On August 11, 2008 JDA and I2 announced a merger agreement
with JDA acquiring I2 for $346 million in cash. Back in 2006 when JDA acquired
Manugistics, Forrester recommended that Manugistics’ transportation clients be cautiously
optimistic, demand management clients expect turbulence, and price optimization
clients enjoy the best of both worlds. Two years later, longtime SCM BoB rival
i2 finds itself in the same seat as JDA’s 11th acquisition in 10 years — a
move that marks the end of the original I2, Numetrix, and Manugistics
triumvirate that first brought to the enterprise market the concept of advanced
planning and optimization. JDA CEO Hamish Brewer explained that JDA expected
the acquisition to yield vertical market synergies, technology synergies, and
more opportunities in the SMB market. On
first blush, we’re a bit skeptical. Here why:
- Vertical market synergies? The customer bases of the two firms are relatively mutually exclusive — for good reason. While the deal grows JDA’s customer footprint, cross-selling opportunities and other market synergies between the segments look to be minimal. In addition JDA must rationalize duplicated offerings in domain such as demand management and TMS.
- Technology synergies? Brewer stressed that I2 like Manugistics had developed to a J2EE standard for reasons of scalability and that marrying these powerful engines to JDA’s front end .NET expertise would yield opportunities to simplify and democratize sophisticated supply chain planning apps. But improved UI is only one element of democratization and simplification. An alternative would be to leverage the significant technology investment i2 has made in its flexible ABPP platform to provide JDA with a much needed architecture update.
- More opportunities in the SMB market? JDA believes that its experience in packaging Manugistics for out of the box deployment in smaller and medium sized firms could be applied to offer I2 functionality to SMB discrete manufacturers. But even if it could squeeze I2’s legendary complexity into a box, JDA would face stiff competition SMB manufacturing supply chain app market from fellow-assimilators like Infor with its Mercia SCP and NxTrend Tech acquisitions and Lawson with Intentia’s supply chain planning.
Overall, the announcement doesn’t exactly come as a
surprise. Despite returning to profitability at the end of 2005,
the strength of i2’s financials remained poor. I2’s revenues fell from just
under $337 million in 2005 to just under $280 million in 2006, and $260 million
in 2007. During the same time period, gross profit declined from almost $217
million to just over $1143million. So frankly this smells more like an
opportunistic acquisition that made sense financially.
Expect much more from Forrester on this acquisition as we
more details are hammered out regarding product rationalization, development,
and support. In the meantime, here’s our
initial advice for i2 customers:
- Retailers should sit tight. I2 and JDA had at least 30 retail customers in common. We expect that the combined company will build on the success of I2 for example in deploying its solution to accelerate J C Penney’s private label product lifecycle, in delivering superior assortment planning to retailers like Gap and Payless and most importantly on I2s retail meta data model helping retailers to separate data from processes, to manage their typical best of breed portfolios and to implement sophisticated price and merchandise optimization without the trauma of replacing all their apps with ERP.
- Manufacturers should expect turbulence. If JDA redevelops a simpler I2 manufacturing portfolio to be deployed out of the box existing users must ask what will happen to the resources to support and extend their applications. In the meantime, i2’s many customers who leverage niche, less profitable product lines (i.e. service parts planning) should start looking for new solutions.
As always, we’d love to hear what you think. Send us your
thoughts, concerns, and questions regarding this announcement (and our initial
take) so we can incorporate and address them in future research.
George Lawrie, Principal Analyst
Business Process & Applications