This Week in Logistics News (January 30 – February 3, 2012)

Patriots, Giants, Super Bowl. Enough said.

This week’s news was dominated by financial results, the introduction of the Transportation Bill in Congress, and economic indicators.

UPS, Manhattan Associates, and JDA Software all reported record Q4 2011 results, while Con-way and CH Robinson also reported positive results for the quarter. You can read the press releases for all of the details, but in brief, all of the companies had a much improved year in 2011 compared to 2010, and they are all expecting similar growth in revenues and earnings in 2012.

For software vendors, the bet is that ongoing uncertainty and volatility with the economy will lead companies to invest in technology (instead of cutting spending, as they did in late 2008 and most of 2009) to find new ways to reduce costs and increase productivity. As JDA Software President and Chief Executive Officer Hamish Brewer states in the press release, “With the backdrop of continued global economic uncertainty, increasing volatility in the global supply chain and changes in consumer spending habits, JDA could be very well placed in 2012 to support vital deployments of advanced technologies that have the potential to help our customers deal with these significant and continuing challenges.”

Another sign that “cloud computing” is transforming the business models of software vendors: Last week, as part of its Q4 and full year 2011 financial results presentation, SAP announced that starting in 2012, the company will “provide additional transparency on cloud-related revenue streams and revenues from multi-year licensing arrangements (formerly known as software subscriptions). ‘Cloud subscriptions and support’ will no longer be included in the line item ‘Subscription and other software-related service revenue’ but will be presented as a separate line item within ‘Software and software-related service revenue’.”

Source: SAP, Fourth Quarter and Full Year 2011 Preliminary Results Release, January 25, 2012

The pending acquisition of SuccessFactors was certainly a driving force in SAP’s decision to start reporting “cloud subscriptions and support” as a separate line item, but I also believe that investors are starting to view this revenue stream as an important (and perhaps better) gauge of a software vendor’s financial strength and future prospects. I expect other “traditional” software vendors to do the same, if and when their cloud-related revenues become large enough to justify breaking them out.

Speaking of cloud solutions, RedPrairie announced that its Merchandise Management and Direct Commerce applications are now available as on-demand, hosted offerings through the cloud. The value proposition, which is aimed primarily at small and medium businesses, is the same as with all cloud solutions: lower upfront costs and faster time to value. But the press release also highlights the following value proposition for retailers with seasonal businesses:

While the cloud-based solutions make sense for any SMB, they are particularly valuable for retailers with seasonal businesses. With an on-premise solution, retailers must build up their computing capacity to handle peak periods during the height of their busy season or risk customer dissatisfaction. That means at off-peak times of the year, they have excess computing capacity sitting idle for which they are still paying. With RedPrairie’s on-demand offerings, retailers can turn the volume up and down as needed, only paying for the capacity they are using at that time.

This was a big week for transportation. First, the “American Energy & Infrastructure Jobs Act” was introduced in the House on Tuesday. Here is an excerpt of House Transportation and Infrastructure Committee Chairman John L. Mica’s comments from the press release:

“The American Energy & Infrastructure Jobs Act is the largest transportation reform bill since the creation of the Interstate Highway System in 1956. This is a five-year bill that reforms our federal transportation programs, cuts the red tape and bureaucracy that delays projects across the country, gives states more flexibility to determine their most critical infrastructure needs, provides states with the long-term stability to undertake major improvements, and encourages private sector participation in helping to finance transportation projects.”

I haven’t had a chance to fully analyze the bill, but as is always the case with transportation infrastructure, there will be many debates and questions to answer in the weeks ahead, especially how to pay for it. Stay tuned.

In related news, the House Transportation and Infrastructure Committee voted down an amendent that would have allowed states to raise the limit on Interstate highways from 80,000 pounds to 97,000 pounds on six-axle vehicles. I first wrote about this topic back in July 2010 in “Coalition for Transportation Productivity: Interview with Harry Maney at Kraft Foods.” In a statement issued yesterday, the CTP vowed to keep working with members of Congress “to introduce a significant amendment during consideration of the Highway Bill on the house floor.”

Finally, about 100 shippers and 12 industry associations participated in “Stand Up for Trucking” in Washington this week. John Shulz at Logistics Management wrote a nice summary of the event, which according to Mike Regan, president of Tranzact and head of NASSTRAC’s advocacy committee, accomplished three things (as stated in the article):

  1. Get carriers and shippers to demonstrate there are issues over which have common interest.
  2. Help legislators understand while freight does not vote, freight transportation is incredibly important component of U.S. economy.
  3. Show legislators shippers are pro-safety and mode neutral.

Okay, time to call it a week. Have a fun and relaxing weekend!

(Note: CH Robinson, Con-way, JDA Software, Manhattan Associates, RedPrairie, and SAP are ARC clients)