Home
 > Research and Reports > TEC Blog > A Tale of a Few Good SCM Players - Part 3

A Tale of a Few Good SCM Players - Part 3

Written By: Predrag Jakovljevic
Published On: October 12 2009



Part 1 of this blog post series followed the progress of Manhattan Associates from its inception in 1990 throughout the mid-2000s. During this time, Manhattan 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, RedPrairie Corporation and JDA Software, 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 capital budgeting 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 working capital to still produce increased profit margins 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 TEC’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:

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 JDA Software, 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 Manugistics in 2006, had been acquiring a number of smaller firms in the retail space over the past decade, including the following:

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 TEC’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 merger of Lawson and Intentia in 2005). 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 merchandising systems. 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 JDA’s FOCUS 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 (formerly Delivery Manager) 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 demand management.

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 globeJDA'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 suite.

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 MORE or Manhattan’s Optimized Roadmap to Excellence program.

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?
 
comments powered by Disqus

Recent Searches
Others A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

©2014 Technology Evaluation Centers Inc. All rights reserved.