RedPrairie, an ARC client, held its annual user conference, RedShift 2010, in Orlando last week. It was the company’s largest user conference ever. The two biggest news items from the event were the CEO’s explanation for why RedPrairie was acquired earlier this year by New Mountain Group and RedPrairie’s acquisition of SmartTurn, a software-as-a-service (SaaS) multitenant WMS solution.
RedPrairie had been owned by Francisco Partners, a private equity firm, and the company had filed to go a public last November, which would have allowed Francisco Partners to cash out after owning RedPrairie for five years. Then in February of this year, RedPrairie announced that it was being acquired by a fund affiliated with New Mountain Capital, another leading private equity firm.
Mike Mayoras, RedPrairie’s CEO, said that being funded by a private equity firm had worked well for the company. It had allowed them to grow faster than the overall market and to expand their product offerings. He views this acquisition by New Mountain Capital as a continuation of the previous strategy and the company intends to follow much of the same script. RedPraire wants to grow both via acquisitions and organically from existing products. It doesn’t want to become a company focused on rollups; all acquisitions should complement and expand its product offerings or allow it to expand its global reach. RedPrairie is particularly interested in product offerings that increase its market share among retailers.
In recent years, RedPrairie has acquired retail store operations solutions based on a SaaS payment model. The company intends to continue growing the percentage of its revenues generated from that model, which brings us to the other piece of news coming out of the conference: RedPrairie’s acquisition of SmartTurn.
While RedPrairie’s retail solutions are sold in a SaaS payment model, they are not multitenant. SmartTurn will be its first multitenant solution, which the company will rebrand as RedPrarie’s On-Demand WMS. RedPrairie does not have plans to make its flagship WMS or TMS products multitenant at this time. RedPrairie remains willing to host its flagship WMS at offsite facilities under its control and let customers pay in a monthly leasing arrangement.
The SmartTurn acquisition is complementary. RedPrairie’s installed base is mostly large companies with complex warehousing solutions. SmartTurn is an extremely low priced solution ($1,200 per month per facility for unlimited users, $4000 in implementation fees) that has been sold primarily to small companies. The traditional RedPrairie WMS solution offers payback in the form of labor productivity (e.g., slotting, labor standards, efficient moves through the warehouse, order clustering). The SmartTurn solution offers payback for facilities currently operating on paper pick sheets. By using SmartTurn and implementing RF their customers gain virtually perfect inventory visibility, which results in fewer returns, not ordering product the company already has, less obsolescence, and other benefits.
SmartTurn customers get a relatively large, financially sound parent. The SmartTurn organization, however, will remain intact and the group will continue to operate out of Oakland, CA. SmartTurn has sold its solution via telesales and this will continue as well.
But the RedPrairie sales force has a new product in their portfolio that they can position to existing clients. Many of RedPrairie’s large clients have many small storage locations—e.g., depots, storage in backrooms at stores, pop up facilities designed to handle seasonal storage—where implementing a traditional WMS does not make economic sense. The On-Demand solution will make sense for these types of facilities. Based on the amount of foot traffic at the On-Demand booth, it appeared that many existing customers were exploring this idea at the conference.
In the longer term, big companies might explore the On-Demand solution in a different scenario. If they want better upstream inventory visibility into their supplier base, this multitenant solution is something they may decide to mandate to their suppliers as the price of doing business with them. Better upstream inventory visibility will allow these large multinational companies to better synchronize their supply chain.
In conclusion, I enjoyed the RedShift show. There was a Midwestern sensibility about it – low on glitz and hype, high on product content—that made you feel RedPrairie is a partner you can trust.
