Last week, RedPrairie and JDA Software, two leading providers of supply chain and logistics software, announced that they are merging together (see our commentary here). Both companies had grown through the years by acquiring best of breed vendors, and now that they have reached a certain size, they are joining forces to offer customers “a full spectrum of solutions for planning and execution across the entire value chain.”
In a call with analysts last week to discuss the merger, Hamish Brewer, JDA’s CEO who will also lead the new company, shared his perspective on what customers are looking for today with regards to IT:
“Most of our customers today have an IT strategy that I would broadly describe as best of suite, which is to say that they don’t…want to do everything with one supplier, but they don’t want to go back to having hundreds of suppliers either. They want to have a handful, usually a single-digit number, of suite providers that can handle sizable pieces of their IT infrastructure, which can work together, especially now that we have much better common platform integration tools. So, in general, that is the IT strategy that I hear from most of our customers.”
So, where does this leave best of breed providers of supply chain and logistics software? Must they become “best of suite” providers to survive? Are best of breeds going the way of the dodo bird?
First, it’s important to note that (to paraphrase Mark Twain) the death of best of breeds has been greatly exaggerated in the past. Back in 2003, for example, Oracle CEO Larry Ellison emailed a colleague that “Within the year every analyst will agree that best of breed is dead — except at dog shows.” He was referring to CRM best of breeds, but the belief extended to other applications too. Almost a decade later, best of breeds are alive and well, with new startups entering the market every year. The bottom line is that as long as there are new supply chain and logistics challenges and opportunities to go after, as long as there are continued innovations in technology, and as long as there are entrepreneurs with new ideas and the drive to realize them, there will always be a role for best of breeds in the market.
That said, many manufacturers and retailers, especially large ones, are indeed pursuing the IT strategy outlined by Brewer. So, aside from expanding their solution footprints, either organically or via acquisitions, what else can best-of-breed software vendors do to succeed in the market?
I believe there are at least four areas where best of breeds can set themselves apart from the competition:
Provide network-based solutions: Supply chain and logistics processes are inherently network-centric — i.e., they involve many external parties, such as suppliers, customers, transportation providers, 3PLs, and customs. Best of breeds that provide customers with software designed for cross-enterprise planning and execution, and also provide a built-in network of trading partners, will have an advantage over vendors that provide software designed only for “inside the four walls” and also require their customers to build and maintain their own B2B networks. For related commentary, see “Revisiting Supply Chain Operating Networks” and “An Overlooked (But Critical) Component of Transportation Management Systems” and “SAP Buying Ariba: Because Software Alone is Not Enough.”
Leverage Social and Mobile technologies to innovate user interfaces and workflows: Startups always have the advantage of designing their solutions from the ground up using the latest technologies and software innovations. Two of the hottest areas in technology today are social and mobile capabilities, which are opening new paths to innovation, particularly in user interfaces. For related commentary, see “Guest Commentary: Next Generation of Visualization and User Interaction” and “Maps: The New ‘Killer App’ in Supply Chain Software?”
Focus on under-served vertical industries: This has been a formula for success for many best-of-breed vendors in recent years. Instead of following the herd into consumer packaged goods and retail, they have differentiated themselves by serving 3PLs (including freight forwarders and brokers), transportation providers (including trucking companies, railroads, and airlines), and companies in the chemical, pharmaceutical, oil and gas, and other industries with specialized requirements.
Address the “white spaces” in existing solutions: In other words, identify the functionality gaps in existing solutions and fill them. For examples related to transportation management systems (TMS), see “Transportation Forecasting: A ‘White Space’ in TMS” and “Innovation: Addressing the White Spaces of TMS” and “What’s Next in Transportation Management Systems (TMS)?”
Finally, there are two more important points to remember:
- It doesn’t matter what software application or suite you implement, it won’t deliver much value unless you have the right people, with the right training and know-how, to use it effectively. And this is where 3PLs and managed services providers come in. As a 3PL told me recently at a conference, “A shipper can deploy a TMS themselves, but many of them don’t have the resources internally to effectively use and manage it, so they don’t get the full value from the application or stop using it. What a 3PL brings is not only the technology, but also the experts that know how to use it to continuously deliver value.”
- “Best-of-suite” might matter more to customers today than in the past, but not at the expense of time-to-value and speed of innovation. In some cases, speed and flexibility actually matter more to customers than functional breadth and depth, which is why software-as-a-service (SaaS) solutions continue to gain traction in the market.
(Note: JDA Software, Oracle, and RedPrairie are ARC clients and/or Logistics Viewpoints sponsors)