i2, SAP, Oracle Poised For Showdown in Q4
In the approaching SCM showdown, i2 Technologies emerges as the
ailing but defiant market leader who must defend its throne from SAP,
Oracle, and a resurrected Manugistics. The last two quarters
have left high-flying i2 in the unusual position of suffering losses.
In the first quarter of 2001, i2 shocked its customers and market watchers
by posting pro forma earnings beneath projections of $0.04 per share by
two cents. License revenues of $211.1 million fell from an all-time high
of $244 million in the fourth quarter of 2000. The drop was a first for
i2, which has enjoyed nothing but increases throughout its history. If
that wasn't bad enough, the second quarter is projected to be even worse
with the company announcing a pro forma loss of $0.16 per share, an unthinkable
event just one year ago. License revenues are expected to break $100 million,
the lowest since 3Q of 1999.
CEO Greg Brady, a former Oracle exec known for straight talk, didn't try
to spin the preliminary results. "Market conditions were much more difficult
than we had anticipated this quarter - even more difficult than we experienced
in the first quarter. These conditions prevented us from achieving what
we believed were conservative estimates for the quarter."
positive spot this quarter was expense control," said Bill Beecher, CFO
of i2. "We made better than expected progress at reducing our operating
cost structure. Total estimated operating expenses, exclusive of the special
charge for bad debt and other pro forma adjustments this quarter, are
expected to be less than $325 million - under the low end of our guidance.
We are focused on further reducing our operating cost structure."
confident in i2's long-term outlook, as the best positioned company in
a market with enormous potential," Brady stated. "I'm disappointed with
our recent results, and am committed to making the necessary adjustments
to continue our leadership and the achievement of our vision." Other vendors
will not be easily daunted, however, as they vie against i2 to claim the
supply chain kingship.
ability to reverse its losses and fight off rivals will depend in large
part on how well the SCM segment performs as a whole. In a Lehman Brothers
survey of global manufacturing companies, over 75% of respondents expected
their spending on SCM in the third and fourth quarters of 2001 to increase
over the first half of the year. This result bodes well for i2, which
at 15%, retains the largest percentage of SCM revenues among all software
companies. i2 should not allow its former standing to lull it into complacence,
the faltering economy ended the last boom in supply chain sales, ERP vendors
SAP and Oracle have worked tirelessly on improving their products, adding
functionality and building stronger links to financials and manufacturing
transaction processing. The successor to SAP APO, mySAP.com
Supply Chain, now sports event management, collaborative
planning, and mobile device communicability, three areas where i2 is perceived
as less prepared. Oracle's supply chain management suite centers around
Oracle APS, a more recent entrant in the advanced planning
and scheduling market. In spite of the slow start, Oracle has received
rave reviews for the collaborative planning aspects of E-business Suite
addition to horizontal areas like collaboration and event management,
we expect to see the vendors offer enhanced products in supply chain execution,
product lifecycle management, direct/indirect procurement, and sell-side
chain execution (SCE) is gaining mind share among companies who realize
that all the planning smarts in the world may not avail them unless decisions
can be implemented at the shop floor and warehouse levels. i2 currently
partners with third party vendors like EXE Technologies
to supply SCE, giving it a disadvantage against SAP and Oracle, who can
offer planning and execution from a single source.
lifecycle management (PLM) has become more desirable as companies strive
to control products from cradle to grave. PLM has graced product announcements
for years but is only beginning to define a class of applications distinct
from existing production planning & scheduling, procurement, and sales
applications. Some of the hype over indirect and direct material procurement
has died down in recent months, although the cost savings and convenience
brought by efficient purchase of MRO and raw materials are undeniable.
Like procurement, sell-side e-commerce does not represent any of these
vendors' strong suits, which will force them to seek help from third-party
vendors like Ariba and Commerce One.
of the battles will be fought in the small to mid market, where vendors
have been focused for the last few years. Initially, vendors looked to
application hosting as the way to court smaller enterprises by offering
business automation without the hassles of on-site implementation. Although
the ASP model continues to hold potential, vendors are finding it prudent
to offer alternative delivery mechanisms for users who are wary of security
issues. These include stripped down versions of their full-complement
suites and i2, SAP, and Oracle all have strategies for stripping away
core SCM capabilities from their full-complement suites, but i2 has made
better progress than the others.
the first choice for tier one high-tech companies, i2 has become more
proficient at courting middle tier businesses largely through success
in selling Factory Planner, the earliest product in its
arsenal that often serves as the cornerstone application in mid market
manufacturing. In spite of their initiatives, SAP and Oracle still lag
behind due to the old perception that their solutions will fit only in
what of Manugistics? No one can deny the startling turnaround accomplished
by Greg Owens and his team of former Accenture colleagues, but
Manugistics still commands only about 2% of the total SCM market, placing
it fourth behind i2, SAP, and Oracle. Manugistics will remain a contender
only if it can continue the momentum that carried it from near-collapse
in 1999. It will need to step lively come October if it is to find its
way into the title fight.
Users stand to benefit tremendously from the competitive forces at work
in the SCM and ERP marketplace. The drop in software sales has created
a "buyer's market" where vendors are eager to cut deals and are pumping
every available dollar into their research and development organizations.
In selections where i2, SAP and Oracle occupy a shortlist, users have
an excellent opportunity to exploit the weaknesses these vendors have
to gain concessions on price, services, and third-party add-ons. For example,
users should approach the ERP vendors with concerns of a lack of detailed
schedule optimization features while i2 should be asked how difficult
it is to track inventory costs arising from WIP (work-in-process). In
the coming battle for supply chain mastery, the only assured winners are
customers who understand the strategies at work behind the scenes.
more information on the recent developments with SAP and Oracle see Oracle
Claims The Worst Is Over And Turns To KISS For A Boost and SAP
- A Humble Giant From The Reality Land?