Discussing E2open’s Pre-IPO State of Affairs

While the world trudged through the worst economic slump in our lifetime in the late 2000s, E2open, a cloud-based supply chain management (SCM) software provider, was prospering. Today, even with the likelihood of double-dip recession in many regions of the world, E2open believes to be well positioned to provide solutions that help its customers—particularly as capital improvement and rapid results are essential to many businesses. The company’s on-demand, multi-tier, value chain process execution solution E2open is a substantial value proposition, as the company is finding out.


What Is E2open and Why Use It?

E2open was founded in 2000 by a group of electronics companies (IBM and its major suppliers) as an exchange to serve the consumer electronics industry. The company has long had a vision of being a supply chain business network and has spent the last decade developing products in that area. Today, E2open is a cloud-based software platform that enables near real-time communication and multi-enterprise business processes orchestration, with integrated analytics and execution for product companies with complex global trading partner networks. The E2open solution focuses on visibility and collaboration with partners to drive the automation of a multi-enterprise process in a multi-tier supply network.

But how did the need for such a system come about? For that, we need to go back to the last century.

In the 20th century, the business model for manufacturers was one with a traditional inside-out (between the four walls) focus. Enterprise resource planning (ERP) systems were good for linear, line-of-sight planning and execution with no business process integration (especially not with external parties’ processes), whereby asset utilization was the major goal. This setup was sufficient for single-tier, regionally operated businesses and service level relationships. As a result, an organization’s performance was the aggregation of the work of all the company’s divisions, and most of the processes were manual and only marginally scalable.

Figure 1

This however changed. In the 21st century, the business model became one that is network-centric, with an outside-in demand-driven focus (see figure 1). Brand owners switched to outsourced (contract) manufacturing—abandoning linear supply chains for dynamic trading partner networks, wherein lean responsiveness is the main goal. But even so, many companies are still struggling to manage complex and dynamic global supply chains with disparate ERP systems and disjointed means of communication.

E2open caters to this new type of business model by delivering a working trading network management framework, including software, deployment, operations, and trading partner community management, to unify multi-enterprise processes and enable collaborative execution. E2open serves as the execution engine for external business processes—improving visibility, control, responsiveness, and collaboration across multiple tiers of trading partners, including customers, logistics providers, and suppliers. It is deployed as an on-demand cloud service that connects with multiple systems of record, such as ERP, product data management (PDM)/product lifecycle management (PLM), or advanced supply chain planning (SCP) applications. In addition, by augmenting the value of planning solutions with more complete and clean data, E2open aims to deliver faster time-to-value and improve customer service and profitability (cost efficiency) gains across extended business networks.


What E2open Provides

E2open started by providing integration and connectivity of the supply chain networks. Over time, the vendor expanded to provide visibility and event management (see figures 2 and 3) as well as execution analytics (i.e., control tower and zero-latency dashboards) (see figure 4). By providing its solutions in an integrated cloud-based environment, E2open enables its customers and their trading partners to easily share detailed and relevant content and data—thereby gaining visibility for collaborative execution across their extended trading network.

Figure 2

Figure 3

Figure 4

E2open filed to go public in February 2012. The following paragraphs draw in large part from the info available in the company’s S-1 filing with the United States Securities and Exchange Commission (SEC).

E2open refers to the combination of its software applications delivered on its cloud-based platform, the content contributed by its network participants, and its enabling services as the E2open Business Network (EBN). E2open transcends traditional SCM software categories, which include business-to-business (B2B), integration, procurement, forecasting, planning, and execution, by enabling coordination and collaboration among enterprises—what the vendor calls “collaborative execution” (see figure 5).

