Descartes Systems Group Makes D&T Growth List

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Descartes Systems Group Makes D&T Growth List
S. McVey - September 20th, 1999

Event Summary

Deloitte & Touche ranked Toronto-based Descartes Systems Group, Inc. number 21 on their list of 50 fastest growing Canadian technology companies. Descartes obtained their position on the list because of their 1247% increase in revenues since 1994.

Market Impact

Descartes' growth has rocketed over the last five years, fueled largely by a buying spree that has resulted in five major acquisitions since 1997. At an average price of over $10 million USD, these purchases have enabled Descartes to expand its Supply Chain Execution (SCE) product suite, increase its overseas presence, and broaden its vertical product market focus.

Company Name Acquisition Cost Date Business
Michael Mead & Associates, Inc. $13.2 million 2/97 Distribution software for bakery and other food industries
Roadshow International, Inc. $29.9 million 11/97 Vehicle routing and scheduling software
Lightstone Group Inc. $11.4 million 6/98 Software for delivery of goods and services
Calixon BV $7.4 million 6/98 Trading partner collaboration, order tracking software
NRM $1.4 million 7/98 Warehouse optimization software and consulting

For instance, the acquisition of Dutch software maker Calixon helped quadruple Descartes' revenue in Europe from 1998 to 1999. Its largest acquisition, Virginia-based Roadshow International, in addition to bolstering Descartes' logistics scheduling capabilities, brought a large customer base (over 600) into the fold. The MMA and Lightstone Group acquisitions gave the company added expertise in two additional verticals: baked goods distribution and delivery of goods and services. Managed effectively, these acquisitions can propel Descartes into the lead position among SCE vendors, displacing larger players Industri-Matematik, Manhattan Associates, and EXE Technologies. However, rapid growth can place a significant strain on a company's management and operations. Evidence of this can be seen in Descartes' negative profits for the last ten quarters, a timeframe that coincides with the acquisitions. While it is not uncommon for company balance sheets to dip into the red during periods of growth, continued losses can erode Descartes' financial foundation, impairing its ability to serve its customers.

User Recommendations

In the increasingly competitive ERP/SCM marketplace, corporations either advance or are trodden underfoot. Descartes' acquisitions over the last few years demonstrate that its management is committed to establishing a dominant position in the Internet fulfillment and collaboration software market. Companies for whom efficient consumer fulfillment is an imperative, such as those in the consumer direct industries or consumer packaged goods, may want to take a closer look at Descartes' industry-specific product offerings. However, users need to be aware of the consequences of rapid growth of their potential business partners. Without strong corporate leadership, the significant strains that expansion creates on its organization can negatively impact Descartes' ability to deliver quality application development and customer support services. We also question Descartes' ability to fully integrate its disparate, acquired products into a packaged, off the shelf business application. Organizations should take this into account when finalizing their SCE selection and negotiating implementation and service contracts.

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