Reminders

The Omnichannel Commerce Quotient of the Merger of JDA Software, "The Supply Chain Company " and RedPrairie, "The Commerce in Motion Company"

By November 3, 2012
OfflineLeslie Hand

On November 1, RedPrairie Corp., backed by private-equity firm New Mountain Capital LLC, and JDA Software [NASDAQ: JDAS] announced that the two companies have entered into a definitive merger agreement valued at $1.9 billion. The deal is already approved by the JDA board and is expected to close by the end of 2012 if a tender offer succeeds.

The result will be a private $1 billion+ supply-chain software company, led by Hamish Brewer, current CEO of JDA.  Being a private company means the company can make some decisions it couldn't necessarily make as a public company.  Overall, the acquisition makes sense given their similar perspectives on serving supply to shelf.  By merging JDA - "The Supply Chain Company " with RedPrairie - "The Commerce in Motion Company", the combined capabilities should help companies achieve supply and commerce execution. 

JDA is a significant player in the supply chain market, branding itself as "The Supply Chain Company," with revenues for the 9 months ending September 30 of $495.5 million. The company's software portfolio includes supply chain planning, sourcing, collaboration, transportation planning, core merchandising, and a broad range of retail planning from enterprise financial planning to shelf-level planning  for manufacturers and retailers. These offerings reflect JDA's acquisitions over the past several years of software vendors including i2 Technologies and Manugistics most recently and earlier acquisitions-most notably Arthur E3, and Intactix.

RedPrairie has a heritage in supply chain execution, including warehousing, workforce management, store operations, and e-commerce. RedPrairie, originally a WMS vendor, also assembled its application portfolio through a string of acquisitions- BlueCube, Escalate Retail (which included Blue Martini), LIS (affording it a foothold in Europe, MARC, SofTechnics, and StorePerform. The company has deep roots in industrial manufacturing and distribution, expanding for at least the last ten years to include a significant number of retail customers. This shift in core customers is reflected in the company's re-branding to support "commerce in motion," a move to meet its customers' growing needs for that support retail commerce and supply chain.   This includes enterprise level and extended trading partner network supply chain execution with a modicum of planning, inventory visibility, and workforce management.

Combined, the merged company will have 87 of the top 100 consumer goods manufacturers as customers, and 82 of the top 100 global retailers. The combination will provide a broad range of supply chain offerings that extends upstream to suppliers-high tech, discrete, and automotive manufacturers in addition to CPG companies, and downstream to store operations including workforce, inventory management, and collaborative shelf-level planning. 

The overlap in application functionality is minimal, and primarily in transportation management, which the companies have acknowledged they will treat carefully to reflect customer needs. Both companies have ample experience assimilating acquired products and the challenges that go along.   Keeping the sales organization focused on customer segment, rather than product category, will help with the transition.

Perhaps the most important consideration for the merger is the platform direction in which both companies are moving. The synergies are encouraging. JDA is in the final stages of completing a nearly three-year process of fully integrating the assets from its acquisition of i2 in 2010. With the release of JDA 8.0 in Q1 2013, the new platform, which is 100% cloud-based, will include the heritage supply chain functionality working together on a unified platform, sharing data, in 11 of the 17 solution areas that JDA has. The work JDA has done with its architecture for JDA 8.0 is nicely aligned with RedPrairie's long-term plans.  RedPrairie is also in the process of re-architecting and integrating its own key assets.  As a result, the newly merged company is optimistic that it will be able to continue down the multi-channel, cloud-based path together and more quickly.

From our perspective, the acquisition aligns with the reality that manufacturers and retailers need to operate in an omnichannel environment, with a seamless experience for customers and consumers. Consumer goods manufacturers and retailers are increasingly conscious that they need to be able to plan for and execute down to the shelf, with localized assortments.  This level of performance requires an interconnected supply chain, and a critical enabling technology for this omnichannel vision is cloud, and JDA and RedPrairie have made it clear they are all-in. 

According to Hamish Brewer, the emergence of the cloud as an IT discipline and way of thinking about consuming software for large enterprises is going to help transition deployment from behind the firewall to the cloud. JDA is making a full commitment with JDA 8.0, and RedPrairie offers a hosted commerce platform - Commerrce Cloud, and other applications are also available from RedPrairie via hosted deployment.  The core focus for both companies on the cloud may help accelerate their integration plans.

A hidden gem of the merger may be not in the application side of the business, but rather the services side. As CEO Hamish Brewer for JDA mentioned, the combined entity will bring together 2,000 consultants who are steeped in supply chain expertise across a wide swath of supply chain topics. This knowledge base will be well-positioned to assist manufactures and retailers that currently have either one or both company's offerings.  

The greatest challenge ahead will be delivering an integrated set of products in a timely fashion. It has taken JDA nearly three years to successfully transform its i2 acquisition into a unified platform that reflects all of the rich assets within JDAs portfolio. The results are highly anticipated, but it's been a long wait. Customers will want to know which products will be phased out, if any.  We believe the new company should also work on marketing key commerce assets in addition to the robust supply chain portfolio.  That approach isn't just for retailers, but also for manufacturers; our research shows that 39% of consumer goods manufacturers are also selling direct to consumer.  The newly formed entity will need to pull together a roadmap relatively quickly after the merger is finalized, and find some low-hanging fruit to focus on delivering first to its A-List captive market, preferably within the 2013 calendar year.

As we look ahead, if there are gaps in the new company's application and services portfolio, they are in business analytics and intelligence-an area JDA has explicitly eschewed. We think that manufacturers and retailers need this functionally, most notably customer intelligence, as well as marketing management and analytics. Executive management should decide whether to build, partner for, or acquire these capabilities to more fully serve the needs of their customers. 

This analysis is a joint effort from Kimberly Knickle, Leslie Hand, Greg Girard, Heather Ashton, and Simon Ellis.  Tell us what you think the newly formed company should be named, by sending me an email - lhand@idc.com. 

 

About the author

Leslie Hand

Research DirectorIDC Retail Insights

As Research Director for IDC Retail Insights, I provide fact-based research, analysis and thought leadership on supply chain, sourcing, product lifecycle management, sustainability, workforce…

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