Figure 5


Key Differentiating Features of EBN and How they Benefit Customers:

  • Cross-network analytics—The EBN provides real-time monitoring and control of large volumes of data to sense and respond quickly and collaboratively to changes, opportunities, or disruptions in the supply chain. The idea is to maintain service level agreements (SLAs) while adhering to the desired financial metrics. Analytics also help with granular costs and pricing data per, e.g., spend category, process, region, etc.
  • Multi-enterprise, multi-tier supply and demand process management—The EBN supports key operational processes, such as collaborative forecast, order, and inventory management, for E2open customers and their multi-tiered supply and demand trading networks.
  • Scalable and secure cloud-based connectivity platform—E2open solutions combine B2B connectivity and integration capabilities, allowing customers to securely connect, share, and act on information across their trading networks that can include thousands of partners. The software is engineered to run on multiple parallel servers to enable access by a large number of concurrent users and external systems.
  • Integration with existing systems—E2open configurable solutions can integrate with many ERP systems to efficiently manage complex networks and facilitate the interchange of transactions. The software includes predefined application connectors to ERP applications, such as those of Oracle and SAP. For easy integration with existing user management systems, the software supports protocols for authentication and authorization.

When configured, E2open software can assimilate business data from a large variety of disparate systems, present such data to the users, and allow them to modify it in real time. E2open also provides business intelligence (BI) software for Web-based reporting and data mining capabilities. This software maintains the context of the execution process and has flexible mechanisms for acquiring, storing, and presenting historical information, as well as a secure infrastructure for rapid deployment of business reporting solutions.


E2open Technology Underpinnings

E2open’s technology platform is based on service-oriented architecture (SOA) concepts and uses Java 2 Platform, Enterprise Edition (J2EE) technologies designed to run in a cloud-computing environment. The platform addresses requirements for multi-enterprise business process management (BPM), management-by-exception, B2B integration, and tactical and strategic decision support, while the cloud-based model provides flexibility and scalability to customers without large upfront hardware and software deployment costs. The E2open platform has been designed to be deployed as a scalable Web application, enabling users to view and interact with business objects using standard Web browsers, spreadsheet applications, and other portable user interface (UI) technologies including mobile devices (see figure 6).

Underlying the technology platform is a built-in workflow engine that leads users through a logical progression of steps to enable collaboration among business partners. E2open software provides B2B integration capabilities that support B2B protocols and message formats including RosettaNet, EDI-VAN, AS2, cXML, xCBL, and Web Services. It provides extensible message validation and transformation services that allow any-to-any message and protocol transaction. The software also includes security and naming services that provide authentication, authorization, data privacy, and non-repudiation.

Figure 6

E2open also provides a set of self-service software tools, such as tools to enable customers to quickly integrate their business partners, and a tool for creating and managing maps and integrating metadata that enables customers to quickly configure E2open’s standard maps to meet their business and technical needs. Additional self-service software tools are available to allow customers to manage their security attributes, user accounts, and message processing parameters—ensuring that customers have control over the operation of their business processes.


Proper MDM at the Heart of Multi-enterprise Collaboration

Master data management (MDM) is the “devil in the detail,” particularly as companies outsource more and more of their manufacturing to partners. Single-tier extensions of PDM systems are not much help, as both parties involved in this transaction have their own nomenclature, engineering change cycles, and effectivity dates, making it very difficult to keep them in sync without an automated B2B connection. E2open can help facilitate multi-tier collaboration around MDM and serve as the “system of process” for reconciliation of master data mismatches. Generally, E2open integrates to a “system of record” such as the PDM or ERP system, and uses this information as part of a business process outside of the customer’s firewall.

E2open’s multi-tier data model is not built around the traditional concept of a general ledger (G/L), hence it is able to reflect value being added at several tiers. The vendor uses a bill of material (BOM) based on a routing through multiple stages of value creation. The EBN monitors the BOM of each party to look for mismatches and alerts the appropriate party of any changes—a new part number has been added or an existing part has been changed. It then allows for a collaboration to confirm or correct the mismatch.

E2open’s multi-tier BOM capability includes costs, which makes it useful for value-engineering activities and cost containment. The vendor introduced an Execution BOM capability when it launched the E2open Multi-Tier Cost Management (MTCM) offering. This enables BOM management in a dynamic environment – complementing the static engineering BOM typically employed by high tech companies. Users can also use it for environmental declaration business processes to highlight hazardous material content or greenhouse gas footprints. E2open communicates these changes via PDX in the PDM space or EDI-VAN or RosettaNet for MDM of B2B transactions such as the approved vendor list (AVL), transportation or sourcing lane information, etc.


