|
A few developments in the market have got me thinking about the Transportation Management Systems (TMS) market, and how that impacts shippers, at a time when transportation has never been more important and challenging.
The significant consolidation that is occurring in the supply chain software market is hitting the TMS market substantially. Actually, it seems like the history of the TMS market is one of “specialists” in transportation getting purchased by larger software companies needing to fill a transportation gap.
Sorry for a bit of history, but there was another wave of TMS-related acquisitions in the late 1990s, as i2 purchased ITLS, Optum (now part of Click Commerce) purchased Metasys (a move that never worked out) and McHugh (now RedPrairie) purchased Weseley. (There will be a quiz in the morning!)
It’s been happening again. Just last week, one of the current major TMS providers, Manugistics, announced it was being acquire by JDA. That follows Oracle’s acquisition last year of GLOG. A few years back, Manhattan Associates had acquired Logistics.com, SSA purchased Arzoon, and Descartes the same with Centricity.
What’s happening, and should you care? First, the nature of software vendors today is to grow the company to the point where it can be sold and pay off the VCs and the founders – that’s just the way it is. Second, as Adrian Gonzalez, an analyst at ARC Research and friend of SCDigest, told me last week, companies are looking to better integrate transportation processes – and hence TMS capabilities – into their supply chains. That means there is more perceived value in TMS as part of an integrated suite.
“Companies want to develop more integrated logistics processes, and the suite vendors are pitching it that way,” Gonzales told me (see 10 Trends in TMS story in News and Views). “It makes it harder to be a ‘stand-alone’ TMS provider.”
At the same time as this is happening, transportation is in fact viewed as increasingly strategic in the supply chain. Combined with the rising pressures in cost and the capacity shortage, it would seem to put a premium on having strong transportation technology.
Except that a surprising number of companies – even big, great supply chain companies – do not have great capabilities. Gonzalez told me he continues to be “surprised at the number of really big shippers that have pretty mediocre TMS technology.”
Razat Gaurav, VP of i2’s transportation and logistics group, echoed a similar theme in a conversation this week. “We’re working right now with a company with several hundred million dollars in freight spend that really has very little transportation technology,” he told me. Interestingly, he also noted there is also a parallel wave of “second time” purchasers that are taking the technology evaluation down to a very deep level, based on experience.
So, if you are keeping score at home, right now you have a TMS market that looks something like this:
- WMS/Supply Chain Execution Vendors with TMS: Manhattan, RedPrairie, HighJump, Catalyst, Irista, Descartes
- Supply Chain Planning: i2, Logility, JDA thru Manugistics (note: Manhattan is also now in the planning area)
- ERP Vendors: SAP (homegrown), Oracle (GLOG), SSA (Arzoon)
- Stand alone TMS (partial list): Lean Logistics, Nistevo, GT Nexus, Shipper’s Commonwealth, Mercury Gate, Best Transport
- Specialists: Kewill (mostly parcel), and a number of others in areas like routing and scheduling, fleet management, etc.
-
I’m sure I’ve left someone players out. If that includes your company, let me know.
So, what’s the takeaway?
- In the midst of all these provider dynamics, there seems, finally, to again be some real action by shippers looking at TMS. If your technology is modest or aging, in this environment it’s time to take a look (see our case study on Goodyear getting TMS “religion”).
- Many of the “stand alone” providers – and some of the others – focus on an “on-demand” or hosted model. I’d highly recommend comparing a more traditional approach to the on-demand offerings. There’s no right answer (see On-Demand Logistics ), but on-demand sometimes can enable technology acquisition that a shipper couldn’t otherwise get thru the capital appropriation process, so it’s worth a look.
- You have to consider a bit the vendor’s position – is it likely to be acquired, and if so what would that mean? If recently acquired, what is happening with investment and focus on the product? It will be an educated guess at best, but an exercise worth doing.
Why do so many large companies still have pretty low-end transportation technology? Are market dynamics going to force most to make some changes? Or is the technology not that important? What’s your take on all these software industry developments, and how should a potential buyer think about them?
|