The News: Supply chain software vendor i2 acquires the assets of RiverOne, an ecommerce and collaboration software provider for the contract electronics market.

The Impact: The deal highlights four key supply chain software market themes: continued consolidation, emergence of the on-demand model, focus on multi-tier optimization, and i2’s continued recovery.

The Story: Supply chain software vendor i2 announced this week it has acquired the assets of RiverOne, primarily an on-demand provider of software solutions that offer visibility, ecommerce and collaboration capabilities to the contract manufacturing market.

What attracted i2 was both the multi-tier nature of the functionality, and RiverOne’s customer base, said CEO Mike McGrath in an interview with Supply Chain Digest.

“It’s the multi-tier nature that’s really different,” McGrath said. “Our current products can do some of that, but RiverOne has a number of live, satisfied customers.”

Multi-tier visibility or collaboration means the “channel master,” and perhaps other supply chain participants, can collaborate and have visibility beyond their direct trading partner relations. So, for example, an electronics OEM can see the purchase commitments and delivery status of the components purchased from suppliers by its contract manufacturer.

“That would be a three-tier scenario,” McGrath told us. “In theory it could be n-tier, or unlimited.”

Dell and other electronics companies have been building such capabilities for several years, though it is far from universal, and still relatively immature in its application even in most companies embracing a multi-tier solution.

“We believe collaboration is still very immature in the marketplace, but will be an essential element of next generation supply chain,” said McGrath.

While the RiverOne solution has been targeted primarily to the electronics and contract manufacturing market, supply chain changes in other industries, such as offshoring and outsourcing, means these kinds of capabilities likely will also be of value there.

“We just had a planning meeting on that this morning,” McGrath told SCDigest. “While the first job will be to take care of current customers, we believe this does have applicability in other markets, especially consumer goods and retail.”

Acquiring just the assets (software, intellectual property, etc.) means i2 will have to re-sign existing RiverOne customers and hire RiverOne employees. “We’ve had a lot of success on both counts in the last 2 days,” McGrath said.

i2’s acquisition also highlights four broad trends impacting the supply chain software market:

• As the software market matures, larger companies look to gain customers through acquisition, and smaller companies have trouble getting critical mass, as the spate of deals in the last 18 months indicates. You can expect more to follow.
• Growth of the on-demand model: while still not a major force, many observes believe the hosted or on-demand model is software’s future. IBM, for example, is investing heavily in this area. “In some ways, this multi-tier, on-demand model is an extension of what the exchanges were trying to do, but which never really took off,” McGrath said. “But I think it will turn out there is value in the architectural model of the exchanges, if not the business model.”
• Focus on multi-tier: From visibility to inventory planning and deployment, one of the few “hot” areas of supply chain software in the past few years have been solutions that tackle the multi-tier/echelon problem.
• i2’s continued recovery. The once high-flying company stumbled badly at the end of the technology bubble, but under McGrath has now achieved three consecutive profitable quarters and dramatically improved its balance sheet. Once a frequent acquirer, RiverOne “is the first acquisition for i2 in several years,” noted McGrath.

Do you believe the on-demand model will continue to gain strength? How important in your industry is “multi-echelon/multi-tier” collaboration and visibility? Let us know your thoughts.

Related stories:

Software Vendor Merger Mania

On-Demand Logistics

Article key words: Supply chain software, on-demand software