Analysts Evaluate JDA/i2 Deal
August 13, 2008 -- Early Monday morning, JDA Software Group Inc. announced the signing of a definitive merger agreement to acquire i2 Technologies Inc., a global provider of supply chain solutions, for an enterprise value of approximately $346 million in cash.
While the company historically focused on the retail industry, JDA Chief Executive Officer Hamish Brewer expects that this latest move -- supported by its 2006 purchase of Manugistics as well as nine other acquisitions in 10 years -- will further strengthen its position in the global manufacturing market for supply chain planning and optimization solutions.
The acquisition expands JDA's addressable market to include discrete manufacturing. The combined company has annual revenues of $635 million from manufacturing, wholesale distribution, retail and services industries.
While Brewer is optimistic, industry experts question the value that the deal will deliver to JDA as well as to the consumer goods market. Here is what members of CGT's Research Advisory Board have to say about the acquisition:
"Manufacturing Insights, an IDC company, is not optimistic that JDA will be able to satisfy the pent up needs of the installed base and, much like its acquisition of Manugistics, will ride out the maintenance stream until customers move on. There is a glimmer of hope that the consolidation of one time market leaders, Manugistics and i2, will provide a viable alternative to the SAP/Oracle duopoly, but JDA will have to show a conviction to spending development dollars to achieve functional parity and marketing dollars to stretch beyond its retail comfort zone." - Simon Ellis, Practice Director, Supply Chain Strategies, Manufacturing Insights, an IDC company
"The roll-up of assets in the supply chain planning market will have little effect on options for the consumer products market. Despite a lot of marketing on penetration of the consumer products market by i2, the only application where the company was able to gain traction was transportation planning. We expect that it will have little effect on these IT investments or the use of these technologies." - Lora Cecere, Research Director, Consumer Products, AMR Research
"On first blush, the acquisition by JDA of i2 Technologies looks like a major exclamation mark that signals the end of an era: Manugistics and i2 tripped up, and erstwhile, competitor JDA jumped in to fill the void. However, this acquisition bodes significantly more risk than the recent Manugistics deal. i2's business model was predicated on the long-term emerging needs of users for "process innovation" whereas JDA and Manugistics were both focused on the broader, mass market needs associated with "process automation." i2 customers will have to consider the following: If you're focused on standardized, repeatable business processes, then expect i2 services to wane, and JDA may even try to convert you to Manugistics (due to high product overlap); if you are focused on unique, configurable, competitive SCM processes, then secure access to i2 IP and services skills, and/or look elsewhere for additional support." - Andrew White, Research VP, Gartner Inc.
While the company historically focused on the retail industry, JDA Chief Executive Officer Hamish Brewer expects that this latest move -- supported by its 2006 purchase of Manugistics as well as nine other acquisitions in 10 years -- will further strengthen its position in the global manufacturing market for supply chain planning and optimization solutions.
The acquisition expands JDA's addressable market to include discrete manufacturing. The combined company has annual revenues of $635 million from manufacturing, wholesale distribution, retail and services industries.
While Brewer is optimistic, industry experts question the value that the deal will deliver to JDA as well as to the consumer goods market. Here is what members of CGT's Research Advisory Board have to say about the acquisition:
"Manufacturing Insights, an IDC company, is not optimistic that JDA will be able to satisfy the pent up needs of the installed base and, much like its acquisition of Manugistics, will ride out the maintenance stream until customers move on. There is a glimmer of hope that the consolidation of one time market leaders, Manugistics and i2, will provide a viable alternative to the SAP/Oracle duopoly, but JDA will have to show a conviction to spending development dollars to achieve functional parity and marketing dollars to stretch beyond its retail comfort zone." - Simon Ellis, Practice Director, Supply Chain Strategies, Manufacturing Insights, an IDC company
"The roll-up of assets in the supply chain planning market will have little effect on options for the consumer products market. Despite a lot of marketing on penetration of the consumer products market by i2, the only application where the company was able to gain traction was transportation planning. We expect that it will have little effect on these IT investments or the use of these technologies." - Lora Cecere, Research Director, Consumer Products, AMR Research
"On first blush, the acquisition by JDA of i2 Technologies looks like a major exclamation mark that signals the end of an era: Manugistics and i2 tripped up, and erstwhile, competitor JDA jumped in to fill the void. However, this acquisition bodes significantly more risk than the recent Manugistics deal. i2's business model was predicated on the long-term emerging needs of users for "process innovation" whereas JDA and Manugistics were both focused on the broader, mass market needs associated with "process automation." i2 customers will have to consider the following: If you're focused on standardized, repeatable business processes, then expect i2 services to wane, and JDA may even try to convert you to Manugistics (due to high product overlap); if you are focused on unique, configurable, competitive SCM processes, then secure access to i2 IP and services skills, and/or look elsewhere for additional support." - Andrew White, Research VP, Gartner Inc.
"JDA has regularly added complementary and, at times, overlapping solutions through its 11 acquisitions over the last decade. It has shown that consolidation within the retail and consumer goods solution area can deliver license revenue growth as well as ever increasing maintenance streams. The common focus on J2EE technology-based solutions should help to simplify the integration of the technologies on a common foundation, however, it remains to be seen just how many cross-selling opportunities will exist given that there is significant overlap with existing JDA solutions. Expanding successfully from JDA's home territory of retail and consumer goods into new sectors such as i2's long-term focus areas of high tech and electronics will be a challenge. It will be interesting to see to what extent JDA will continue to invest in building out solutions for these new discrete manufacturing customers. What JDA may want to focus on next is how to also grow demand generation capabilities for its core retail and consumer goods target sector, through investing further in application areas such as trade promotion management and promotion optimization." - Peter Bambridge, Research Director, Manufacturing IAS, Gartner Industry Advisory Services