I attended the Descartes Evolution 2012 Global User & Partner Conference a couple of weeks ago. When Art Mesher took over as CEO of Descartes Systems Group eight years ago, I wasn’t sure the company was going to survive. Today, it is a thriving company. What are the secrets of its turnaround?
Descartes (a Logistics Viewpoints sponsor) was one of the first enterprise software companies to move to the software-as-a-service (SaaS) model. Moving from upfront license fees to recurring subscription fees hurts revenues for the first few years, but then revenues become much more dependable and predictable.
The SaaS model can also be very good for clients. At the conference, a Director of Logistics at a retail company spoke about the results his company achieved after implementing Descartes’ SaaS routing and mobile resource management (MRM) solution. The solution was inexpensive enough that he could pay for it out of his operating budget. The solution was also implemented fairly quickly. The savings in the first year were 20 times larger than what the retailer spent on the product! Three quarters of the savings came from better routing of the company’s private fleet, the other quarter from reduced driver idling. I thought, “Where else have I heard of such an impressive ROI?” And then I remembered: at a Descartes conference a couple of years ago.
The second key to Descartes’ turnaround is its Global Logistics Network (GLN), an electronic communication network with 63,000 connected parties. About 4.5 billion messages are exchanged annually on the network, which is focused largely on logistics documents. At the core of Descartes’ strategy is what the company calls the “Federated Network,” which is similar to our Supply Chain Operating Network model. The idea is that applications that run on a network can achieve synergies that are just not possible with standalone applications. The difference is that by speaking of a “federated” network, Descartes makes the point that it connects to about 50 other EDI networks.
Descartes’ IES warehouse management system (WMS) is a good example. This solution is used by freight forwarders and 3PLs with port (air and ocean) facilities, and it is particularly well suited for facilitating shipment consolidation and deconsolidation. While the core WMS does not support advanced labor saving activities like directed put-away, the electronic communication component has rich functionality for coordinating seller, carrier, and buyer interactions to facilitate the consolidation process. This is where Descartes seems to excel, finding the white spaces and inefficiencies in logistics processes that involve more than two parties. Other examples include the company’s DC Bypass and Logistics Flow Control solutions.
At the conference, Descartes announced its intention to leverage its network to build what it calls the Descartes Community. The solution, which was demonstrated at the conference, looks similar to LinkedIn, although it’s much more specific to people interested in logistics, and with more in-depth profiles of logistics companies. Ultimately, this solution could help shippers find new carriers to do business with.
This brings me to the third thing that has aided Descartes’ turnaround. For the company, acquisitions are a core competency. IES, the source of its IES WMS solution, is just one of many examples. Descartes likes to buy small, profitable companies that are focused on logistics processes most other supply chain software companies seem to ignore; companies that offer SaaS solutions that will drive new traffic to its GLN, and are strong in particular geographic regions where it has a limited presence. Descartes’ acquisitions fall into the three product categories it supports – global trade compliance, mobile resource management, and supply chain execution. The company’s most recent acquisition, Exentra, is an example of this acquisition strategy in action. Exentra is UK based, a SaaS solution, and falls into the MRM product category.
In conclusion, there is a lot to be said for consistency. When I go to other supply chain vendor conferences, there seems to be a new vision every few years. At Descartes, the vision has remained consistent ever since Art Mesher took the helm.