SCDigest editorial staff

The News: Manugistics agreed this week to be acquired by JDA, a software company focused on retail applications. Manugustics was a pioneer in the supply chain planning software market and one of the most prominent solution providers in the industry, but had experienced financial challenges for several years.

The Impact: The move is yet another in the steady stream of supply chain software industry mergers and acquisitions, as slower overall market growth and changing customer buying patterns put financial pressure on many providers. The deal brings some great potential synergies for the retail industry customers of both companies. The big question for the hundreds of Manugistics customers is whether under its new owner the company will continue to invest in its solutions outside of retail-related markets, such as consumer goods, government, aerospace/defense, and hospitality/travel.

The Story: Manugistics, a true pioneer in the area of supply chain planning software and for many years among the most influential and successful firms in the industry, announced this week it is being acquired by JDA, primarily a provider of software solutions for the retail industry.

While the timing of the news and the name of the acquiring company came as small surprises, that “Manu” was being acquired did not. It had been struggling financially for several years, had a large amount of debt coming due, and in 2004 brought in a CEO, Joe Cowen, with a history of orchestrating the sale of financially struggling software firms.

Manugistics has hundreds of customers, including many of the world’s most prominent corporations. Customers include Hershey Foods, Federated Stores, Kraft, ConAgra, Unilever, Campbell Soup, Avon, Limited Brands, Staples, Sears, Black and Decker, Goodyear Tire, and many others. It had also perhaps the industry’s greatest success in selling supply chain software to the U.S. government, though that market proved especially unpredictable. Manugistics’ has also been feeling pressure in recent years in its core consumer goods market from SAP’s supply chain products.

A looming question stemming from the deal is whether under JDA the Manugistics solutions will continue to support non-retail industry. The JDA press release affirmed support for other industries, saying “Manugistics brings advanced new optimization solutions to JDA’s retail customers and substantially expands JDA’s presence with consumer goods manufacturers and wholesalers.”

But whether JDA will in the end support non-retail market’s is “the hot question,” says Andrew White, a Vice President in Gartner’s Supply Chain Management research group. “It is unlikely JDA will keep the current Manugistics product focus as is,” he added. “There are some obvious complementary products for the JDA retail strategy, such as Transportation Management, Price Optimization, and Inventory Policy Optimization; yet there are some glaring overlaps with Manugistics’ Demand and Supply Planning, and Collaborate products,” White said.

Is JDA likely to support non-retail industries? “There are non-core areas involved, such as Government, aerospace and defense, and production planning and scheduling,” White also told Supply Chain Digest. “JDA does also sell into distribution and Consumer Goods companies, and so there is a runway here for JDA to figure out what to use and exploit. JDA has some pretty tough choices ahead – and they need to be made soon if they are to satisfy their own financial objectives related to this deal.”

Continuing the trend of Supply Chain software companies “bulking up,” the combination of JDA and Manugistics will result in a company that based on current combined revenues would have nearly $400 million in annual sales.

While Manugistics made some missteps over the years, it was severely impacted from the overall technology recession in 2001-2002, a time when fellow planning company i2 also suffered a significant downturn. While it had moved to approximately break-even performance in recent quarters after some significant cost-cutting, it struggled to generate revenue growth.

With supply chain software provider i2 recently showing improved financial results, Gartner’s White believes there is still lots of opportunity for both providers of supply chain planning technology and the companies they serve.

“The Supply Chain Planning market remains stable with some signs of growth in certain areas,” White told SCDigest. “This is a sign that there is value to yet to exploit.”

What is your opinion of the acquisition of Manugistics by JDA? Do you think the consolidation of supply chain software industry companies is a good or bad thing for end users? Why? Let us know your thoughts.