Logility: Voyager in B2B Collaborative Commerce

Logility: Voyager in B2B Collaborative Commerce
S. McVey - February 7th, 2000

Vendor Genesis

Atlanta-based Logility originated as the Supply Chain Planning division of ERP vendor American Software, Inc. American, founded in 1971 by James C. Edenfield and Thomas Newberry, saw increasing demand for the distribution and logistics components of its mainframe and client/server-based enterprise software. In January 1997, American gathered its increasingly popular supply chain solutions under a new entity, Logility. A wholly owned division at that time, Logility accounted for 40% of American's license revenues.

The fledgling company inherited a comprehensive product suite that included demand planning, inventory planning, replenishment planning, manufacturing planning, and collaborative planning modules. Transportation management (from 6/92 acquisition, Distribution Sciences, Inc.) and warehousing (WarehousePRO) were added in August 1997. Two months later, American conducted an IPO of 16% of Logility's shares, which raised $32 million despite the fact that Logility had never had a profitable year.

Logility has achieved an impressive 33% total revenue growth over the past five years, demonstrating that it can compete effectively in a business-to-business (B2B) software market dominated by much larger players (see Figure 1). Of its $32 million in revenues (last four quarters), 48% derives from sales of its Voyager solutions, with the remainder from services and maintenance activities (see Figure 2).

Logility's B2B collaborative commerce solutions sprang from its foundation in Supply Chain Management. These solutions still compete with offerings from i2 Technologies and Manugistics (see Table 1). Of the three, Logility ranks a distant third, placing it more comfortably with Paragon Management Systems and SynQuest. Logility sells its planning and execution solutions primarily to food & beverage, chemicals, apparel, and retail companies and its warehousing products to a broad range of industries. Voyager is especially effective for clients with standard business processes who require minimum customization.

One of the first vendors to offer a collaborative planning solution, Logility maintains a strong lead in this area with its Voyager XPS and i-Community products.

Vendor Strategy and Trajectory

Focused on the mid-market ($100 million - $2 billion in revenues), Logility derives 90% of its revenues from companies in the process manufacturing industries. At present, Logility seems satisfied to continue in the SCM and B2B markets, focusing on maintaining and enhancing existing functionality of its Voyager solutions (see details in sidebar) and in expanding Internet deployment capabilities.

Its applications run on Windows NT and Unix, but little demand exists for Unix. Logility entered the ASP and application hosting markets with i-Connection, announced in July 1999, although only a few clients have signed up to date.

Combined with its strong position in CPFR (Collaborative Planning, Forecasting and Replenishment), the application services business is expected to drive revenues over the next 3-5 years. Logility plans to invest in alliances with ASPs to further its penetration into this increasingly popular marketplace.

Vendor Strengths

• Comprehensive supply chain planning product offering: Logility's Voyager SCM solutions cover a wide area within SCM (see "Product Information"). Its distribution planning is especially strong in consumer packaged goods. Its strategic network planning application, Value Chain Designer, uses embedded technology from INSIGHT, a leading provider of optimization technology for supply chain modeling and logistics systems.

• Out-of-the-box product: A chief advantage of Voyager over competitive offerings, most notably i2's Rhythm and Chesapeake's MIMI, is the ability to provide a competent solution with little or no customization. Standard interfaces with major ERP and legacy systems enable faster implementations. Logility's pre-packaged functionality also gives it an edge over other candidates in demonstrations for prospective clients.

• Headstart in collaborative planning: Logility's Voyager XPS was one of the first applications to embody Collaborative Planning, Forecasting and Replenishment (CPFR) as devised by VICS, the Voluntary Interindustry Commerce Standards organization. Resource Chain Voyager, a precursor to the current application was installed at client sites as early as 1996.

Vendor Challenges

• Building the foundations under its castles: Logility has invested heavily in its move toward application hosting, a market that can have considerable impact on its future livelihood. Though its applications possess attributes that make them well-suited to Internet deployment (e.g. configurable product, mid market focus, CPFR), considerable investment in product development, marketing, and alliances are necessary to turn Logility's vision into reality.

• Dependence on American Software: American software represents 83% of Logility's indirect channel. While Logility benefits in many ways from its parent company, American's tepid performance calls into question its ability to provide a safety net.

• Poor visibility at highest levels: Although Logility has achieved small-scale success with its marketing approach, it admits to having difficulties selling at the highest levels of management. To effectively compete and grow its business, Logility's sales execution needs to break into senior management, a goal that can be attained through a proper shift in marketing strategy.

Vendor Predictions

• Projected to exceed $20 billion by 2001, the ASP market could be a major growth area for Logility in the next 3-5 years. To support its hosted applications, Logility will continue to form partnerships with ASPs over the next six months, similar to the one recently announced with eBaseOne. (80% probability).

• Provided it can secure one or two more ASP partnerships in addition to those with eBaseOne and American Software's AmQUEST, Logility will derive 30% of its revenues from hosted applications by the end of calendar year 2000. (70% probability).

• Following moves by i2 and IMI, Logility will partner with a major hardware vendor in the next 12 months to expand its indirect channel and diminish its reliance on American Software. (70% probability).

Vendor Recommendations

• Logility should consider drawing from its collaborative planning expertise to create a true B2B product, an offering to combat i2's TradeMatrix. Much of the technology is available in-house and it could prevent customers from partnering with the competition.
  

• In order to widen its indirect channel, Logility may want to partner with smaller integration firms with e-business services, such as Cap Gemini or Origin. Logility's preconfigured software and relatively short implementations has made it unpopular with Big 5 firms that rely on longer, labor-intensive implementations.

• Logility wins many of its contracts from clients that have implemented ERP systems and found the supply chain planning functionality lacked sophistication. This advantage will fade as ERP vendors continue to develop and acquire supply chain management capabilities. To stay competitive, Logility should bring new enhancements to its suite, such as route optimization or product lifecycle planning.
  

User Recommendations

• Users with relatively uncomplicated business processes in process manufacturing industries, such as food & beverage, chemicals, and other consumer goods should certainly include Logility on shortlists.

• Third-party logistics companies should find benefits in Logility's transportation and warehousing products, especially coupled with expertise of new partner, Tompkins & Associates.
  
  

• Users with very particular business requirements that defy simple implementation should still involve Logility in the selection, at least through the scripted scenario demonstrations, but should ask for quotes that detail additional costs raised by customization. Other products like Rhythm (for high tech, semiconductor) or MIMI (for chemicals, metal industry, food & beverage) may prove better when extensive customization is in order.
  
  
• Small to mid market companies evaluating application service providers should ask Logility for a reference from its small, but growing, list of clients who use hosted Voyager products.