Systems Group Makes D&T Growth List
S. McVey - September
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
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.
|Michael Mead & Associates, Inc.
||Distribution software for bakery and other
|Roadshow International, Inc.
||Vehicle routing and scheduling software
|Lightstone Group Inc.
||Software for delivery of goods and services
||Trading partner collaboration, order tracking
||Warehouse optimization software and consulting
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.
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.