logility

Good-bye to the Breakfast Club

by Lora Cecere on March 24, 2010 · 2 comments

We met for five years at the Wyndham Hotel on Broad Street in Boston.  It was usually for breakfast. My calendar was so full that it allowed very little face-to-face meeting time with a struggling start-up like Optiant; but since I have a passion to help start-ups, I rolled out of bed early for the breakfast club.

The group, due to turnover, was never the same.  The names changed—Jonathan, Sean, Matt, Rajb, and Jim came to the table at different times – but, the topics were constant.  We talked about the market, founder aspirations, and potential exit strategies.  For awhile, it was like musical chairs, but on Monday, March 22, 2010, the music stopped, and the exit strategy became clear.  Optiant was purchased by Logility for 3.3 Million dollars.  The company sold for a low multiple and the founders, unlike those at its competitor LogicTools, received very little financial reward for their efforts.

It is a case study of a flawed software start-up.  What can we learn?  Three thoughts come to mind.

Three Lessons

Not about a Good Product.  I have visited the Optiant implementations at HP and Procter Gamble.  They are world class.  The software worked.  Optiant had a good product.   The results were compelling: 30-50% reduction in working capital and a 5-10% improvement in service levels. Sadly, success in software start-ups has little to do with the product. 

The company started off on bad footing –leadership and financial sisues– that never allowed it to get on its feet.  Leadership, sales and marketing issues abounded.  At the end, the board was more interested in an exit strategy and recouping some of the investment than improving supply chain value. The sale to Logility removes the financial viability shadow from Optiant’s battered past and allows a good product to survive.  To be successful, Logility will have to leverage its sales and financial capabilities (which continue to impress me) without squashing the innovator’s spirit.

A Missionary Sell needs a Missionary.  In many ways, Optiant was a solution looking for a buyer.  The solution was ahead of its time.  When the company started, inventory configuration –analyzing the right form and function of inventory and optimizing push pull boundaries—was new.  It was a missionary sell.  Unfortunately, the company was never able to find the right voice to convince buyers to try a new approach.  For success, the company needed to find the equivalent of Ken Sharma of i2 Technologies, David Semchi-Levi previously of LogicTools or Shridar Tayur at SmartOps.  They needed someone with enough passion and conviction to help a buyer try a new approach.   They never found it.  To make this successful, Logility will need to find one.

Market needs to be Big Enough.   Inventory optimization is too small to be a stand-alone market.  The primary driver of the inventory optimization market is the lack of functionality in the ERP supply chain planning suites.  Simply put: companies struggling with new ERP implementations and million dollar implementations were unwilling to ask for new funds to improve what they had asked their boards to implement.  Optiant found itself in a small, but competitive market. They were never able to achieve the SAP partnership status of their competitors and there were just too few of these companies to buy.  This will not be an issue for Logility.  They have a loyal and mature installed base.  The company can sell it successfully into its base.

 What now?

This solution will be available in the Logility Voyager 8 product.  The question is will the two cultures find the right blend?  Will Logility be able to retain and appreciate the deep optimization and innovation background of the Optiant’s founders? And will the Optiant founders be able to appreciate the sales and financial leadership that they were so sorely lacking?  It will no longer be about improving SAP and Oracle implementations; instead, it will be about taking Logility to the next level.  Will the Optiant founders have the stomach to do this?  What do you think? Do you think that they will be successful?

Let me know what you think.  The Supply Chain Shaman is off to India this week. Look for more postings on my travels.

Some Flowers may be Perennials

by Lora Cecere on February 23, 2010 · 0 comments

I am a gardener. I love to spend Saturday afternoons with my shovel and trowel.  Having a neighbor stop by to comment on its beauty, gives me pleasure. To get the accolades, I need to have the right mix of annuals and perennials.  Annuals have bigger, brighter flowers, but they only last a season.  Perennials have less flair, but are the dependable contributors season after season.  It dawned on me this week, that my garden has some parallels with the  Supply Chain Management (SCM) market.  My recent post, Where have all the Flowers gone?, I describe the brightly blooming software start-ups that could not last the season.  In this post, I want to celebrate the companies, that like perennials, have lived to see the new season.   

What do Kinaxis, Logility, WAM Systems have in common? Despite turbulence in the SCM market, over the past fifteen years, they have achieved growth and profitability.  They are small.  They are not headline news, but each is thriving and will see the new season.

What can we learn?

Why did these three companies survive when over fifty competitors succumbed to less than optimal take-over strategies? I offer three thoughts:  

  •  Solve an industry-specific problem.  Focus on serving this user group. Don’t stray.  Each of the suvivors focused on solving an industry-specific problem. Kinaxis for high-tech, Logility for consumer products and WAM Systems in the chemical market.   They have focused on serving their user group through networking, conferences, and steering committees. For companies that spun out of control, a common characteristic was trying to serve to wide of a market.  Let’s face it.  SCM is industry-specific.  When a company’s focus strays to beating competitors versus serving customers, the game will soon be over.
  • Over-hyping leads to under-delivering.  Each has stayed the course.  While their roadmap’s are not the most exciting and don’t garner the highest rankings on analyst frameworks like Forrester’s Wave Diagram, or Gartner’s Magic Quadrant, they have provided consistent, reliable solutions for their target market. While these high-flyers pander to analyst community, Line-of-Business buyers are less willing today to buy promises.
  • It’s the balance sheet stupid.  Revenue recognition issues put AspenTech, i2 Technologies, and Manugistics into uncontrolled tailspins. A healthy balance sheet is necessary to survive the season.

 What do Ortec, OM Partners, ModelN, Terra Technology, Retail Solutions, SmartOps have in common? They are promising, and relatively recent newcomers (since the e-commerce bubble) to the SCM market.  Each is adding their version of market innovation.  However, the jury is still out on whether they are perennials or annuals. What do you think?

The jury is still out on whether the 40% of the market that has been acquired by existing entities will be milked for their maintenance stream or melded into a new solution to help supply chain leaders drive value.  Follow my blog to get the latest news and updates on what this market coalescence means for  you.