Monday 23rd Oct 2017 - Logistics & Supply Chain

Small wonders

Is the long awaited shake out among companies that sell supply chain management (SCM) software underway? JDA Software recently put e166m on the table to acquire Manugistics, a company that specialises in systems for supply chain planning.

The deal follows several takeovers last year including a bid by SAP for Khimetrics and Oracle’s acquisition of ProfitLogic. SAP and Oracle are now battling head to head in the retail software market and JDA, another retail specialist, is hoping to make a three-sided contest.

Observers have been saying for some time that there are too many IT companies chasing too little business. AMR Research – a technology advisory firm that knows the supply chain business better than most – is in no doubt.

‘A new wave of SCM and retail market software consolidation is beginning,’ the firm’s analysts are quick to point out. ‘We know of many other SCM companies with uncertain futures that are being shopped for sale.’

And the firm warns companies thinking of buying SCM software from independent firms to ‘sit tight for now’.

Recurring theme
Consolidation is a recurring theme in the software business as the bigger ERP companies such as SAP, Oracle and JDA, which sell integrated software, strive to acquire more advanced or specialist programs to incorporate into their packages.

Although integrated systems are usually cheaper and more convenient than best of breed they can fall down on functionality. Many so-called integrated systems are the result of larger companies acquiring specialised best of breed systems.

The business of piecing together acquisitions is complicated. It can result in suppliers using a different hardware platform, database or operating system for each module. And these lash-ups may not be easy for customers to interface with.

Software users take the long view and are concerned that the products they buy will be supported and developed in line with advancing technology over a period of many years. Change is unsettling.

That’s why Manugistics’ 600 customers will breathe easier now that the clouds of financial uncertainty blowing around the company have been lifted. Many of them have been very loyal to a company that has struggled to regain profitability.

On the face of it, the deal makes commercial sense. Based on each company’s latest results the combined operation would have annual revenues in excess of e306m and benefit from a further e134m of annual maintenance revenue. With 5,500 customers, an enlarged JDA will be the fourth-largest supply chain software firm in the business.

As always with these software takeovers there are overlaps and potential conflicts between product lines. These will need ironing out. But with nine takeovers already under its belt including Arthur, E3 and Engage, JDA has some experience at stitching other companies into its corporate petticoats.

One area of Manugistics’ expertise that JDA can cash in on quickly is its transportation know-how. With retailers keen to cut rising fuel bills with more efficient use of vehicles, there is plenty of scope to plug this in to JDA’s planning and allocation applications.

But according to AMR Research, JDA will have to attend to areas such as software for replenishment where both companies have offerings. JDA will also have to make important decisions about how it handles a conflict between its commitment to Microsoft .NET and Mangistics’ reliance on the rival J2EE platform.

Does the latest round of deals signal the end for best of breed? Oracle chief executive Larry Ellison is fond of saying that people just want to deal with a handful of big software companies – dealing with small fry is risky and time consuming.

But there’s plenty to suggest that so long as there is evidence someone’s software can do a better job in a certain area and save money or generate revenue, they will find a ready market. Even the biggest companies still have plenty of tiddler software firms on their supplier lists.

And it’s likely to get easier for these small fry to pick up the leftovers. One of the most talked about technology trends is towards creating service-oriented architectures that allow software users to mix and match applications without having to commit to an overall supplier.

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