A Conversation with an E2open Marketer

We recently spoke to Sean Rollings, vice president (VP) of product marketing at E2open, to get some insight on the company (within the constraints of the pre-initial public offering [IPO] quiet period). Prior to E2open, Rollings held executive-level product and marketing roles at Marketbridge Consulting, Amitive, NetSuite, Oracle, and Deloitte Consulting. He received master’s degrees in business administration and in management in manufacturing from the Kellogg Graduate School of Management as well as a bachelor’s degree in engineering from Vanderbilt University.

PJ: What are E2open’s “killer” capabilities?
SR: Our “killer” capability is collaborative execution: working together to improve supply chain performance by continuously working together to monitor for and solve problems with real-time information. Through collaborative execution, we empower our customers to manage demand they cannot predict and supply they do not control. Our solutions enable our customers to gain visibility into and control over their trading networks through the real-time information, integrated business processes, and advanced analytics that we provide. Our solutions enable our customers and their trading partners to overcome problems arising from communications across disparate systems by offering a reliable source of data, processes, and analytics, which our customers rely on as the single version of the truth.

PJ: How do you view your competitive landscape, and why do you win over these competitors?
SR: With regard to competitive landscape, we do not believe that any specific competitor offers the breadth of business network solutions and collaborative capabilities that we do; the distinct markets that make up the business network space are each rapidly evolving and highly competitive. 
In addition to my answers and comments above, the traditional door opener for us is our ability to enable companies to get away from “management by spreadsheet,” and replace it with collaborative execution across a global trading partner network. The key characteristics of the EBN that drive customer adoption include:

  • Large global business network. Our solutions have been designed for companies that either manage or participate in distributed supply chains and whose business processes require collaboration among numerous entities performing multiple interdependent activities to source, produce, and fulfill demand for their products across disparate geographies.
  • Demand-driven model. Our solutions enable our customers to transform their trading networks from a forecast-driven production model, where products are manufactured in anticipation of future demand, to a demand-driven fulfillment model, which is responsive to changes in actual current end-user demand or constraints in supply.
  • Multi-tier functionality. Our solutions allow trading network participants to better manage processes and information, relating to raw materials, products, finished goods, and related services across multiple tiers—from the extended supply base, to their outsourced manufacturing partners, then on to their distribution channels, and ultimately to the end customer.
  • Cloud-based platform. Unlike many companies operating legacy on-premise solutions that are difficult and costly to configure and support, our customers and their trading partners using the EBN are able to share, analyze, and act on information in real time on a common platform. Our cloud-based platform enables process management and information exchange among our customers and their trading partners.

PJ: During our recent briefing and product demo, I saw a bit confusing/overwhelming combination of connectivity (à la Ariba, GXS, Sterling Commerce), supply chains process platform (à la Progress RPM, JDA, Manhattan Associates, etc.), and solvers (à la SAP APO, Kinaxis, Logility, etc.). Where is your real strength, and who and when should use E2open versus the combination of the aforementioned vendor solutions?
SR: It takes a stack to enable collaborative execution. Our strength is the integrated stack of trading partner connectivity, multi-enterprise/multi-tier business processes, and cross-network analytics—the EBN. You could assemble an equivalent multi-vendor solution, and many have tried, but we believe the cost and complexity of such an approach—and the risks associated with multiple providers—makes that unattractive. We like to think of this as an Einstein versus Frankenstein difference in approaches. 

PJ: Is there anything that you are at liberty to divulge on the company's future moves, i.e., new functional scope, verticals, etc.? How do you plan to grow in the future?
SR: I will defer to the section entitled “Our Strategy for Growth” in the S-1 filing. Our objective is to be the leading provider of multi-enterprise, cloud-based, on-demand software enabling enterprises to more efficiently and profitably procure, manufacture, sell, and distribute products through collaborative execution. The key elements of our strategy include:

