JDA FOCUS 2010 Impressions - Part 1

Last year I attended the JDA FOCUS 2009 conference to realize that Scottsdale, Arizona-based JDA Software (NASDAQ: JDAS) has become a force to be reckoned with in the vast supply chain management (SCM) space. Although far from being a vocal or touchy-feely company, throughout its history JDA has been run fairly effectively by applying basic principles of sound management. These principles of profits and prudently spending within its means have been rare in the software business, and JDA’s results have been impressive for a very long time.

Throughout most of its history, JDA has also acquired a number of companies that were often doing badly, typically because their management was long on strategy, vision, and ambition, but short on execution. JDA has been able to rectify the situation, time and again. The company’s acquisition criteria have been as follows: strategic fit, market leadership, and relatively modern software architecture of the acquired product. 

During the conference last year I realized how successful was the 2006 mega-acquisition of former Manugistics, which many pundits doubted at the time. As analyzed in my related 2009 blog series, combined capabilities from JDA and Manugistics have recently provided many attractive value propositions for both consumer product goods (CPG) manufacturers and retailers: connecting the upstream supply chain with the retail shelf.

JDA has long had notable retail merchandising, category management, and store execution solutions. It appears that in the CPG sector, retail solutions from JDA and supply chain planning (SCP) solutions from Manugistics have begun to gel based on increased availability of downstream supply chain data that needs to be leveraged by both retail and manufacturing constituencies. Since the Manugistics acquisition, JDA has managed to deliver the following attractive capabilities for both retailers and their suppliers:

  • One Synchronized View of Demand

  • End-to-End Supply Chain Plan

  • Consumer-Driven Assortments

  • Shelf-Centered Collaboration

  • Pricing & Promotion Management (see the related blog series)

  • Transportation & Logistics Management

  • Integrated Business Planning (IBP)

  • Global Visibility & Collaboration

i2: Take Two

At JDA FOCUS 2009 there was a bitter taste after the failed merger efforts with i2 Technologies in early 2009. In private conversations, JDA executives shrugged the failed merger off as a good riddance, since the discrete manufacturing industries that i2 targets were quite affected by the recession (e.g., hi tech and automotive), in contrast to JDA’s more recession-proof target industries (we all have to eat, drink, and wear something after all). While I got their points in part, I couldn’t also help but feeling some “sour grapes” attitude.

Well, in a “never say never” manner of some reality TV shows, the relationship was rekindled in early 2010. Consequently, JDA has since been expanding its product roadmap and integrating products following the i2 acquisition. I was attracted to JDA FOCUS 2010 since the large event presented an opportunity for me to see first-hand how JDA plans to integrate the products and services offered by i2 as well as figure out how those may be expanded and merged with its own SCM products.

What I Needed to Clarify at JDA Focus 2010

Prior to the conference, I had questioned how much support and product development can JDA really afford for some legacy i2 (and perhaps even Manugistics) products. In addition, how will the company justify the formerly competing products that have apparent overlaps--retail solutions, Sales & Operations Planning (S&OP), multi-echelon inventory optimization (MEIO), and transportation management systems (TMS), as at least four duplicate sets that come to my mind?

Another issue, which I share with many market observers, such as Nari Viswanatan of Aberdeen Group (an ex-i2-employee), Steve Banker of ARC Advisory Group, and David Dobrin of B2B Analysts, as well as with a number of JDA and i2 insiders and ex-employees (the “ex-i2 diaspora“ in this industry is as notable as Irish emigrants worldwide), is JDA and i2’s apparent cultural mismatch in two aspects. One aspect is the managerial and fiscal discipline, which in JDA’s case has been without reproach, as already noted.

In contrast, after reaching its climax some time in 1999/2000, when its stock price equaled that of Google’s today, i2 has been on a steep downward slope. The company was plagued by financial reporting scandals and the US SEC investigation and settlement in 2004 (its CEO was then sentenced to home custody and wearing an ankle bracelet, well before Lindsay Lohan’s time) and an array of money-losing quarters. That is to say, the words “i2” and “well-managed” would simply create an oxymoron.

The second divergent cultural aspect is the go-to-market strategy. JDA’s culture is centered on being a “software product” company with limited professional services involvement. The company has little to no interest in developing highly customized, one-off solutions that take years to deploy. Instead, JDA has been the proponent of CD-based software delivery (a la AOL) before the advent of cloud computing and managed services of late.

In other words, JDA’s interest is in standardization, specialization, repeatability, and automation. These traits result in maintenance revenue streams and high customer satisfaction (the company claims customer satisfaction in the upper 90's).

