Formerly the supply chain planning (SCP) market leader, Manugistics was
a pioneer in the advanced planning and scheduling market, arguably before
such a market existed. Founded in 1969 as Scientific Time Sharing Corporation,
a division of Continental Telecom, the company became independent under
then CEO, William Gibson, through a leveraged buyout in 1986. Renamed
Manugistics Group, Inc. in 1992, the company established a dominant position
in the advanced planning and scheduling and transportation planning markets
through successful integration of acquired technologies (such as ROVER
Technology in 1991).
has witnessed its market position erode steadily over the last several
years in favor of more vibrant players in the market, most notably i2
Technologies. While Manugistics was not the only enterprise applications
vendor to face financial upheaval in 1999, its decline cleared the way
for competitors to move in and capture much of its former market share.
that all was not well began appearing on Manugistics' income statement
in early calendar 1999. At fiscal 1999 year-end (February 28), license
revenues were $73 million, a 30% decrease from the prior year, placing
it second among other supply chain management (SCM) vendors (see Figure
1). For its 1999 fiscal year ended February 28, 1999, Manugistics posted
the greatest loss in its history, $96.1 million, which included one-time
charges related to business restructuring. Following shortly after a period
of take-over speculation, the overhaul included a 30% staff reduction
and renewed focus on "customer-driven" industries, including automotive,
electronics, consumer products, apparel, textiles, food & beverage and
April 1999, Greg Owens, the partner in charge of Andersen Consulting's
supply chain practice, was hired to replace William Gibson as CEO. (Gibson,
who owns 20% of the company, continues in his role as Chairman but maintains
a low profile.) Cost savings resulting from staff cuts yielded a positive
bottom line in 1Q 2000, but losses have followed in each succeeding quarter.
current product suite, NetWORKS, includes applications for demand planning,
transportation planning, manufacturing scheduling, replenishment planning,
real-time ATP, strategic network planning, and business-to-business (B2B)
trading partner collaboration. Its B2B/B2C product, bstreamz was announced
in January 2000 and is available as a Manugistics-powered online marketplace
or as a user-controlled version that makes use of Manugistics's WebWORKS
Manugistics' platform for both intra- and inter-enterprise integration
is based largely on Extricity's enterprise application integration (EAI)
software. In addition to its online trading networks and tools, Manugistics
offers a product for companies who want to develop their own trading exchange
environments, ExchangeWORKS, which features a pre-built infrastructure
that allows the sharing of information, real-time visibility, and channel
linkage. Manugistics' core SCM software is available on Unix (Digital,
HP-UX, Solaris, IBM-AIX) and Windows NT servers. Support for Windows 2000
is planned for release in 2001 with version 6.2.
revenues are derived from the sale of product licenses and support services
in the ratio of 40:60 (L:S) as of the end of FY2000. The ratio was a much
healthier 60:40 (L:S) two years ago, but has shown signs of improvement
in the two most recent quarters due to some wins in the B2B e-commerce
market (see Figure 3). Competitors i2 and Logility enjoy higher percentages
of new license revenues (see Table 1).
1. Leading Best-of-Breed SCM Vendors
Year-End Revenues ($M)
4 Quarter Revenues ($M)
comparing latest 4 quarter revenues with those of the previous 4 quarters
Strategy and Trajectory
Like other SCM companies, Manugistics is positioning itself as a provider
of back-end fulfillment capabilities for e-commerce companies. With its
movement into B2B with WebWORKS and bstreamz, Manugistics is well-positioned
to play this role in the marketplace as its product technology is mature
and has been proven in over two decades of implementation. Its transportation
strategy optimization capabilities are especially relevant to the needs
of e-commerce as delivery costs have a profound impact on bottom line
results. Recent evidence of its success in supporting e-commerce is Manugistics'
win at Amazon, who, like other Internet retailers, is beginning to understand
the importance of supply chain optimization on its businesses.
has historically maintained strong alliances with complementary ERP vendors
and systems integrators that shoulder much of the implementation support
burden for its installations and it continues to foster these relationships.
The company has a good record of customer service and a large customer
base that represents a who's who among blue chip companies, including
Procter & Gamble, The Gap, and Dupont.
year, Manugistics has spared no expense in putting its name and revised
identity in front of prospects, hosting lavish user events in Orlando,
Florida, as well as Cannes, France and Tokyo, Japan. The new focus on
image is a much needed departure for Manugistics, which desperately needs
to shed its marketplace perception as a respected, but outdated relic
of the SCM era. It remains to be seen whether its public relations efforts
will pay off in the long term and whether Manugistics can live up to its
product functionality in core SCM: Manugistics' long history gives its
products a significant edge in maturity over much of its competition.
