SAP Announces Investment in Catalyst International

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SAP Announces Investment in Catalyst International
S. McVey - September 1st, 1999

Event Summary

ERP giant SAP AG announced on September 1 that it had acquired nearly a 10% stake in warehouse management system (WMS) vendor, Catalyst International Inc. In return, Catalyst will drop its NT platform development plans, and provide customer training, consulting and product customization services for SAP Logistics Execution System (LES), at its Supply Chain Execution (SCE) Competency Center.

Market Impact

In return for an insignificant portion of its capital, SAP gains an experienced consulting partner. The alliance will help SAP expand its already huge market footprint into warehouse management execution, by leveraging certified interface partner Catalyst. Although the strengthened relationship stands to significantly accelerate Catalyst's business, having a big investor like SAP carries a price. It remains to be seen just how much longer Catalyst can continue to market its Catalyst WMS and CatPack products for use by other ERP systems, given the resource commitment the new alliance will demand. As part of their reorganization efforts, Catalyst will cease development on its NT version of Catalyst WMS. This allows Catalyst to focus entirely on UNIX. History indicates that their departure from NT may be a good move in the short term. Catalyst has tried repeatedly to deliver a Windows NT product without success, most recently through the acquisition of Kearney Systems Inc. (KSI). A previous attempt to deliver an NT-based WMS was abandoned when management scrapped development on a product acquired from Information Strategies Inc. (ISI) in early 1997.

SAP's move is another example of the rapid consolidation and partnering underway in the ERP and supply chain planning/execution markets. There are varying degrees of commitment in these relationships and the SAP-Catalyst deal is stronger than many. SCM powerhouse, i2 Technologies maintains alliances with Industri-Matematik International Corp., and EXE Technologies, Inc., that involve joint marketing and development aspects, but not an equity investment. Though strategies differ, these moves ultimately provide tighter integration of the packages, more comprehensive services and support, and lower installation costs for companies who seek to benefit from new technology.

User Recommendations

Current SAP LES users should benefit short-term from the consulting and training services available through the SCE Competency Center. More advantages will come later as Catalyst leverages experience from its SAP integration projects to scale Catalyst WMS to larger and larger enterprises.

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