E2open Buys icon-scm, Makes Waves in Supply Chain Space

E2open and icon-scm have just combined to create a collaborative planning and execution software stalwart, enabling brand owners and their trading partners to work together to improve their supply chain performance by continuously solving real problems with better information. The transaction, valued at approximately $34 million in total (more than three times icon-scm’s revenues), represents an important component of E2open’s mission to redefine traditional supply chain management (SCM) with strategic, cloud-based solutions designed to facilitate collaboration across today’s global trading networks.

By combining icon-scm’s integrated planning and analytics capabilities with the E2open Business Network (EBN), E2open should expand its market opportunity and broaden the addressable market. E2open can now sell more solutions to its install base customers, as well as to icon-scm’s customer base, and additional solutions to new customer wins. Founded in 1992, icon-scm is a privately owned company with headquarters in Karlsruhe, Germany and offices in San Jose, California and greater China. Global market leaders including Hewlett-Packard, Western Digital, Foxconn, and Sanmina are some renowned icon-scm customers.

Complementary Solutions
With the acquisition, E2open should be able to expand its solution portfolio, accelerate its product roadmap, and extend its position in the collaborative planning and execution space. icon-scm seems to be a good fit with E2open’s cloud connectivity and multi-tier collaborative process capabilities for planning, orders, stationed inventory, and in-transit inventory. The combined E2open and icon-scm solution focuses on network planning and rapid response solutions, the latter consisting of Rapid Optimization and Rapid Resolutions. These solutions manage network data from multiple trading partners and are designed to execute rapidly but can be used in a weekly batch scenario as well.

The new cloud-based SCM software market is growing and evolving quickly, and E2open believes it’s now in an enhanced position to capitalize on market demand and integrate trading partners with collaborative planning and execution solutions. For far too long in the SCM space, vendors have focused on functional plan generation (demand planning, forecasting, inventory optimization, etc.) and far too little on horizontal process enablement. SCM is a 'team sport', requiring different functions to work together to solve a problem. Some soccer teams have always had brilliant individual players, but these teams seldom do well on the world stage, because they play as individuals, not as a team (the Netherlands and my home countries, former Yugoslavia and now Serbia, being great examples). Germany and the current team from Spain, on the other hand, seldom have brilliant individual players, but they play very well as a team and have done extremely well on the world stage.

Competitive Landscape Ramifications
This merger is certainly a major coup by E2open against Kinaxis' optimization capabilities. For those that are not that familiar with this space and some of its history, Kinaxis and E2open have evolved from once partners to now being fierce competitors. Kinaxis is still better rounded than E2open (including icon-scm) and others in terms of horizontal SCM process enablement. There are a number of functional areas where Kinaxis wins out over icon-scm, such as demand segmentation, total cost-to-serve (TCS) calculations, what-if scenario comparisons, etc. (see my previous blog on Kinaxis). But, the E2open-icon combination is much less weak in terms of rapid response capabilities than Kinaxis is in terms of native network collaboration and connectivity capabilities (sometimes bolstered via the GT Nexus partnership) in comparison.

Perhaps even more intriguing is how this merger might affect SAP’s alliance with icon-scm in light of the SAP Supply Chain Response Management (SAP SCRM) by icon-scm offering. Will SAP now be motivated to acquire E2open? I am not sure. There are some indications that SAP has been tinkering with SAP HANA to develop its own rapid response capabilities. Related to that are indications too that SAP’s sales force has not really been breaking its back in selling SAP SCRM by icon-scm. On the other hand, SAP has a number of network collaboration offerings, such as SAP Supplier Network Collaboration (SAP SNC), Ariba Network, and Crossgate (or whatever the SAP nomenclature for that product is now). Thus, would the (likely pricey) E2open addition to SAP mean much more of an overlapping footprint than new functionality?

It may in fact make Kinaxis more attractive to SAP. The giant still has to concoct a number of various offerings/modules (e.g., SAP Demand Planning, SAP SNC, SAP SNP, some of SAP Production Planning/Detailed Scheduling [SAP PP/DS], SAP Sale and Operations Planning [SAP S&OP], SAP Jam, and SAP SCRM by icon-scm) to compete with Kinaxis’ breadth of functionality and horizontal process enablement. In any case, this should be an interesting summer in the SCM software space, and Bob Ferrari’s blog post might shed more light in this regard.
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