Yesterday, RedPrairie announced that it would acquire JDA Software in a transaction valued at approximately $1.9 billion. I had a chance to ask the CEOs of both companies what the impact might be for companies that use their applications.
Unlike other acquisitions in recent years, where companies gobbled up weaker competitors in the same space, Commonwealth believes that this merger is a true game changer. The resulting entity will be something the industry hasn’t seen before: a “super best-of-breed” software provider pairing JDA’s expertise in supply chain planning, merchandising, and pricing with RedPrairie’s supply chain execution strengths: warehouse management and store operations.
Companies with physical supply chains have been struggling for decades to reconcile the CIO’s desire for technology uniformity with the COO’s needs for functional operations applications. The two camps have always had a hard time compromising. Top ERP companies have not had supply chain execution applications that can compete with the top best-of-breed products, but the best-of-breed world has been so fragmented that users have had to patch together multiple applications to achieve complete functionality. Applications like supply chain planning, warehouse management, transportation management, and store operations all had to be purchased from different providers and integrated back to an ERP system.
Two forces have begun to transform this picture. To begin with, top ERP providers Oracle and SAP have been improving the features and functionality of their supply chain execution systems, notably in areas like warehouse management and transportation management. At the same time, best-of-breed providers JDA and RedPrairie began to acquire companies to complement their core offerings, a process which culminated in yesterday’s announcement. Will the new mega-company be able to satisfy a CIO’s desire for uniformity in technology? Or will the various applications be uniform in name only, with numerous different technology platforms that require extensive integration on the part of the users?
I had a chance to ask the CEOs of both companies that question in a press conference this morning. Hamish Brewer, president and CEO of JDA (who has been tapped to lead the new company after the merger), said in no uncertain terms that the company plans to migrate as many applications as possible onto a common platform. Mr. Brewer described the company’s intention offer a “best-of-suite” application with a manageable interface back to an ERP system. JDA has grown extensively through acquisition in the last six years. Mr. Brewer highlighted the fact that a new release, due out in Q2 of 2013, will bring 11 of the 17 JDA solution areas under one technology platform. If this trend can be continued, it certainly bodes well for the company.
Michael Mayoras, CEO of RedPrairie, pointed out that “supply chain applications have to move at a different velocity than the rest of the company.” These applications must be more nimble and responsive to changes in real-time. Commonwealth believes that RedPrairie should be able to present itself as a credible third option to the ERP vs. fragmented best-of-breed debate: a “super best-of-breed” that can manage the entire supply chain with a single interface back to the ERP.
What this will mean:
- Retailers stand to gain the most. Many of them are already using JDA applications for demand planning, merchandising, and store replenishment. These applications would, in theory, be much more closely linked with execution applications like warehouse management, transportation management, and store operations for greater responsiveness to changes in the demand plan.
- Manufacturers, wholesalers, and 3PLs will benefit from having the option to use world-class warehouse management and global transportation management systems from the same company – somewhat of a first in the industry. Tighter integration between these applications can improve distributed order management and sourcing decisions.
- Today’s generation of CIOs – already gun-shy from multiple platform replacement projects, may now feel more comfortable about venturing down the best-of-breed path if the resulting footprint will be simpler and easier to maintain.
- Oracle and SAP – the dominant ERP providers – now have some hard choices to make. Will they continue on their present course of improving their own supply chain execution applications – a slow process by most measures – or will they decide to make an acquisition of their own to compete with RedPrairie?
- Manhattan Associates, RedPrairie’s top competitor in the supply chain execution world, is the most likely target of such an acquisition. Manhattan has developed leading warehouse management and transportation management applications that are heavily used within the Fortune 500 community. Despite the continued dominance of these products, Manhattan may find it harder to compete with a company with a wider set of planning and retail offerings. A merger between Manhattan and a top ERP provider would present a credible reply to the new RedPrairie/JDA conglomerate.
Commonwealth Supply Chain Advisors will eagerly follow the responses of SAP, Oracle, and Manhattan Associates as they determine the best strategy to compete with the new entity.
Commonwealth Supply Chain Advisors (www.commonwealth-sca.com) is a supply chain consulting firm that does not re-sell or maintain formal relationships with any software providers. Commonwealth is an objective advisor to numerous Fortune 500 companies as they select and implement supply chain technology solutions. Commonwealth regularly publishes research on topics such as WMS selection, WMS implementation, TMS selection, and supply chain network optimization.