Technologies at the Front of the Supply Chain
S. McVey - August 8th, 1999
Technologies is the largest and fastest growing vendor of supply chain management
software with $456 million in revenue over the last twelve months and a 48%
average growth rate over the last five years. For the second quarter of 1999,
total revenues were $131.4 million, an increase of 57% over second quarter 1998
($83.6 million). Net income in the second quarter was $8.5 million, compared
to $0.6 million for the same period in 1998. Employment at i2 grew 123% from
1006 in 1997 to 2244 in 1998, with headcount currently at about 2400. The rapid
expansion is fueled by a powerful sales and marketing machine and corporate
development strategy that emphasizes speed over perfection. i2's product offering
consisted of three applications as recently as 1996. Since that time, it has
combined internal development with acquisitions of established vendors to achieve
what is arguably the most comprehensive SCM offering of its peers. i2 is determined
to challenge the large ERP vendors for CRM market space, as evidenced by its
acquisition of SMART Technologies, a provider of internet-based CRM solutions.
i2 plans to incorporate SMART's application technologies into its "Intelligent
eBusiness" suite that will include applications to enable internet collaboration
among trading partners, and support web-based ordering with real-time visibility
to supply from multiple sources.
Strong financial position and commanding market presence:
More than any other aspect, i2 is known for its rapid growth rate. In contrast
to its competitors claims, this growth remains unaffected by Y2K remediation
spending and general economic downturn.
Aggressive sales and marketing organization: i2's direct
sales force headcount stood at 564 at the end of 1998, nearly twice that
of their nearest competitor. At 34%, investment in sales and marketing as
a percentage of revenues is the highest of their competitors.
Innovative marketing approach: i2 is remaking itself into
an eCommerce software company with its "Intelligent eBusiness"
suite of applications, including Rhythm eXchange Services and Rhythm Internet
Fulfillment Server. i2's ability to reinvent itself to provide a basis for
churning out new products is evidenced, in part, by its consistently high
percentage of license revenues (see Fig. 2).
Product flexibility: Rhythm provides the capability to
satisfy a wide variety of functional requirements and business rules through
its custom modeling language, OIL (Object Integration Language). Also, i2
offers a series of vertical industry templates, which allow customers to
jump start their modeling effort.
Delivering on vision: While able to conceive and articulate
architectural visions, i2 has been less successful at delivering fully developed,
bug-free applications to support them. Clients and third-party integrators
often discover the gap only after the implementation is well underway.
Business consultants, though skilled in Rhythm applications,
often lack industry-specific knowledge. This is in part due to the rapid
growth of the company and the inevitable learning curve faced by new staff.
i2 relies heavily on implementation partners such as Andersen Consulting
Acquisitions: i2 continually demonstrates its willingness
to make strategic acquisitions (Think Systems - '97, ITLS - '98, SMART -
'99) in order to expand its product offering to new market segments.
It is likely that i2 will acquire a current SCE partner,
such as IMI Corporation or EXE Technologies within the next 24 months.
Look for at least one more internet-based CRM or EAI
company acquisition as i2 expands its eBusiness suite. (70%).
Growth projection: Expect 35-40% average growth over the
next 3-4 years, less than previous years, but ahead of the rest of the market
Continue existing initiatives in mid-market to increase
market share, both internal development to scale down core applications
and partnerships with mid-market systems integrators, such as Mastech.
Focus development efforts on reducing complexity of its
product suite and integrating acquired technologies. RhythmLink, i2's integration
platform for both its own modules and third-party products such as SAP,
PeopleSoft, fails to deliver fully on its promise of seamless integration.
Leverage success in EHT to achieve better penetration into
automotive and CPG markets: Over half of i2's revenue is confined to the
electronics and high tech industry (57%). Its low penetration into other
industry segments conflicts with its stated objectives, especially in the
case of automotive (see Fig. 3).
Due to the breadth of its product suite, web initiatives,
and strong financial standing, i2 should be on every shortlist for users
in a wide range of industries, especially electronics and high tech, semiconductor.
Although i2 plans to leverage its recent CRM acquisition
to gain ground in non-manufacturing industries like banking, insurance,
companies in these industries that do not relish a joint development with
i2 should wait for successful reports from pilot implementations before
Customers who ultimately do select i2 should consider the
CPG - Consumer Packaged Goods
ERP - Enterprise Resource Planning
CRM - Customer Relationship Management
SCE - Supply Chain Execution
EHT - Electronics & High Tech
SCM - Supply Chain Management
EAI - Enterprise Application Integration