  • Leverage our existing network to add customers. The EBN creates a network effect by attracting the largest suppliers and customers in a particular industry vertical to establish and grow our presence. Once a number of prominent enterprises purchase our solutions and develop separate ecosystems comprising their trading partners, their trading partners then add data onto our platform that ultimately drives growth in the use of our applications. As our network of trading partners grows in an industry, the value we deliver to our customers—and potential customers—increases. We intend to leverage our customers’ expanding ecosystems to attract new customers and convert trading partners from within our network into direct customers.
  • Up-sell additional solutions to our existing customers. Once our customers begin to rely on the real-time data and visibility provided by our platform and solutions, they typically purchase additional solutions from us. We intend to continue to leverage our knowledge of and familiarity with our existing customers to deliver additional solutions to them. Through our existing customer network and growing product portfolio, we have a significant opportunity to up-sell additional applications as our customers seek to add greater functionality to their respective networks. With each of our major customers, we nurture this up-sell strategy by developing a multi-year business plan or roadmap for the customer, which provides continuous improvement to their operations and results in further growth for both our customers and our company.
  • Expand into new verticals. We believe our experience with our customers in our initial target markets provides a successful model for future growth. We have found that the challenges presented by managing inventory, orders, and planning are similar across many industries, which makes our solutions applicable to a wide array of industry verticals. We intend to leverage our experience, expertise, and proven customer success within our current key verticals to accelerate entry into and delivery of our solutions to these new vertical markets. Our expansion into the consumer products industry demonstrates our ability to transfer our capabilities to companies in new verticals that face challenges common to our existing customers.
  • Introduce new products. We will continue to expand our portfolio of solutions by leveraging our familiarity with advanced supply chains and more than 30,000 of our partners in our trading network to develop new applications and introduce new products that are strategic to our customers and their trading networks. Our analytics solution enables cross-network collaborative decision making and problem or exception resolution, all of which provides users with a real-time system for faster and more effective decision making.
  • Expand our international presence. For the year ended February 29, 2012, we generated 38.2 percent of our revenue from sales to customers outside of the United States (US). In 2011, we grew our sales team in Europe, and we intend to hire additional sales personnel in Germany, France, and the Nordic countries. In 2012, we opened an office and established a direct sales force and a sales, hosting, and distribution alliance with a local partner in China. We intend to make additional investments outside the US to expand our geographic reach.
  • Expand our target market to include midmarket customers. Historically, we have focused our sales and marketing efforts on the largest companies within specific vertical markets. Once these key relationships are developed, they have historically yielded very low churn rates, allowing us to focus on driving adoption of our solutions by smaller, midmarket companies in the same industry. By leveraging our established trading network and cloud-based subscription model, we can offer cost-effective, pre-packaged solutions to expand our target market to include midmarket customers. By packaging, designing, and pricing our solutions for the midmarket, we are able to expand our addressable market, accelerate our sales cycles, and further expand our EBN.
  • Make targeted, strategic acquisitions. We intend to complement our organic growth with strategic acquisitions of technologies, solutions, and businesses that enhance and expand our existing offerings.

PJ: Given your white paper entitled "Don’t Re-Plan, Just Execute: Making Supply Chain Plans Work with Collaborative Execution" and the fact that you don't do forecasting and sophisticated demand planning/shaping, which environments can get by without too much planning and re-planning? Surely, in some environments you cannot just wait for crises and do firefighting, without any (re)planning?
SR: There are probably no environments where you cannot do any planning; however, there are probably few environments where you cannot deal with a significant percentage of the inevitable exceptions to the plan better through execution—re-allocation of assets in flight, re-balancing, expediting, etc. —than by simply re-planning.

We work with planning systems as an input; however, even the best forecasts are far less than 100 percent accurate and even the best plans are quickly superseded by unanticipated events. By all means, plan. But when those plans go wrong (as they will), do what you can to meet customer needs right now, with up-to-date information on current and projected inventory and order levels, clear visibility into every tier of your supply chain (so you do not get blindsided by critical component shortages originating deep in the supply chain), and a platform that allows you to work collaboratively with your trading partners in real time to satisfy demand with as little latency as possible.


Closing Remarks

E2open is growing its business and working toward a platform to better serve midmarket companies in a cost-effective manner. For now, E2open is not offering solutions for forecasting and demand planning (although it can import forecast data and manage the demand context) and rapid response (re-planning) solvers like those offered by Kinaxis. E2open doesn’t generate forecasts per se, but it manages collection, breakdown, re-aggregation, and distribution, which are different services around forecasts.


