On September 3, Inovis International, Inc. An electronic data interchange (EDI), business-to-business (B2B), and value-added network (VAN) connectivity specialist, and a leader in providing e-business commerce automation solutions that facilitate the more effective management of retail, supply, and manufacturing partnerships, and QRS Corporation (NASDAQ: QRSI) announced a definitive agreement to merge.
This announcement occurred just as JDA Software Group Inc. (NASDAQ: JDAS), a prominent global provider of integrated software and professional services for the retail demand chain, was about to close acquisition of QRS. QRS broke off the "engagement" in favor of a better-priced acquisition by Inovis. For details of what happened between JDA and QRS see Not All Acquisitions Happen: JDA and QRS.
Nevertheless, the task of rationalizing products and customers' overlap will be a notable challenge for Inovis (as one could glean many similarities from the above products' descriptions) that is yet to announce what its new strategy will necessitate. Also, because QRS customers have so far largely relied on AT&T or IBM's VAN (due to the long-standing partnerships between these parties, such as with IBM since 1988 as a reseller of the IBM VAN that acts as the communication network for some of QRS Exchange modules and services such as Data Exchange, QRS Web Forms, and QRS Managed EC), Inovis will be tempted or compelled to migrate them to its own hosted integration service. This will particularly be the case after the very recent purchase of G International, who has been running IBM's legacy EDI offering, by GXS. In addition to internal competition (given that both Inovis and QRS are major EDI providers after all), that is just a glimpse of increased competition the combined company will now face from many directions, given the fragmentation of the retail and trading community sectors, which have so far been too complex for any vendor to master the true intricacies thereof.
For example, competition in the market for the provision of QRS' products and services has become more intense in recent years as well, particularly in light of the entry of new technology platforms and software alternatives. In the traditional connectivity and network services market served by the Trading Community Management Solutions Group, QRS competes with a number of traditional VAN providers such as Inovis (in the past, and likely in the near future too), Sterling Commerce, a division of SBC Communications, Cyclone Commerce, GXS, and IBM and AT&T from now on. In addition to the traditional VAN competitors, it also competes with Internet protocol (IP)-based network providers, such as ICC, and software providers, such as bTrade and former IPNet Solutions (a sister division to be).
In the market for catalogue solutions served by QRS Catalogue, it faces competition from traditional providers such as SPS Commerce and GXS. There is even a co-opetition from recent entrants such as UCCnet (which already provides a catalogue solution to Home Depot, Wal-Mart, and other large retailers) and other industry consortia such as Transora and WorldWide Retail Exchange (WWRE). Another competitive threat to the catalogue solutions and QRS IMPACT appears to be from the above-mentioned behind-the-firewall PIM software providers (e.g., Trigo, FullTilt, and Velosel) that can handle content management and maintain item information. An example of some vendors that have also eyed delivering packaged data synchronization software and transaction delivery services would be e-commerce network services vendor Transora and PIM software maker Trigo (recently acquired by IBM), which have relatively recently announced plans to work together on a joint offering that combines the two companies' products. The same could be said for the partnership between Cyclone Commerce and Velosel.
Moreover, the service bureau market is highly fragmented, and QRS Managed EC thus competes with many small companies offering fax, e-mail, or EDI conversion and with unavoidable SPS Commerce, as is the in-store intelligence market, with many local and regional players offering similar, labor-based solutions. That is why QRS Retail Intelligence Services competes with these local and regional providers, brokers and Mosaic Group, another national provider. In addition, QRS may encounter competition from the internal field intelligence departments of companies.
In addition to the above-mentioned direct and indirect competitors in data synchronization and retail demand chain spaces, the combined company's possibly biggest challenge remains a still ongoing lack of awareness of the need for these applications. While many people have realized the power of e-commerce on the consumer side, there is still plenty of education to be conducted by all the B2B e-commerce vendors as to prove how much leverage their applications can bring to corporations. Also, many retailers prefer to trust seasoned employees rather than software "black boxes", and they are typically slow to adopt new technology till they see proven results from their peers and market leaders. On the other hand, some leading retailers like Wal-Mart tend to not invest in packaged applications tailored to their needs, since it could take away their competitive edge.
This is part five of a five-part note.
Parts one, two, and three detailed the event.
Part four discussed the market impact.
Combined respective Inovis and QRS customers, while being attentive, should consider this event as a move toward a more viable position for their IT investment, given the combined company stands a better chance to provide more elements of B2B e-commerce, particularly in the realm of GDS and PIM. For existing QRS PIM, Catalogue, and data synchronization customers, it should be business as usual, while watching for (dis)advantages of working with a more established and stable software partner. Prospective and current customers from retail and consumer products segments of all sizes, and with the need for data synchronization should evaluate the combination.
Users should not expect first integrated applications to be available before some time in late 2005, and should challenge the company to commit to more certain product development and a migration strategy roadmap. Consequently, until the merger is consummated, users evaluating the above individual products should keep themselves informed, and consider generally available (GA) functionality only. QRS customers, particularly those using the product outside PIM and data synchronization realm, should inquire about possible similar commitments by Inovis to their needs, and they should demand from the vendor to articulate its overall strategy and how much of its prodigious R&D budget will be directed towards their solutions. These customers might see the new owner's attempt to migrate the QRS' B2B and exchange part of the business to its own VAN from the AT&T or IBM's one. While this might not be particularly flawless, some cost negotiation could be leveraged from the move to Inovis' underutilized and specialist hosted B2B integration services.
Users should ask the following questions when evaluating the Inovis-QRS combined offering:
- Are there any price advantages offered to existing clients who elect to purchase or migrate to the future integrated products?
- Will the applications share a common server platform and user interface (and when)?
Current Inovis customers in a need of standalone PIM technology that would enhance their GDS efforts should prod Inovis for detailed plans regarding its new strategy in light of QRS capabilities. Both customer groups should nonetheless keep a close eye on the vendor while it rationalizes its product portfolio.