Executive Briefings

i2 Acquisition Brings New Customer Base to JDA, and Also New Challenges

It looks like JDA Software will be successful in its bid for i2 Technologies this time around. While the deal has many advantages for JDA, it also presents its share of challenges, says AMR Research analyst Noha Tohamy. "The main challenge is from a functional standpoint, because there is a lot of overlap between i2's solutions and solutions from Manugistics," she says. Manugistics was i2's chief rival in the SCM market before it too was acquired by JDA, in 2006. In many ways the strengths of these two companies are complementary, with Manugistics having deep penetration among CPG and retail companies and i2 being more focused on the high-tech and discrete manufacturing sectors. But the difference in their customer bases also raises questions.

"In looking for cost efficiencies, JDA will need to rationalize its product portfolio," notes Tohamy. "I think the question they have to answer, for themselves and for their customers, is whether it is possible to have a single product that meets the supply chain planning needs of consumer goods companies as well as high-tech companies."

Tohamy says JDA has done "a very good job" integrating Manugistics with JDA solutions while still protecting the Manugistics brand. This was made easier by the fact that JDA also has its roots in retail. "Moving up the supply chain from retail-centric solutions to solutions for CPG manufacturers was not such a big leap," Tohamy says. "And JDA succeeded in creating an end-to-end solution for the retail supply chain that includes CPG manufacturers."

i2 has built its customer base in inherently different industries, however. On the one hand, this gives JDA a lot of new market share, but on the other hand it thrusts them into "a very different world with different problems and a different language." For this reason, Tohamy says she hopes JDA will retain all or most of i2's talent.

In the merger announcement, the companies said they plan to cut $20m in costs after the deal is done in the first quarter of 2010, but they did not specifically address job cuts. Dallas-based i2 has 1,172 employees, including about 280 in that area.

Working in JDA's favor is the fact that it has completed a total of 10 acquisitions since 1998. "None was as big as the i2 acquisition, but I think they have learned a lot, particularly from the Manugistics deal," says Tohamy.

The analyst notes that in the year since JDA first tried to buy i2, the companies appear to have come closer together from a cultural standpoint. "i2 brought in Jack Wilson as CEO and he has tried to go back to the basics of running a packaged software company," she says, noting that in recent years i2 had become more of a services company. At the same time, JDA has realized that "doing services right can be very profitable," Tohamy says. The company recently opened a center of excellence in India just for managed services. "It seems as though both companies have seen that the other's approach can work and be profitable," says Tohamy.

The acquisition of i2 turns the market for comprehensive supply chain management into a three-horse race between JDA, Oracle and SAP, Tohamy says. "I expect that SAP and Oracle will continue to argue that they offer better integration and a lower total cost of ownership, while JDA will argue that they are all focused wholly on the supply chain and nothing else - and that they now have the entire supply chain covered."

From a revenue standpoint, SAP is way ahead. "But from the standpoint of specialization and domain expertise, JDA has been strong and will become stronger as result of the i2 acquisition."

- Jean V. Murphy, SupplyChainBrain

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It looks like JDA Software will be successful in its bid for i2 Technologies this time around. While the deal has many advantages for JDA, it also presents its share of challenges, says AMR Research analyst Noha Tohamy. "The main challenge is from a functional standpoint, because there is a lot of overlap between i2's solutions and solutions from Manugistics," she says. Manugistics was i2's chief rival in the SCM market before it too was acquired by JDA, in 2006. In many ways the strengths of these two companies are complementary, with Manugistics having deep penetration among CPG and retail companies and i2 being more focused on the high-tech and discrete manufacturing sectors. But the difference in their customer bases also raises questions.

"In looking for cost efficiencies, JDA will need to rationalize its product portfolio," notes Tohamy. "I think the question they have to answer, for themselves and for their customers, is whether it is possible to have a single product that meets the supply chain planning needs of consumer goods companies as well as high-tech companies."

Tohamy says JDA has done "a very good job" integrating Manugistics with JDA solutions while still protecting the Manugistics brand. This was made easier by the fact that JDA also has its roots in retail. "Moving up the supply chain from retail-centric solutions to solutions for CPG manufacturers was not such a big leap," Tohamy says. "And JDA succeeded in creating an end-to-end solution for the retail supply chain that includes CPG manufacturers."

i2 has built its customer base in inherently different industries, however. On the one hand, this gives JDA a lot of new market share, but on the other hand it thrusts them into "a very different world with different problems and a different language." For this reason, Tohamy says she hopes JDA will retain all or most of i2's talent.

In the merger announcement, the companies said they plan to cut $20m in costs after the deal is done in the first quarter of 2010, but they did not specifically address job cuts. Dallas-based i2 has 1,172 employees, including about 280 in that area.

Working in JDA's favor is the fact that it has completed a total of 10 acquisitions since 1998. "None was as big as the i2 acquisition, but I think they have learned a lot, particularly from the Manugistics deal," says Tohamy.

The analyst notes that in the year since JDA first tried to buy i2, the companies appear to have come closer together from a cultural standpoint. "i2 brought in Jack Wilson as CEO and he has tried to go back to the basics of running a packaged software company," she says, noting that in recent years i2 had become more of a services company. At the same time, JDA has realized that "doing services right can be very profitable," Tohamy says. The company recently opened a center of excellence in India just for managed services. "It seems as though both companies have seen that the other's approach can work and be profitable," says Tohamy.

The acquisition of i2 turns the market for comprehensive supply chain management into a three-horse race between JDA, Oracle and SAP, Tohamy says. "I expect that SAP and Oracle will continue to argue that they offer better integration and a lower total cost of ownership, while JDA will argue that they are all focused wholly on the supply chain and nothing else - and that they now have the entire supply chain covered."

From a revenue standpoint, SAP is way ahead. "But from the standpoint of specialization and domain expertise, JDA has been strong and will become stronger as result of the i2 acquisition."

- Jean V. Murphy, SupplyChainBrain

Comment on This Article