Especially strong is its functionality for transportation optimization,
which may be the most widely installed package of its kind. Manugistics
was also one of the first vendors to offer flexible VMI and replenishment
modules, and enable customers to integrate to POS and consumer data.
relatively short implementation time frames: Manugistics' well-developed
functionality and seasoned implementation resources lead to shorter
average implementation times (six months vs. 9-12 months average). A
recent implementation at Matthew Clark, a large UK-based drinks wholesaler,
was completed in three months.
client base (approximately 900 customers): Larger than those of its
main competitors including i2 and SAP (for supply chain), Manugistics'
customer base provides a great advantage, if properly utilized, in generating
new license revenues. Loyal customers can be persuaded to purchase Manugistics'
newer, less proven applications and tend to be more forgiving of shortcomings,
such as delayed product releases.
position weakened by acquisition-related growth: Manugistics' inability
to effectively incorporate acquired sales forces into its existing organization
contributed to a 30% decline in license revenues in calendar 1999. Though
its cost-cutting measures worked to reduce expenses, we are concerned
that Manugistics' development staff is now somewhat thin at 27% of its
total employment. For comparison, i2's development staff is 35% of total
and Logility's is 39%.
and supporting its Internet collaboration application: Manugistics'
bstreamz application for trading partner collaboration was announced
with fanfare in January 2000 with early testimonials from the first
client, Canadian Tire Corporation. Succeeding months have brought little
growth to this segment of its business model, however, and Manugistics
has reacted slowly in response.
of experienced personnel due to recent financial problems: Traditionally,
one of its advantages over newer SCM entrants, the implementation expertise
and industry knowledge of Manugistics' support staff has been compromised
due to attrition. This is especially true for its transportation group.
Defections have slowed since the beginning of the year, but many of
its experienced resources have moved on.
revenue growth should continue in FY2001 as restructuring efforts around
core markets bear fruit and web initiatives expand, but not enough to
recapture significant market share this year (70% probability). Manugistics
market share has declined by approximately 62% since 1995.
that Manugistics invests more in development and marketing for its web
marketplace offerings and forms more alliances with e-commerce companies,
similar to that with Moai signed in July 2000, we expect its revenue
growth to increase substantially through FY2002 (ending February 2002)
and approach that of the rest of the B2B e-commerce marketplace, 45%
candidate for acquisition by a larger vendor within the next year due
to lack of suitors with both functionality need and financial wherewithal.
In addition, Owens's management team seems intent on remaining independent,
tying its future to e-business (40% probability).
develop middle market penetration to boost revenues: Manugistics needs
to tap into new and existing alliances with complimentary software vendors
(Siebel, JDEdwards) and software integrators (AnswerThink, JGI) to expand
its mid-market customer base. Signs that it is pursuing such alliances
include recent deals with BORN and IBM mid-market services. Manugistics
has also shown its willingness to partner with other SCM extensions,
such as warehouse management system vendor, HK Systems and EAI vendor,
Extricity. Manugistics should also consider expediting its port of key
parts of its application suite to Windows 2000/NT as this platform is
expected to find increasing favor with the mid market. Current release
is scheduled for spring of 2001.
advances into Customer Relationship Management (CRM): Manugistics had
fallen behind other players in capitalizing on the CRM movement, although
it signed a joint marketing agreement with market leader Siebel earlier
this year. If its financial base continues to improve, Manugistics should
consider acquiring CRM technology for customer personalization or data
mining and integrating it into its core applications.
marketing message: Manugistics has released a slew of products related
to Internet collaboration and marketplace connectivity. Names of the
products are similar and marketing communication further confuses their
capabilities, which may lead users to conclude that they comprise vaporware
more than real software.
should consider offering web-hosted versions of its applications. Though
other enterprise software companies are seeing customer reticence in
subscribing to hosted applications, the ASP model is expected to grow
substantially over the next few years and vendors need to pursue opportunities
aggressively in order to establish a presence.
belongs on a short-list for top tier companies in consumer packaged
goods, retail, food & beverage or high tech seeking an add-on or standalone
SCM solution due to its mature product functionality and expertise in
these industries. Though Manugistics has regained much of its financial
footing, potential customers should not assume that its recent success
assures long term viability.
- Mid market
companies ($50 to $500 million revenue) with IBM platform technology
in-house may want to consider Manugistics' Supply Chain Collaboration
products that features Manugistics NetWORKS, along with IBM Global
Services consulting and implementation services, IBM MQSeries message-queuing
software, IBM RS/6000 and IBM Netfinity servers and customer support,
with financing options provided by IBM Global Financing.
in Manugistics' new marketplace offering, bstreamz and supporting infrastructure
application ExchangeWORKS should be made only after a thorough evaluation
that includes on-site demonstrations showing the integration of multiple
trading partners. Its only blue chip customer to date, Canadian Tire,
chose Manugistics primarily based on a long, successful history with
its core SCM applications and a certain degree of faith that Manugistics
can deliver on its Internet vision. Users should also ask for references
from other customers, including FreightWise, Commerx, and National Transportation