The websites are swept clean. The messages are honed. The Wikipedia pages are aligned. The E2open marketing machines are spinning. The blogs, social media networks, and pundits are whirring with predictions and accolades. I watch with a bit of amusement, and want to offer a bit of caution.
Let me start with a disclaimer. The Shaman is a curmudgeon. She cannot count the number of SCM software acquisition announcements that promised 1+1=10. In short, this never becomes the reality. Very few software acquisitions reach their potential. The ones that do can be counted on one hand. However, I like this acquisition. It will make E2open more relevant and could accelerate the evolution of a new form of marketplace offering. The supply chain management market is troubled and needs some excitement.
icon-scm was founded in 1992. The product, a licensed offering, was designed to enable a “rapid response” of what-if analysis in material-centric discrete supply chains. The company partnered with SAP to launch a product offering, SAP Supply Chain Response by icon-scm, in 2010. SAP company passed on a thirty-day period of first refusal to acquire the asset allowing the purchase by E2open on July 31st, 2013. This licensed software offering was purchased at slightly under 3X revenues. In 2012, icon-scm had revenues of approximately $10 million. The product was used to improve supply chain decisions in discrete manufacturing companies like Avnet, Hewlett-Packard, Pratt & Whitney, and Western Digital.
Based in Germany, icon-scm and the company leadership team was driven by a very product-based mentality. The company was never good at marketing. The company name is hard to say and for client’s to remember. < I liken it to the Johnny Cash song, A Boy Named Sue. The company was born into the world with a tough name and faced a tough uphill battle. The founders bet the future of the company on the SAP partnership. The results were disappointing for both parties.>
Over the last decade, the German-based company was never able to successfully compete with the more aggressively marketed Kinaxis solution. There was a strong preference in the market for a Software as a Service (SaaS) offering, and Kinaxis was quick to claim that position. SAP’s marketing of icon-scm was one of the most confusing marketing positions in the history of supply chain software. The tension between the SAP sales team to position SAP APO and SAP Supply Chain response by icon-scm was always tough.
With all of this as a preamble, and background, let me share five reasons why I think that you, as a supply chain leader, should care:
- Execution is key. E2open users need to get involved. When the hype settles, it will be all about execution for E2open. With all software acquisitions, there are trade-offs. The E2open client base is a very loyal long-term user base. Now is that time the E2open client base needs to get very involved with E2open management to ensure that product roadmap trade-offs are in their best interest. Act now to avoid a surprise. I expect E2open to continue to acquire additional assets and built a stronger presence in the supply chain market.
- Marketplace offerings are gaining steam. The race is on. A new form of marketplace offering is emerging. The battle lines to build inter-enterprise supply chain solutions are drawn. SAP is betting on the Ariba platform. Elemica, E2open and GT Nexus are improving their solutions, working on aggressive product solution platforms to provide new value. Each has a different, and improved, position to improve value chain network visibility and analytics. My bet is on the evolving best-of-breed provider landscape. <I find it hard to see the value in using the Ariba network that was designed for indirect procurement to seize this market opportunity.>
- Validation of Rapid Response as a market is good news for Kinaxis. The Canadian planning vendor, Kinaxis, pioneered the concepts of Rapid Response early in the decade. They were one of the first SCM vendors to move to a SaaS model. It was a gutsy, but right, move. The company has waged a tough market battle for recognition. The acquisition of icon-scm by E2open now makes them official competitors and validates the space. The building of icon-scm functionality into the E2open platform should be a wake-up call for Kinaxis to move quickly to evolve their strong cloud-based architecture to a one-to-many and many-to-many data model to serve the emerging marketplace opportunity. It is my hope that they get more serious about their relationship with GT Nexus.
- SAP partnerships have less meaning. icon-scm and SAP partnered in 2010. It was a “preferred partner” with formally announced intentions to incorporate the Rapid Response functionality into its supply chain management capabilities as an SAP Solution Extension Partner. The partnership was on the official SAP product roadmap. It drove the buying decisions of many a CIO. While the press will say that SAP will continue to support this application, over time, clients will have to rethink their platforms to migrate to E2open or to embrace Kinaxis. SAP is betting on their new solutions based on the Ariba Network.
- SAP loses momentum to drive value for supply chain leaders. The right acquisition would have been SAP’s acquisition of E2Open and public disclosure that SAP APO and SAP SNC have not lived up to their promise. In my opinion, the SAP teams need to rewrite their applications to meet clients’ needs. They are losing market relevance.