JDA Managed Services was a major initiative for JDA that started in 2009 (or earlier) and was one of the major topics at JDA FOCUS 2009. JDA Managed Services is a complete software and business management set of services (e.g., infrastructure management, software management, service level management [SLA], IT governance, security management, etc.) that provides access to JDA’s portfolio of SCM applications, as well as its support and industry experts (many of which are offshore in lower cost regions). To accentuate the program’s success, JDA touts one million users of JDA’s Managed Services Cloud worldwide.

Product or Services: What Will Prevail?

Contrast to that i2’s traditional SCP offering, which has hardly ever been “off the shelf” and with customers being self-sufficient quickly after deployment. To be fair, i2 has tackled some of the most complex supply chain problems for some of the largest and renowned companies in the world and solved them. In fact, a vast majority of AMR Research’s Top 25 Supply Chain corporations are i2 users.

At i2 Planet user conferences, one could watch these customers’ overwhelming “rocket science” presentations talking about “high risk, high reward multi-year transformation plans.” Yet, most of the complex solutions i2 developed were not applicable to other customers en masse (maybe only to a few other customers at best).

The vendor’s employees were largely the folks with unmatched in-depth knowledge of supply chains and optimization models, but these were also the folks with a short attention span. They would only get excited about one-and-done lengthy special projects and would want to move onto other special challenges (and leave the “menial” task of commercialization and repeatability to someone else).

In one peculiar case, the i2 team never even brought the software to the customer site. Instead, its staffers did some major process redesign, shipped the slabs of data to India, processed the data there, and shipped the results back. And those results were reportedly stellar.

Moreover, while i2 offered sophisticated and exciting optimization software and services, many of its projects were dangerous, as many of desired (and promised) customer transformations and benefits did not succeed. To add oil to the fire, some of those custom solutions’ quality was the equivalent of beta releases for “guinea pig” pilot customers, i.e., bug-ridden and virtually unusable.

A number of bad publicity press artices about failed projects and customers’ grumbling (if not even litigating) took place even during i2’s peak era. One of the first was at Hershey, who blamed i2 for badly planning its Halloween 1999 season. At least there i2 could share the blame and point fingers at SAP and the former Siebel, due to the mishmash software implementation.

Soon after came the problematic project at Nike in 2001. Nike filed a lawsuit, which, unless I am mistaken, was settled. At one point, as rumor would have it, K-Mart/Sears did file a lawsuit, but then dropped it (perhaps taking pity on i2’s own sad state of affairs at the time). Other unhappy companies were placated with a certain amount of "free" software or "free" consulting (which would bloat i2’s protracted losses).

What I Saw at JDA FOCUS 2010

In a nutshell, my overall impression was that the merger was proceeding well. JDA is already one integrated company with more than 6,000 customers, an estimated US$600 million in revenue, more than 3,000 employees, and 39 offices worldwide. The company’s espoused vision and mission statement is as follows:
“Enabling supply chain, merchandising and pricing excellence through superior solutions and domain expertise that empower our customers to make optimal decisions that achieve real results.”

To my knowledge and based on whom I met at the conference, JDA has retained key i2 personnel with industry-wide respect (those that have survived many previous voluntary and involuntary exoduses at i2), and many of whom are in positions of authority at JDA (e.g., Kelly Thomas is now SVP in charge of discrete manufacturing). JDA announced multi-year integrated product roadmaps 60 days after the i2 close. In these roadmaps, JDA plans to converge most of its existing and acquired product sets.

JDA pledged several key commitments to its customers starting with that the company would continue to support all of its products. JDA will note replace one product with another, but will rather create a “Superior Solution” that is a “Superset” of the combined functionality. Last but not least, JDA will not impose a forced timeline to upgrade: JDA customers will be able to move to the converged solution when they are ready, i.e. in the normal cycle of upgrade.

Meanwhile, certain products from JDA and i2 have been designated as the “go to market” products -- i.e., the superior products that will be sold in new sales situations. This plan seems plausible given the great assimilation job that JDA has thus far done with Manugistics. In fact, JDA’s vintage IBM AS/400-based system for mid-market specialty retailers called JDA MMS (Merchandize Management System) is still in use at 600 retailers worldwide.

Indeed, Oracle's “Applications Unlimited” support program for all of its products (albeit at hefty support and maintenance rates) while the vendor has been slowly delivering Oracle Fusion Applications seems to be working for now. JDA might be following that model and could perhaps even improve it cost-wise via its aforementioned managed services offering. Clearly, it has been taking ages for Oracle to deliver its Fusion Applications, and it remains to be seen whether JDA can do it well and how quickly.

Part 2 of this blog series will continue with my analysis and impressions from JDA FOCUS 2010. In the meantime, your comments, opinions, etc. on JDA’s approach and strategy are more than welcome.

What are your experiences with JDA and i2 (especially your experience with their solutions and services)? We would certainly be interested in your experiences with the abovementioned SCM software categories (if you are an existing user) or in your general interest to evaluate these solutions as prospective customers.
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