Something has changed in the force…
At one time there were two big supply chain companies, Manugistics and i2 Technologies. The debate could rage on for years about who was first or who was best, but the story I know best was from the inside looking out and then from the outside looking in. Manugistics was my first real big software company job. Being there in 1997 was perfect timing (for everything except my options), as I learned so much and put myself in such a better position going foreward in this industry (not to mention meeting some really amazing people — and lets not forget the frequent flyer points).
I bring this up today because this afternoon, JDA Software announced that it's acquiring Manugistics for $211(million) in cash. I have a lot more thoughts around this. More later (possibly). Now in terms of free-standers, "…and then there was one." I am a little sad in a silly nonsensical (i.e. ilogical and stutupid) nostalgic sort of way. But, without this deal — what would they have done with the debt service staring down the hall at them?
I don't know much about JDA, I've seen a demo of their E3 product (if I take that on as a proxy, they know the retail space very, very well) and have seen the ERP-like AS/400 footprint they have sitting around working for years at retailers around the world. Per a friend, "it just works" (its a theme people, work with me).
Five things I took away (that I'm sharing now) about the conference call (password is "jda")
- Hamish Brewer, JDA's CEO understands the space and (sounds as if) he understands how the deal will work.
- The debt gets paid (talk about a sword of Damocles) — $180 million large — off the table
- They believe that by taking the rumors off the table (that Manugisitcs is for sale); the sale announcement will open up any pipeline that was "held up" as a result of the rumors.
- Yes there will be headcount reduction — there always is. These guy's (JDA's execs) would get murdered if they didn't.
- Technology shift or emphasis for the first time to Microsoft SQL server. Support for SQL Server 2005 will be added right away. Techie boys and girls — that is important. The bet, a-la Vinne Mirchandani will be on SOA
A lot of Manugistics alum will be listening in on this call and wondering, "what next?" If done right, this deal will help Manugistics. The question remains around the "how" of the execution. The deal is not done, the dust will settle and there are a ton of SEC things going on — so don't be ticked off if no one plays nice until the lawyers and the SEC police back off.
Quiet period, clean room, or not, the world just changed and a lot more people have got to think about being nice to a lot more people now. The people factor is critical here — the expertise and the answers are not all in India.
The one question I have is this: when Oracle buys a company, its Oracle that you "throw through the window" and the acquired company is the trailer; the same with SAP, and other companies (SSA, Infor, etc). When two companies of the same size merge, who leads through the door? Their only overlap is in retail now — and that could be turned into something very healthy for both company's sales forces.
I am actually betting on Manugistics on this one — the "noise" will be abating, they will have a CEO who can provide the dynamic leadership that this company needs now. Somebody should be looking at WDS.
Sell on boys and girls and lets hope this clears the air.
UPDATE: Someone asked me to sum it up from a client's perspective, so here goes:
If you were a Manugistics customer you would worry about two things (1) if they were for sale and the uncertainty that would bring and (2) what will happen to them if they have to pay off $180 million in debt in 18 months or so?
Well now, the rumor is no more: they've been purchased by someone who sees value in their company and will make them more efficient AND pay off their debt. The "noise" and concern has abated. As a Manugistics customer, I'd have little to worry about right now. No one can predict the future…who knows what Google will do??
Later,
V
April 25, 2006 at 5:09 pm
thanks for link but wanted to clarify I am hard on the apps industry for too much emphasis on architectures and delivery models (SOA and SaaS) and not enough on stretching the bounds of apps. To me SCM apps could be doing so much more with telemetry and the wave of analytics that is generating…
see
http://dealarchitect.typepad.com/deal_architect/2006/03/soa_sos.html
and
http://dealarchitect.typepad.com/deal_architect/2006/04/application_ma.html
April 25, 2006 at 6:03 pm
Vinnie -
Thanks for the feedback; sorry for the misstatement (embarrassingly, I’ve read those postings too).
You do bring up a point, SCM, honestly, to me needs to focus on not doing more or looking further (how boring would an analyst report look using my approach?), vendors need to simplify their messaging, their solutions, and the overall implementation envelope, so that the uptake of SCM apps within the enterprise increases.
OK, across companies with complex supply chains — maybe your stretch is needed. However, outside of highly complex supply chain companies sophisticated users, the benefit and the opportunity of SCM applications is still…foggy.
I know users who don’t care if its SOA, client server, or a brick through the window! They just want (1) a better plan and (2) their users (not their consultants) to be able to get it and tune the software as their business changes.
This comment really was an excuse to rant.
- V
April 26, 2006 at 1:31 am
This acquisition gives JDA an opportunity to go stronger in the manufacturing sector. It was mentioned in the press conferecne that many companies are already using both Manugistics and JDA. So for such customers who need both retail and manufacturing SCM under one roof, it is a good deal. There seem to be an issue with the underlying technology platform which is different for Manu and JDA.
April 26, 2006 at 1:34 am
JDA Software acquires Manugistics to provide end to end supply chain solution
JDA Software, a leader in the retail software with more than 4,800 customers will acquire Manugistics, a leading supply chain software vendor with over 800 customers. While JDA started by focusing on POS and retail optimization software, Manugisti
April 26, 2006 at 3:33 am
Senthil –
Thanks for looking in (re: comment #3), however (and this is where I am an ass), where can you tell me “how?” this will happen?
I believe that this is a very good thing for Manugistics and its customers but I don’t think my 3 readers (thanks mom), would let me off the hook when I lead with “…an honest discussion about supply chain..” when you tell me its good and you sound like you’re reading off the press release or a script.
Which customers will “…need retail and manufacturing solutions under one roof?” No people who have a retail solution have gaps that Manugistics’ functionality can fill (pricing, revenue management, etc). Companies with Manugistics in retail (office max as an example), could work with one vendor to get more out of the total footprint of the solution.
I figure if I talk smack, I needed to offer up a solution.
- The “issue with the underlying technology platform” is because they are different. JDA will port to SQL Server to offer another DB support and J2EE is different than .Net…. But then there is the composite application SOA approach — that’s where it could get interesting.
When you study mergers and acquisitions, you look at three types of fit:
Business fit: are the businesses complimentary or will the combination be the breath of fresh air that each company needs to grow even faster as one (in the face of two formidable foes in Oracle and SAP)
Financial Fit: Do the numbers make sense. I believe the CFO (JDAs) and her analysis of the debt load (they took on debt to retire debt) and that the combined organization can manage it.
Organizational Fit: Face it, they never really are (it takes a strong leader and a person who can take in the whole footprint or “big picture”). It will also hinge the ability of the acquiree to work well with the acquirer (and vice versa. Also there is the hope that each organization recognizes the value that the other organization brings to the table.
- I don’t moderate posts, but lets keep it honest and think about this a little more. You have to admit, the discussion would be a lot more fun and interesting.