Backgrounder: E2open Customer and Partner Information

E2open Customers and Global Presence

E2open’s 330-plus employees serve more than 240 customers in 62 countries that use its solutions in 9 languages and trade in 26 different currencies. As of February 2012, E2open customers included 56 so-called Enterprise Customers who purchase both on-demand software solutions and network connectivity solutions, representing over 99 percent of E2open’s total revenue. The remaining 184 customers purchase E2open network connectivity solutions. The EBN is a community comprising E2open customers, more than 30,000 unique registered trading partners, and more than 88,000 unique registered users.

E2open customers are primarily multinational corporations with complex product and services portfolios, including many Fortune 500 companies. To date, the vendor’s target markets have been technology, telecommunications, aerospace and defense (A&D), and consumer products. Some high-profile customers include Avon, Boeing, Cisco, Dell, The Gap, GE, Flextronics, IBM, Motorola, and Vodafone.


E2open Partner Ecosystem

E2open products and services are sold to businesses through the company’s worldwide sales force and channel partners. Over 90 percent of the E2open’s total revenue comes from direct sales. E2open senior sales executives seek to establish and maintain executive-level relationships with Fortune 2,000 companies. The focus of E2open’s sales team is identifying business network-related challenges and initiatives and then engaging with these customers to develop a solution roadmap and business case.

In addition, E2open has developed strategic alliances with IT and business services vendors that serve its targeted markets. The vendor’s alliance strategy is three pronged:

  1. Resellers—E2open will establish reselling relationships with select partners that are prominent in its target markets, such as Exostar, MavenWire, and Tieto.
  2. Consulting and Systems Integrators (SIs)—Partners such as Barkawi, Camelot, and Oracle collaboratively design and implement customer solutions.
  3. Independent Software Vendors (ISVs)—Oracle is an ISV partner, and offers the E2open Logistics Network (ELN) bundled with an Oracle Transportation Management (OTM) application connector.


E2open Potential Competitors (adapted from the company’s S-1 statement)

  • ERP vendors: Companies such as Infor, Oracle, and SAP offer ERP extension solutions that provide features similar to a limited subset of our offerings in the area of trading partner portals. These companies may include those solutions as part of their larger ERP or business application offerings. As each trading partner is likely to have some form of existing ERP system, we are able to provide a common platform tying these disparate systems together as a business network. Our solutions generally do not replace the current functionality of existing ERP systems and therefore tend not to undermine our customers’ investments in their existing business applications. Our customers have found that our solutions extend and enhance the value of their existing ERP systems by adding integration, multi-enterprise processes, and real-time collaboration capabilities. Therefore, we do not believe traditional ERP vendors view our solutions as a competitive alternative to their own offerings.
  • Multi-enterprise B2B infrastructure vendors: Companies such as GXS Corporation, IBM/Sterling Commerce, SAP/Crossgate, and SPS Commerce provide point solutions in the B2B integration space. We do not view these offerings as competitive with our solutions. While our strategy is to provide a broader solution, which can include B2B integration functionality, we believe integration platforms as standalone solutions lack the business processes and analytics that E2open provides.
  • Niche SCM applications vendors: Companies such as JDA Software, RedPrairie, Manhattan Associates, and Logility have specialized functionality for specific process areas such as transportation management, demand planning, or network design. Niche applications may provide important functionality for enterprises, but they typically are not built for multi-enterprise process management or a multi-tier environment.
  • Internally developed solutions: Potential customers with large in-house information technology (IT) departments are capable of developing applications customized for their businesses and many have. Typically, these applications lack complete functionality required to run complex, multi-tier trading networks.


References and Recommended Reading:

Supply Chain Matters: Bob Ferrari’s Blog on Global Supply Chain Process and Technology. E2Open Announces its Entry into PLM and Cost Management Collaboration. January 31, 2012.
United States Securities and Exchange Commission. Form S-1 Registration Statement. E2open, Inc. February 17, 2012.

Technology Evaluation Centers. Taking Stock of TAKE Supply Chain Solutions – Part 3. May 23, 2011.

Technology Evaluation Centers. How to Plan and Manage in Uncertainty and Volatility? Based on Reality and Facts, Duh! – Part 2. November 29, 2011.

E2open. Don’t Re-Plan, Just Execute: Making Supply Chain Plans Work with Collaborative Execution.

Technology Evaluation Centers. On-demand Retail Trade Partner Integration Provider Asserts its Expertise. May 16, 2011.

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