (preliminary results from survey in progress)
Today, there are simply too many cooks in the kitchen to put together a solution: software provider, hardware vendor, wireless carrier, and so on. And bolting all of these pieces together is not always easy and the end result may fall short of requirements because each component was designed in isolation instead of as a system.
Unlike the GTM market, however, where Descartes focused on market segments most of its competitors ignored (e.g., freight forwarders, brokers, etc.), competitors like UPS Logistics Technologies and others in the broader TMS space are paying attention to MRM too. In short, Descartes will face a more competitive environment this time around, and there will likely be multiple winners. It will all depend on who has the best strategy and who can successfully execute it the fastest.
We’ll be doing a lot more research and writing on this topic in the weeks ahead. Stay tuned.
(Note: Descartes is an ARC client)
