We'll caveat this Friday rant on JDA and RedPrairie joining forces in a billion dollar merger with the footnote that our primary coverage area is procurement. We touch on supply chain topics and cover direct materials procurement extensively on our premium research site Spend Matters PRO -- but there are better supply chain analysts who we turn to outside our own Six Sigma walls (even though we have one black belt on payroll) for advice on demand planning, forecasting, S&OP, etc. We know enough to be dangerous and have been involved in implementing and buying these systems in the past, but it's not our main focus day-to-day like procurement and even direct procurement approaches and systems.
Having said this, we must say we're scratching our heads at the combination of JDA and RedPrairie given where the supply chain and procurement marketplace is headed. We can't help but think, at least on first glance, that this is a financially driven roll-up play designed to create a more saleable and packaged asset with more supply chain IP than just about any other vendor on the planet. Yet the problem is that the supply chain universe isn't what it used to be. In today's environment, multi-tier collaboration, scenario planning/forecasting, visibility, demand aggregation, compliance, risk management (including supplier management and GRC) and related areas are taking priority over generalized supply chain investments dating back to the optimization my-solver-is-better-than-your-solver days (or in the case of i2 executives, "my solver is bigger than your solver," but we won't go there...)
Stirring the Supply Chain Solution Pot: "Barney Making Mishmash Soup"
Seriously, think back to the days of i2, Manugistics, Adexa and others duking it out (and Nike blaming a supply chain fiasco – fair or not – on i2). It was a different world. That's the legacy JDA comes from with numerous other assets sprinkled in for good measure. It really was more of a supply chain version of Infor than an innovator like the individual components that made it up used to be. RedPrairie, on the other hand, struck us as far more focused, especially with more recent traction in retail, warehouse management and transportation management rather than trying to be all things to all COOs and operations managers. Combining the IP asset mess that was JDA onto a more focused solution set feels like the i2, Aspect and TradeMatrix days all over again (but without i2's crazy executive team scaling up and down walls at user events and sales training – not to mention other escapades).
Maybe they'll get the roll-up right. But it's clear that they're not paying enough attention to procurement -- including direct or merchandise procurement -- in the combined solution equation. Moreover, RedPrairie, despite having workforce management solutions, does not have strong assets in the contingent workforce management or vendor management system (VMS) space, let alone broader services procurement (yes, even in the warehouse sector, these could be quite useful). Both of these areas would be great to tie into supply chain planning and collaboration, especially in retail, manufacturing and basic materials industries. The sad part is that JDA has lots of legacy procurement assets they could bring to bear, from Hologix attribute matching for supplier capabilities tied to buyer needs (never commercialized by i2 as far as we know) to a catalog content management toolset, to direct procurement, to indirect procurement to sourcing. i2 and Manu had acquired this stuff and it sat on the shelf for years.
So please excuse us for not truly getting the spin in the press release: "To address ever-increasing complexities, manufacturers and retailers increasingly seek best-of-breed solutions and specialized domain expertise for planning and execution. JDA's heritage of pioneering market-leading supply chain planning, merchandising and pricing solutions is a perfect strategic fit with RedPrairie's heritage in warehousing, workforce management, store operations and e-commerce. This unique combination will provide retailers and manufacturers with extraordinary capabilities to meet the needs of hyper-connected, mobile consumers."
I asked my fellow blogger Trevor Miles and he had this to say. Agreeing more with me than the spin, he wrote "Show me one roll-up play that has had both sustainable growth and innovation. Remember when i2 Technologies bought Aspect Development for $9.3B in March 2000? Aspect had some really good stuff, but, as with any acquisition, whether in the software industry or not, if you can't show both an increase in sales due to product synergies (1+1=3) and a decrease in costs due to development efficiencies (1+1=½) the merge is not going to be successful. Remember the $5B write-down of the Aspect purchase by i2 just 18 months later? What all the roll-ups are struggling with right now is that the end user is looking for end-to-end horizontal process capability, and they are not going to get that from a mish-mash of loosely coupled functional modules. With the RedPrairie purchase if JDA I just don't see how they are going to reduce their cost base without a radical reduction in the number of individual modules while at the same time how their combined revenue will increase above that of RedPrairie and JDA right now. They are caught between a rock and a hard place."
We certainly wish RedPrairie the best in making sense of the mass amounts of supply chain IP it will now have at its disposal. Moreover, Joe Juliano, who still runs sales for RedPrairie (and who I used to work with at FreeMarkets back in those crazy B2B days) as far as we know, is an old-school enterprise software sales executive, one of the best I've seen in action even with less than great software products (in the case of FreeMarkets at least). Yet in a supply chain and procurement world that will increasingly value truly integrated solutions, common data models, mobile over desktop interfaces, cloud-native solutions, BI-driven analytics and benchmarking embedded at the core of toolsets, multi-tier visibility, predictive analytics/forecasting and the like, the combined company will more than have their work cut out for them.
Or put another way: will the Workday of supply chain please step up to the plate?
From a contrarian perspective, perhaps a combined vision noted by one supply chain analyst I traded notes, with who did not want to be referenced by name, of "bringing together advanced planning, analytics and supply chain execution into a contiguous product suite or collection of combined capabilities," does represent a credible goal. But the magnitude of such a diversity of loosely coupled assets will make achieving such an integrated vision a challenge. Given our lack of focus examining product depth in the area on a current functional basis, we look forward to sharing additional commentary from others on the JDA and RedPrairie merger in the coming weeks, ideally presenting a range of views on the topic on whether this is possible -- and what it's impact will be on direct procurement and supply chain decisions, including multi-tier planning, forecasting, sourcing, execution and related areas, will be.