RedPrairie and JDA Software Merger, Part Three: What Does it Mean for Manhattan Associates and Other SCM Players?

On November 1, 2012, RedPrairie Corporation and JDA Software announced their merger. Under the terms of the agreement, the entities affiliated with RedPrairie will effect a cash tender offer to acquire all outstanding shares of JDA common stock for $45 per share. My initial positive and negative thoughts on the merger were outlined in Part One of this blog series, while Part Two discussed how the merger might work and some points to consider when evaluating the merger.

After any merger of two large companies in a specific market, there is inevitably a shift in the market landscape, and opportunities become available that a savvy competitor will take advantage of. A look at the current state of the SCM market reveals that we need much more innovation than consolidation in the market, such as new solutions and capabilities in addition to “upgrades” and increased ease of use. RedPrairie/JDA will now have to be focused on product family rationalization, stabilizing their employee base, and retaining customers. But at the same time the smaller vendors in the space such as Logility, Manhattan Associates, Kinaxis, E2open, and ToolsGroup, will, if they’re smart, be focused on innovation, new customers, customer success, and growth—real growth on a global basis.

Moreover, the combined companies are certain to lose some industry focus (it is hard to say now whether it will be more in the SCE or retail space) as they attempt to integrate the two organizations. They will need to rationalize the products that they will offer in the future, potentially alienating some customers if they decide to discontinue certain products. In contrast, Logility, Manhattan, Kinaxis, etc. remain solely focused on delivering quality solutions to every customer they serve. These smaller players should have the confidence and ability to move quickly and to efficiently capture opportunities that others cannot. As mentioned in Part One of the RedPrairie and JDA Software merger blog post, the debt structure of the RedPrairie/JDA merger will create an enormous burden in meeting exorbitant interest payments, taking focus away from future R&D and diluting customers’ strategic investment in solutions they depend on to run their business.

The product portfolio and structure at JDA/RedPrairie is a massive collection of disconnected point solutions. Together, the companies will attempt to offer a host of products without a platform (RedPrairie is largely a Microsoft .NET shop, while JDA has a mishmash of technologies). In contrast, Manhattan Associates offers 25 products on common business process platforms (both on the so-called “Open Systems” and on IBM System i). Logility is also tightly compact on Microsoft .NET. To be fair, parts of the JDA portfolio have been on a common platform for some time. Furthermore on the JDA side there is the 8.0 series of releases (slated for Q1 2013) that have been referenced publically and will put over 60 plus JDA solutions on a common platform. But what about RedPrairie, and will it even need to be necessarily on the same platform?

  • Delivery model – cloud

  • Pricing model – subscription

  • Process focus – horizontal, cross-functional, multi-enterprise

  • Architecture – fast in-memory, single data model, single code base

What’s Ahead for Manhattan Associates?

Manhattan, Kinaxis, and Logility deserve credit for being three of the best managed and run enterprise software companies: no debt and a decent investment in R&D and innovation (without a burden of integrating acquired companies, since Manhattan's last acquisition was seven years ago, while Logility's Optiant acquisition has long been successfully assimilated and was miniscule in size). In addition, these companies’ customers are generally a happy bunch. See my most recent reports on Logility and Kinaxis.

As for Manhattan Associates, I still think that the company misses some growth opportunities by not catering to manufacturing and to retail stores. The vendor is also not involved in sales and operations planning (S&OP), which is a popular solution these days. However, with each new channel, adding go-to-market capabilities, sales, marketing, and services is expensive and risky. If a company has enough runway and focus, the “last man standing” position can be good, as portrayed in this recent article.

The biggest concern I have for Manhattan is regarding how the company will transition to the cloud, as it has just spent $250 million or so to rewrite all of its 20-plus modules on to the same platform (Manhattan SCOPE). But the company did it in a single-tenant on-premise architecture— was a multi-tenant cloud TMS, and Manhattan rewrote it into a single-tenant on-premise architecture after acquiring it in 2000. What will the company do when cloud requirements really become mainstream, given that HighJump, Softeon, Accellos, SmartTurn (now part of RedPrairie, which thus offers deployment diversification for many of its products),  Snapfulfil, and Logfire are already cloud warehouse management systems (WMS)?

For high volume WMS deployments, you still need a pretty big internet pipe, since the response time has to be nearly immediate. For some time, the cloud will not be able to provide these response times, and Manhattan will have some time to figure out its go forward strategy. Last year, 90 percent of all Manhattan implementations were in the private single-tenant cloud space. The vendor believes that its offering is spot-on for its target market. And if Manhattan wants to get into the cloud space quickly, it could always jump on the acquisitions bandwagon and buy a cloud-based solution.

Related TEC blog posts:

RedPrairie and JDA Software Merger, Part One: What’s (Not) to Like? (Nov 2012)

RedPrairie and JDA Software Merger, Part Two: How Will it Work and What Should we Think? (Dec 2012)

Analyzing Manhattan Associates’ Supply Chain Platform Play – Part 3 (Apr 2011)
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