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A Tale of a Few Good SCM Players - Part 3
A Tale of a Few Good SCM Players - Part 3
October 12 2009
Part 1 of this blog post series followed the progress
from its inception in 1990 throughout the mid-2000s. During this time,
was the epitome of a well-managed
supply chain management (SCM
) software company in terms of market share, growth, profitability, and its products’ capabilities. Indeed, the company set the industry standard for the supply chain execution (SCE) space and was the envy of its competitors.
But lately, the two competitors that had long looked at Manhattan from behind,
, have been posting much more upbeat news in terms of growth in contrast to Manhattan’s declining revenues.
Part 2 analyzed some possible reasons behind that occurrence and focused on RedPrairie’s emergence
Part 3 of this blog post series will analyze the current market dynamics in the retail sector, and try to explain the ongoing resurgence of JDA Software.
The current tough economic environment has created an urgent call to action at virtually every enterprise. To that end, long-standing previously tolerated inefficiencies must now be addressed without any further delay, and
is being diverted from stores (in terms of expanding real estate) to properly harnessing IT in the retail sector. Retailers’ survival and readiness to take advantage of market opportunities depends on their ability to adapt to leveraging reduced
to still produce increased
and reduced lost sale opportunities.
For the above reasons, retailers have almost zero interest in long, expensive, and difficult implementations of enterprise applications suites. Focused, smaller, and easier to implement solutions from application providers are the wave of the future. This approach minimizes exposure and allows for quick wins that provide immediate
return on investment (ROI)
. For more information on the current state of affairs in the sector, see
’s recent article
“Retailers, Consumers, and the Recession: Weathering the Storm.”
What Do Retailers Need (and Want)?
Capabilities that can be implemented relatively easily and that retailers need to succeed nowadays are as follows:
one synchronized view of
market-driven product assortment management
multi-modal (intermodal) transportation
and logistics management
integrated store-level planning and execution (that propagates all the way to suppliers)
internal and external
supply chain visibility
sales and operations planning (S&OP)
integrated business planning (IBP)
By quickly leveraging most of the above capabilities, retailers can hope for increases in sales and margins, reduction in inventory, improvement in forecast accuracy, improvement in asset utilization, reduction in freight costs, and so on and so forth. One of the key success factors is to ensure that these solutions, while loosely coupled, can still tie back into a broader SCM vision and platform that that enables changes to business processes and takes advantage of changes.
What’s behind JDA’s Renaissance?
This brings us to
, which posted a record year in 2008, had record quarters in 2009, and continues to invest in integrating its portfolio of solutions. JDA has been around since the 1970s, and, prior to the mega-merger with
in 2006, had been acquiring a number of smaller firms in the retail space over the past decade, including the following:
in 1998 for advanced merchandize planning and allocation
in 2000 for retail space planning and management
for trade allowance and marketing expense management
in 2001 for warehouse, store, and vendor managed replenishment and inventory optimization (IO)
in 2001 for retail data mining
J-Commerce in 2002 for Java-based point-of-sale (POS) capabilities
for advertising, marketing and promotions (AMP) capabilities
in 2003 for data synchronization, Web-based collaborative commerce, and supplier trade promotion management
for workforce management in 2004
But for a long time, the acquisitive company remained obscure within the mid-market retail sector and was not forthcoming about its strategy with regards to tying together its diverse portfolio of solutions. Neither did the company have a plausible strategy for developing a scalable platform that would attract the largest global retailers. For more details, see
’s six-part series from 2004,
“JDA Portfolio: For the Retail Industry.”
Well, what difference a few years and one good major acquisition can make. It strikes me that former Manugistics and JDA would be another combination of two vendors that were not that recognized on their own, but got much better together (the other example could be the
). So, what did they give to each other, or what were they both lacking on their own and end up getting in this combination?
The Manugistics Factor
JDA was a leader in its respective target retail segments before the acquisition of Manugistics. Likewise, Manugistics was a leader in its respective niches, while (granted) the company had backed off on investments in several of these areas (e.g., complex discrete manufacturing) prior to its sale to JDA. Immediately before being acquired by JDA, Manugistics had re-branded itself around
consumer packaged goods (CPG
) manufacturers and retailers, and I still think that was a wise strategy.
The two vertical sectors have symbiotic relationships and need to solve similar SCM problems. In my mind, what the combination of JDA and Manugistics did is the following:
Create great opportunities to reinvigorate the Manugistics base through JDA's commitment and investment;
Leverage the solid and highly scalable Manugistics architecture as the go-forward platform for JDA;
Expand JDA's ability to address the end-to-end supply chain from retailer all the way back through the manufacturer/supplier, and
Provide the combined market leadership and leverage--opening up greater retail sector leverage and opportunity for Manugistics and a greater manufacturing sector opportunity and leverage for JDA.
