Where have all the Flowers Gone?

Where have all the flowers gone? Long time passing
Where have all the flowers gone? Long time ago

On January 28, 2010, JDA completed the acquisition of i2 Technologies for $604 Million in cash and stock. It was 2.5 times revenue.  Fourteen years earlier, in 1996, Red Pepper sold for $225 Million or 24 times revenue.  In my opinion, these were the low and high water marks for the industry.  i2 Technologies, once the source for innovation, sold for 1/10th the multiple of Red Prairie the early industry darling.

Over a cup of coffee on a beach in the Caribbean, I quickly jotted down the names of over fifty supply chain management companies that have come and gone between these two watermarks. Want to go down memory lane with me? Think back to the names that used to dot the headlines. Names like Avyx, Aspect Development, Blue Agave, Click Commerce, Demantra, Demand Solutions, E3, Evant, GLOG, ILOG, Intentia, Logistics.com, Logictools, Manugistics, Marcam, Mercia, Nistevo, Numetrix, PartMiner, Prescient, ProMira, Red Pepper, Retek, Rightworks, SSA Global, Spaceworks, Synquest, SupplyWorks, STG Holdings, SYNCRA, Talus, Thinque Systems, Thruput, Western Digital, V3, Vigilance are now reserved for the pages of history. Where did they go? 40% were rolled-up into ERP portfolios and the rest were swallowed up by the then leaders of SCM.

Market consolidation happens in every industry.  In the first half of the twentieth century, there were two thousand automotive companies; and in the period of 1991-1939, there were two hundred airplane manufacturers. Today, in either industry, you can now count them on one hand. There is a cycle.  Innovation is followed by consolidation. And, so it is in SCM technology market. 

Who would have ever predicted that the arch enemies of i2 Technologies and Manugistics would consolidate in a roll-up of JDA? Or that i2 Technologies, the industry darling, would sell for 2.4X earnings.

Were have all the flowers gone? They are long time passing. Market consolidation is seldom good  news for software users. As I throw my wadded napkin (with all of the past supply chain technology names scribbled across it) into the trash, I think that it is time for a new era in supply chain management.  What do you think?

8 Comments

  • Lori Schafer says:

    Laura, I agree its time for a new era and its coming. And I don’t think it will be dominated by SAP, Oracle, IBM, JDA or like ERP type of players. Since the development of the software used by all of these companies to reach their peak, the technology industry has undergone disruptive changes – the internet, distributed architecture, cloud computing, mobile, social collaboration…. As with most technology consolidations and disruptive changes – they give way to new startups, new innovations and a better way for the future.

    • Lora Cecere loracecere says:

      Lori
      I could not agree more.
      The start-ups are starting.
      The buyer finally realizes that innovation will come from new players.
      Have a good day.

  • Karthik Mani says:

    Lora:
    Is it time to say that the solutions in the market are good enough to solve the broadly applicable supply chain challenges? If that is the case, then it points to three things.
    (a) There is innovation from technology side. For example, SaaS as a delivery model. Can that produce a Salesforce.com for supply chain? I doubt it.
    (b) If not trying to disrupt using new technology, new players in supply chain are going to be more specialized and are going to be consultng heavy because of the complexity needed for solving the tougher problems. They are going to grow only to a small size because the market is smaller for that special solutions and the scarcity of very good consulting resources.
    (c) Also, the next big innovations are going to come from looking at the problem more holistically – across supply chain and other major processes with in the organization like product innovation, financial planning etc.

    Yes, it is time for the new era. But is it going to be 2.4x revenue era or 24x revenue multiple era? How long is that era going to take to develop?

    Karthik

    • Lora Cecere loracecere says:

      Hi Karthik

      I agree that we defined the problem too narrowly.
      It is time for redefinition.
      I see SaaS solutions evolving; albeit, to solve the problem differently.
      I do think that we will see targeted SaaS solutions evolve, but probably with exit strategy multiples of 4-8X revenues.
      I think 2010 is the start of the new era.

  • Bobby Miller says:

    Totally agree. I remember Blue Agave, Numetrex and other names like Red Pepper. I believe that the next wave of innovation will focus on REAL collaboration such as truly sharing transportation, collaborative warehousing, city distribution. Information sharing like we’re doing in this blog will become the way CP companies will do business. Example: There’s no competitive value to being on a seperate truck, the end customer could care less.

    Best regards!

  • Larry Layden says:

    Hi Lora,… great article. It is interesting how the high value technologies of yester year were defined as innovation, but actually ended up obtrusive technologies that were really “next generation” or “extending the supply chain” solutions. The new Supply Chain Management leaders truly understand the real needs of the supply chain customers (internal and external) and thus, develop deep innovative solutions that go to the core. These solutions are not “rip and replace” disruptive technologies but actually leverage the current transaction systems to improve operational performance around 50%.

  • Jay Nearnberg says:

    Hi Lora – Wow, its been a long time since I thought about all those innovators! I was once very optimistic that they would make a big difference for users! Not!

    Here’s an idea for another article: case studies in what happened to these companies when they were gobbled up. Did all the brainpower leave? Were their innovations incorporated into their acquirer, or were they just lost?
    I hope we are on a new path of innovation!
    Regards!

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