Supply Chain Shaman

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My Take: LLamasoft Buys Barloworld Supply Chain Software

Today LLamasoft announced the acquisition of the Barloworld CAST and Optimiza assets for an undisclosed sum of money. This announcement closely follows the September 29th press release about $50 million Series B financing with affiliates of Goldman Sachs & Co.  This is LLamasoft’s second acquisition within a year. (LLamasoft acquired the LogicTools assets from IBM in the spring of 2015.) Here I pen a quick post on what I think this means for the market.
First let me start with congratulations for the LLamsoft team. As an analyst in the battered supply chain software market for a decade, it is fun to watch you grow. I just hope that as you evolve you never forget your roots. Clients buy your software because you make it real. Your history of deep expertise and customer care drove historic growth. It is synonymous with the LLamasoft brand. This is a great asset: nurture it through the change. Your acquisitions are both an opportunity and a risk.
For those who are new to reading the Supply Chain Shaman blog, let me begin my analysis with a disclaimer. I always start the discussion of all software acquisitions with the same statement: the acquisition of software is seldom a good deal for the buyer/user of software. The outcomes are usually based on the goals/strategy of the acquiring company. As a result, companies using the software being acquired should use caution and stay close to the acquiring leadership team. It usually takes a software company a year to stabilize the software assets and finalize product development schedules. This is my experience with all software acquisitions and I expect this acquisition to be no different.
This acquisition is deeply rooted in LLamasoft’s goal to dominate the network design market. The current company is stronger in North America than Europe. Barloworld, a South African software provider, was attempting to enter the North American market. The acquisition helps both companies to expand their global presence. I feel there will be three impacts of this acquisition.
Impact #1. LLamasoft Is Aggressively Aggregating Network Design Software Assets. The Cast, LogicTools and LLamasoft Guru products are now aggregated under common ownership. LLamasoft is pushing for dominance in the network design optimization software market. Barloworld CAST is a strong product to design last-mile delivery: a critical element for e-commerce and home delivery. The CAST product has been largely undervalued in the market.
LLamasoft’s goal is to become the industry standard. The largest competition in the network design market, and one of the last products left following this acquisition, is JDA  Strategist. 
Ishutterstock_294276209mpact #2. Growth: Eye on Global Expansion. Historically, LLamasoft, a Michigan-based North American company, has lacked a presence on the European continent. The purchase of Barloworld gives LLamasoft a strong presence in the United Kingdom, and a team on the European continent. With new sales leadership, with the addition of Dale Erker and Robert McFarland (prior experiences selling software at IBM, JDA, Manugistics and SAP), I expect LLamasoft to become much more aggressive in selling network design capabilities to the global multinational.
Impact #3. The Acquisition Is a Mixed Bag for the Inventory Management Market. While this acquisition rolls up assets across three planning horizons in the inventory optimization market, I think the impact of this acquisition is less clear on the future of the inventory optimization market than for the network design software market. Why? I have three primary concerns:

  1. Software Capabilities Are Evolving. Barloworld Optimiza is primarily a replenishment product that evolved over the past year. While Barloworld has 150 clients, most of them are replenishment clients focused on operational planning versus inventory optimization in the tactical planning horizon for form and function of inventory. The LogicTools product was stronger in the delivery of network design than inventory optimization.  Both inventory products are in transition, and LLamasoft is stronger at the development of network design technologies than inventory optimization. 
  2. Understanding of Enterprise Architectures. Historically, LLamasoft has been slow to build and deploy an enterprise-class architecture with robust API structures to enable continuous inventory optimization with deep integration with Enterprise Resource Planning (ERP) architectures. I see no evidence of LLamasoft closing this gap. The Barloworld acquisition will pull LLamasoft deeper into the supply chain planning and optimization market, and there will be greater pressure for LLamasoft to step up to the plate to close this gap. 
  3. Market Confusion. LLamasoft’s current market positioning with the GURU inventory product and the LogicTools product is confusing to clients, and this will add complexity. For the next year expect a muddled message. Why? LLamasoft has few employees with a deep understanding of inventory optimization and tactical supply chain planning. Until the architectures become more robust, and LLamasoft invests in industry experts, I expect little impact on the inventory optimization market which is largely dominated by JDA, Logility, SAP, ToolsGroup and Terra Technology. (To understand more on the inventory optimization market checkout our report, Inventory Optimization Solutions in a Market-Driven World.)

Selecting an inventory optimization software solution is complex. Here are five recent relevant posts that can add clarity:

In summary, LLamasoft will dominate the network design market. However, network design software is a small market which requires a mature and sophisticated user. This is a limitation. LLamasoft is maturing network design code faster than the users in the market can accept and use the product. I believe the purchase of the optimization software assets is the first step in LLamasoft entering the larger supply chain planning market. LLamasoft’s success, if they chose to go in this direction, will be largely driven by their ability to build enterprise-class architectures and hiring experts in tactical and operational planning.
LLamasoft, a small player in the supply chain technology market, is growing up. This transformation is and will be a major culture shift for the GURUs.
These are my thoughts on a Tuesday morning over a cup of coffee. I would love to hear from you. What do you think this means for the market?
For more, join in the discussion on inventory management at Beet Fusion!
BeetFusion_Logo_FINALTwo weeks ago we launched our new community, Beet Fusion. Within ten days of launch, over 470 supply chain leaders joined the community. Our goal is for Beet Fusion to have the features of LinkedIn, Monster, Yelp, and Facebook for the Supply Chain Community. Why the name Beet Fusion? Simply put, our goal is for it to become the Superfood for the supply chain. 
The community is currently in Open Beta. So when you join, try to stress test the community and let us know your suggestions and concerns. Be patient. It will take us time to work out the issues. To drive improvements, we also would love your feedback in the Beta Tester’s forum.
About the Author:
Tinus70Lora Cecere is the Founder of Supply Chain Insights. She is trying to redefine the industry analyst model to make it friendlier and more useful for supply chain leaders. Lora wrote the books Supply Chain Metrics That Matter and Bricks Matter, and is working on her third book, Leadership Matters. As a frequent contributor of supply chain content to the industry, Lora writes by-line monthly columns for SCM Quarterly, Consumer Goods Technology, Supply Chain Movement and Supply Chain Brain. She also actively blogs on her Supply Chain Insights website, for Linkedin, and for Forbes. When not writing or running her company, Lora is training for a triathlon, taking classes for her DBA degree in research at Temple, or knitting and quilting for her new granddaughter. In between writing and training, Lora is actively doing tendu (s) and Dégagé (s) to dome her feet for pointe work at the ballet barre. She thinks that we are never too old to learn or to push an organization harder to improve performance.

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