With JDA and Manugistics there was also a lot of serendipity. The sluggish economy gave a boost to leveraging supply chain systems for efficiency while it somewhat “poisoned” the sale of
. But JDA also gave instant credibility in retail to Manugistics, where the vendor needed it. Also very important was the emergence of hybrid retailer manufacturers (
so called “Act Vertical” retailers
) as a separate market that can now be best served by JDA.
The fact that I attended
user conference this year
for the very first time might also speak to improvements that I believe the combined company has lately made in its brand, industry analyst relations, and thought leadership positioning. Sure, JDA will have to further improve the effective communication of its message throughout the market and press, but the difference from the “old” JDA is quite noticeable.
In fact, JDA Software today boasts nearly US$400 million in revenue and a true global presence, with over 5,800 customers in 60 countries and over 1,750 employees around the globe. So, what changed at JDA after the Manugistics assimilation?
For one, there is a
new value proposition for both retailers and their suppliers
and the company has a stable customer base (i.e., with a balanced mix and diversity). There has also been accelerated product innovation and improved scalability through the
former Manugistics platform, now called
JDA Enterprise Architecture (JEA
Porting all JDA products onto JEA is still a major work in progress, but a major accomplishment is that
JDA Transportation Management 7.5.x
version is now built on JEA. The new workflow engine and availability of Web services for improved integration and process automation were some of the major drivers for the upgrade projects at some existing customer sites.
These enhancements have also led to some customers implementing features like the
Freight Order Management
) module for managing and monitoring inbound shipments
. Some of other biggest product development projects underway at JDA include a replenishment workbench and an assortment manager that ties together planning analysis, data management, price and promotion management, advanced inventory IO, and
Moreover, JDA has lately established success amid tier-one companies, and has transformed its sales and marketing accordingly. One of the best indications of any software company growth is license revenue growth. License growth is an indication of market penetration, overall solution strength in targeted markets, and it drives recurring maintenance revenue, which in turn creates tremendous business stability. Software license growth is also an indicator of related services revenues.
Looking at somewhat slowed service revenue growth rates, JDA believes that this is not the correct metric from a services perspective, i.e., decreases in services revenue per customer is not necessarily a bad indicator. Namely, several goals could have actually driven a recent reduction in services revenues. For one, JDA claims to always strive to have its solutions implemented more easily, quickly, and cost-effectively.
Additionally JDA has expanded its Center of Excellence (COE) in India, which allows JDA to offer its blended expertise at even more competitive (lower) rates. Finally, today the vendor has an improved ecosystem of JDA certified partners that are participating in customer implementations along with the direct JDA teams.
Beyond these major research and development (R&D) initiatives, the company's number-one strategic initiative is
offering more managed services for its customers across the globe
JDA's Managed Services
encompasses four specific areas: hardware and software administration, advanced customer support, optimization services, and help desk/transition services. This approach can help retailers and manufacturers improve supply chain efficiencies, strengthen IT operations, and integrate customer service offerings.
More on the Reasons for JDA’s Success (Against the Odds)
Actually, due to my no-longer-youthful age, I have been through economic downturns before (granted, not to the extent that the global economy is currently facing), but each time software solution providers that drove quantifiable business improvements with true ROI-based value proposition (and that had “hungry” people that could really sell and were willing to work hard) had little trouble growing their business.
Retailers and manufacturers are buying necessary business software capabilities even in these tough times. For example, some JDA modules remain so important to people's business that recently an automotive manufacturer’s sole project that got funding in 4Q08 for 2009 was for a JDA product. In this case, ironically, the time to close the deal (i.e., to get it through the procurement and legal departments) was actually reduced, because normally a dozen or so parallel projects were not approved by the Board this time--and the only deal they needed to work on for approval was JDA's.
As some more insight,
out of about 70 new projects in the last record quarter for JDA
, about 40 were for the Intactix store space planning and assortment planning system (selling like hot cakes these days, given that store managers have decision-making power, and that the store’s efficiency is critical) while the rest was shared amid store workforce scheduling and parts of the
JDA Enterprise Planning
I think JDA's remarks on the importance of ROI justification to IT budget decision-makers are also relevant for RedPrairie and Manhattan. For its part, RedPrairie has worked hard over the past few years developing an internal tool and consulting practice that enables its teams to go into prospects' operations and show with their own numbers where RedPrairie solutions can save them costs and generate the greatest ROI.
The vendor’s teams have also used this with existing customers to demonstrate where adding addition capabilities can extend the value and ROI of their RedPrairie investment. Along similar lines is
Manhattan’s Optimized Roadmap to Excellence
But the gist of the matter is that JDA and RedPrairie are able to support more SCM roles with their solution portfolios than Manhattan. JDA especially is making inroads in manufacturing along with retail, while,
as mentioned in Part 2
, RedPrairie is also supporting retail store planning, logistics, warehouse, assembly line sequencing, etc.
Part 4 of this blog series will conclude with some attempted predictions about what’s in store (no pun intended) for all three SCM vendors. In the meantime, your comments and feedback with regard to the opinions and assertions expressed thus far are welcome. What are your experiences with any of the vendors and their SCM solutions mentioned in this post?
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