It is with great surprise that I read about the demise of yet another company focused on supply chain planning, namely the purchase of JDA by RedPrairie for $1.9B.
Of course RedPrairie does not see it in this manner. They see this as growth, as opportunity. Equally interesting is that it is RedPrairie, with revenues of about $300M, that has bought JDA with revenues of close to $700M. I can’t help wonder how that came about. Of course it could be a lot more innocent.
More important is the fact that JDA has been formed through the acquisition of a number of other supply chain companies, most notably Manugistics and i2 Technologies, both pioneers in the supply chain planning space. JDA was already struggling with rationalizing the number of software applications to reduce the cost of maintenance and bug fixes, and now RedPrairie will need to evaluate how to absorb the JDA applications. Lest we forget i2 Technologies also grew through acquisition of Think Systems, OptiMax, ITLS, Aspect, and Smart Technologies, amongst others. So did Manugistics. And then JDA. And now RedPrairie. Same DNA, same result?
Of course roll-up is the same business model adopted by Infor. Perhaps this is the route RedPrairie, or, more correctly, New Mountain Capital, RedPrairie’s owners, has chosen. Here is the list of Infor acquisitions in Wikipedia, and I don’t even seen BaaN on this list. (The accuracy of Wikipedia is a whole other topic I won’t get into here!)
- Agilisys (SCT) (2002)
- Brain AG (2002)
- Future Three (2003)
- Infor Business Solutions (2004)
- Daly.commerce (2004)
- Varial Software (2004)
- NxTrend Technology (2004)
- Aperum (2004)
- IncoDev Software (2004)
- Lilly Software Associates (2004) 
- Mercia Software (2005)
- MAPICS (2005)
- Paragon (2005)
- Intuita Holdings (2005)
- Alpine Systems (2005)
- Formation Systems, Inc. (2005)
- Datastream (2006)
- GEAC ERP (2006)
- Extensity (2006)
- Systems Union (2006)
- SSA Global (2006)
- Profuse (2007)
- Workbrain (2007)
- Hansen (2007)
- Corpsoft (2007)
- SLA Management Services (2008)
- SoftBrands (2009)
- Bridgelogix (2010)
- Qurius (2010)
- Hotel PMS division of Amadeus IT Group SA
- Lawson Software (2011)
- ENXSUITE (2011)
- Easy RMS (2012)
Having been around in the early days of i2 Technologies, when they only had one product, Factory Planner, I have mixed emotions. There is a lot that i2 Technologies, and Manugistics, brought to the table. They changed the way we saw the problem; how we went about planning complex supply chain planning problems. I am very proud of the time I spent at i2.
But there was always a major flaw in the approach of the early vendors to supply chain management as a practice. They approached supply chain planning by addressing the needs of individual functions without giving any thought to the value of cross-functional process enablement. What they ended up with was a Rubik’s Cube of solutions. I was at a two day conference held by the Center for Transportation and Logistics at MIT recently during which one of the participants said that they have over 200 supply chain management applications, which means that when implementing new functionality the cost of integration is greater than the cost of purchase and deployment of the new application. That is a sad state of affairs. How are they going to innovate in that environment? But we were all – vendors, practitioners, analysts, academics – complicit in segmenting supply chain management into functional silos, divorcing demand planning from supply planning and materials planning, divorcing new product introduction from procurement and capacity management, divorcing trade promotion planning from supply allocation and distribution requirements planning.
The ERP vendors are faced with the same issues. Oracle has grown its application suite through acquisition, most notably Demantra and JD Edwards. While SAP has grown its APO suite through organic development, they too have followed the functional silo model with 7 individual APO modules with different data models, code bases, UIs, and analytics engines. How are we ever going to be able to support horizontal cross-functional processes and even multi-enterprise commerce with these architectures? Of course Oracle has tried for several years to solve this issue with Fusion and SAP with NetWeaver. Following either of these links is to be faced with yet another list of modules and components required for Fusion or NetWeaver. And Infor has ION, i2 had Agile Business Process Platform, and RedPrairie has E2e, all of which try to accomplish the impossible. This issue of multiple functional solutions also impacts innovation in the supply chain space. With vendors so focused on integration between modules, where is the process innovation going to come from? With small groups focused on functional needs, where is the cross-functional innovation going to come from?
From attending multiple conferences and working with big customers I hear a lot about the need for horizontal process enablement and innovation. Of course any of us can still find conferences that focus on functional excellence, and I’m not suggesting that functional excellence is not important. The gap, though, what is missing, is the horizontal, cross-functional process enablement. This is why there is such as buzz about what we call Supply Chain Control Towers or, what Jim Shepherd called “Multi-Enterprise Commerce” while he was at Gartner. Unfortunately Jim’s original post on Gartner’s First Things Monday blog is no longer available, but here is what he said on Supply Chain Brain.
The real business problem that today’s manufacturers and distributors are struggling to manage takes place between companies, not within them. Planning, sourcing, production, costing, tracking and fulfillment must take place in an environment that can be accessed and updated by all the players in the value chain. This certainly suggests cloud-based services, rather than a series of on-premise systems hidden behind various firewalls. The applications themselves will also have to be redesigned to accommodate rapidly evolving supply networks and extremely fluid material ownership.
Application designers could learn a lot from today’s Web store, lsupply chain and sourcing products, but they need to extend the scope to include finance, asset management, traceability, order management and service. In a multi-enterprise environment, these activities will need all new business processes, and the expectations for control, visibility, and efficiency will be quite different.
I can envision this “multi-enterprise commerce” suite, and I can see how valuable it would be for companies in industries like electronics, life sciences, food and beverage, or fashion. Their businesses today are really based on creating and managing global value chains that may have dozens or hundreds of participating entities. I don’t think the fundamental design of ERP fits this business model very well, and I don’t think just moving it to the cloud really solves the problem.
I agree with Jim’s assertion that manufacturers are struggling to manage what takes place between companies, but I am not yet convinced that they have satisfied the need for horizontal or cross-functional processes within them. Because of outsourcing, what has happened over the past two decades is that many of the internal functions have been outsourced, validating Jim’s statement.
I was asked to comment on the merger by fellow blogger Jason Busch from Spend Matters. He shares some interesting perspectives on this industry news – you can read the article here.
So we live in interesting times. I can’t wait to belt out that other perennial Queen favorite. Know the one I mean?