Revamped Supply Chain Vendors Take on ERP Giants

At international user conferences this month, new management teams at supply chain vendors Manugistics Group Inc. and i2 Technologies Inc. are trying hard to win more customers, while steering existing users clear of enterprise resource planning titan SAP AG and a throng of other rivals.

But with lackluster financial performance over the past several quarters and big restructurings now underway, do these two major supply chain companies stand a good chance with CIOs and other IT decision-makers?

The obstacles are hardly insignificant, but these “best-of-breed” supply chain vendors still have a lot going for them from the customer’s perspective, according to industry analysts.

“Manugistics and i2 are kind of caught in the middle,” said Kevin O’Marah, an analyst at AMR Research. “They’re not small enough to sort of fly beneath the radar and do quiet deals, but they’re not large enough to have the heft or staying power of a SAP.”

On the other hand, i2 and Manugistics are each being led by energetic new CEOs, who are attempting to articulate and carry out new visions for their respective companies.

Moreover, IT decision makers recognize that the products of the best-of-breeders remain largely superior to those being turned out by ERP giants such as SAP and Oracle Corp., industry analysts agree.

“If a company is struggling financially, it makes sense for [decision makers] to be uncertain. But it’s a testament to the strength of the solution when the vendor is able to sign up new customers anyway,” said Steve Banker, an analyst at ARC Advisory Group.

At the i2 Planet user conference in Phoenix next week, i2 plans to introduce new solutions in a couple of areas, said Michael McGrath, i2’s recently appointed CEO.

McGrath told that i2’s new offerings will revolve around two areas: supply chain visibility among trading partners and synchronization between supply chains and demand chains.

Meanwhile, at its Envision 2005 user conference in Atlanta this week, Manugistics unveiled new customers that include beverage makers Barton Inc. and Swire Beverages, along with an expanded relationship with CHEP, a global provider of synchronized supply chains.

Click here to read about Manugistics’ new sales pitch to IT buyers.

ARC’s Banker said he spoke with a number of existing customers at the Atlanta show this week who plan to stick with Manugistics for at least the next four or five years.

“A high proportion of these customers are also using SAP, but they’re only using SAP for ERP,” Banker said

“I asked them whether they were worried about [Manugistics’ financial situation]. They told me, ‘We have Manugistics now. If Manugistics is bought by somebody else, that someone is likely to be an aggregator,'” Banker said.

But if Manugistics is indeed acquired by an aggregator, some of these customers might “throw open a search” in a couple of years, according to the ARC analyst. “That’s because aggregators don’t tend to do as much with R&D.”

Yet, he added, Manugistics might have a harder time swaying new customers to make a switch, especially from the less pricey supply chain software offered by ERP players.

Essentially, Manugistics and i2 are each working on returning to profitability by reducing internal costs, while at the same time driving more revenues among both new and existing customers.

Next page: Differences across target markets.

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