Success in business, like comedy, is all about timing. You can come out with a great product, but if the market isn’t ready for it, the offering will go over like a whoopee cushion at a funeral.
The principals of RedPrairie and JDA saw that the industries they have served for many years are coming out of mourning for their long stretch of dead business and are now ready to celebrate the birth of new opportunities made possible by e-commerce. They’ve followed the habits of consumers newly empowered by the tools and infrastructure developed to support this business model and finally announced last Thursday their joint readiness to meet the new demand.
On Thursday the companies announced that RedPrairie, a leader in the supply chain execution market, would acquire JDA, leaders in the demand planning sector, in a deal valued at about $1.9 billion. “This unique combination will provide retailers and manufacturers with extraordinary capabilities to meet the needs of hyper-connected, mobile consumers,” the companies’ prepared statement read.
Early Friday morning the principals of both companies held a joint press conference to answer questions about the deal. I was able to get one in about whether they were confident their respective customers were ready to start spending money to support their marriage.
“Many of our customers behaved differently in this recession vs. ones we’ve seen in the past,” answered Hamish Brewer, JDA’s CEO and soon-to-be leader of the combined company. “When you look across the Fortune 500 today you don’t see problems with companies’ balance sheets. They have the cash to do things but they’re being very selective and focusing on investments that are critical to get them through this economic challenge. While there will be difficulties in the selling environment for some time, I also know that many of our customers have the financial capacity to invest and they are willing to invest into key areas that will enable them to survive and thrive in this tough environment.”
A merging of customers will bring new opportunities to these merged companies, including manufacturers, retailers, distributors, third party logistics providers—the entire ecosystem that serves consumers. But the leaders of the merging companies expect to have new visibility enabling them to better learn their customers’ strategic intent.
JDA and RedPrairie are also merging their best of breed depth into a common architectural platform. This approach was foreshadowed on the JDA side when it acquired Manugistics and I2. That architecture has been built up over the last few years and Brewer announced a new product release will happen in the first quarter of2013. Eleven of JDA’s 17 solution areas will be running on that common platform.
“But these solutions can still be deployed in a modular fashion so we can respond to individual requirements without putting customers through a three year transformation of programs,” he added. “With RedPrairie it will provide a sizable suite.”
He likened it to the cloud approach to availability but with a single provider. But the merged companies can’t afford to treat their customers as if they were merged. For retailers and their suppliers to work well together in their supply chain, their unique supply and demand signals must be supported.
“All of our retail customers are thinking carefully about what they need to do to reinvent themselves,” Brewer said. “One step behind them are their suppliers, the manufacturers. They need to be in lock step with the retailers. The retailers won’t be able to provide the service they need to offer if the manufacturers can’t.”
RedPrairie’s CEO, Michael Mayoras, who will remain on the board of the combined company, concluded that this merger will help both them and their customers be more agile as new markets develop.
“It costs more to sell goods and to source raw materials and to serve a consumer with online multi-level strategies,” he said. “But price points can’t be continuing to climb. The service to provide those goods to consumers is expected to be at a price point that can be shopped more dynamically. The IT supporting that enterprise today has to be equally dynamic. What we’re providing in this combined company is all the components that allow us to refit the IT that can dynamically address that transformational shift in the market.”
Ian Hobkirk, managing director of Commonwealth Supply Cain Advisors, also called in for the press conference and came away from it with some interesting observations about what this pairing will mean to ERP giants Oracle and SAP. Could acquisition fever become contagious?
Hobkirk blogged that if SAP and Oracle continue on their present course developing their own supply chain execution applications, that might be too slow a process to compete with RedPrairie/JDA. He surmises that might make Manhattan Associates, RedPrairie’s top competitor in the supply chain execution world, the most attractive acquisition target.
“Despite the continued dominance of [Manhattan’s WMS and TMS products], this company may find it harder to compete with a company that has a wider set of planning and retail offerings,” Hobkirk wrote. “A merger between Manhattan and a top ERP provider would present a credible reply to the new RedPrairie/JDA conglomerate.”
As we head into the final stretch of the Obama/Romney campaign, it’s a refreshing diversion to contemplate what can happen when two major parties pool their strengths for the good of their constituents. It’s also exciting to realize that no matter who becomes this country’s next CEO, acquisition fever in the supply chain industry has a good opportunity to go viral. That could be a healthy outcome for consumers.
