Will E2open's acquisition of Steelwedge produce the best SCM software?
Recently, two online supply chain management (SCM) software publishers with similar origins and trajectories decided to merge. Namely, E2open, which in addition to being an SCM software vendor also develops solutions to support supply chain visibility, planning and execution, merged with Steelwedge, a leading provider of enterprise-integrated operational planning and sales and production planning (SPP) cloud software. The combined entity is committed to becoming the leading collaborative S&OP solution that integrates information and provides visibility across multi-enterprise business networks. In today's rapidly changing supply chain environments, companies need an autonomous, aware sales network with real-time information and responsiveness.
Steelwedge and E2open: two publishers with similar histories
Founded in 2000, Steelwedge's cloud-based IBP software platform enables companies to align product, demand, supply, sales, strategy, operations and financial decisions across hierarchies, geographies, product lines, time horizons, channels, customers and suppliers. Steelwedge's customers include leading global companies such as Canon, Pfizer, HP, Jaguar Land Rover, Lenovo, Nissan and Monsanto (around 30 in total).
But the SCM software company has faced a number of challenges along the way, such as uncertain market opportunities as an independent S&OP software vendor as well as self-inflicted setbacks in an already saturated space (for example: product scalability and unsuccessful attempts to expand into process industries). In 2015, with a new influx of capital and a new management team, the company announced a move towards a more scalable architecture and a new representation of supply chains for Big Data using low-cost open source technologies on the PlanStreaming platform. The visualisation stage required the use of various ERP and SCM software solutions (which are typical in the environment of global companies and their trading partners), so an IBP software solution in the Cloud was the natural choice.
As a reminder, E2open was also founded in 2000 in California, but more as a high-tech consortium exchange led by IBM and involving Hitachi, Matsushita, LG Electronics, Nortel Networks, Seagate Technology, Solectron and Toshiba. The company was one of the few to be listed on the stock exchange to survive the collapse of the Internet bubble in the early 2000s. The original aim of the e-marketplace was to bring together thousands of IT, electronics and telecoms companies around the world to transact business over the Internet, with the emphasis on automated purchasing and order visibility. The original platform technology came from the leading SCM software vendors of the time, formerly Ariba and i2 Technologies, but over time E2open moved to its own technology.
E2open has had to overcome a number of setbacks along the way. For example, it went public in 2012 before being taken private again by Insight Venture Partners in 2015. With an injection of capital and a new management team, the software company embarked on a series of acquisitions: icon-scm (for rapid response management), Serus (for high-tech collaborative product change management), Terra Technology (for demand sensing, forecasting and stock optimisation capabilities), Orchestro (for DSR (Demand Signal Repositary) module functionality and finally Steelwedge.
When E2open acquired Terra Technology and Orchestro, it became one of the first SCM software solutions to use Point of Sale (POS) data, as well as cognitive learning (Artificial Intelligence) and demand detection algorithms to improve the accuracy of demand forecasting. Rapid Response Management detects events in the supply chain and finds the best way to respond to them, while remaining aligned with the company's strategic objectives. The addition of Steelwedge's cloud-based S&OP software solution (which has already focused on leveraging unstructured POS data for demand sensing) to the platform demonstrates that E2open can now provide more accurate demand forecasting, constraint-based sourcing plans and financial planning to run the supply chain network in real time.
A brilliant vision of the SCM market
On paper, E2open's vision is proving compelling - the company should now be able to offer agility, responsiveness, connectivity and real-time visibility, much of which has been missing from the various ERP and SCM systems.
To use a board game analogy, Steelwedge was a good solution for planning a game of checkers on the supply chain chessboard, whereas E2open aims to bring the moves of chess to logistics networks.
This combination also means that E2open is probably the largest SaaS SCM software vendor in the world, around twice the size of Kinaxis or Amber Road. It also gives it the potential to compete with rivals such as Infor GT Nexus and SAP's Ariba network.
There are few similarities between Steelwedge's and E2open's product ranges, which makes them a good combination, with many opportunities for additional sales. Looking at the detail, it is interesting to see how Steelwedge can technically be adapted to the E2open platform (or vice versa, although this is less likely). Is this merger a market share grab or a strategic move? And if it is a strategic move, can it really achieve its objective?
For the foreseeable future, we can imagine that E2open will continue to sell its most powerful and autonomous SCM software solutions, the original solution's customers will demand at least ongoing after-sales service, and there will probably be a next-generation converged platform; but will it be achieved by rewriting all these previously acquired applications according to the same canonical data schema and process? Alternatively, it will be more of a loose coupling achieved through RESTfull application program interfaces (APIs), which benefit from a more usual look and feel.
...but tricky to implement
The problem for companies is not necessarily the search for the widest coverage of SCM processes (functional footprint), but rather the integration of processes through the technology platform. They need to offer everything possible - from S&OP and demand detection to execution and response management in the network, but how many companies are likely to buy all this from the same supplier? E2open will therefore need to continue to sell the best standalone SCM applications, while developing a next-generation software suite. Clearly, this will require a great deal of investment in research and development (R&D), and lengthy assimilation phases.
The strategy launched by the former i2 consortium in the late 1990s failed, precisely because the sum of the parts was not greater than the whole. The cost of maintaining the integration of isolated modules eats up a large part of the development budget, meaning that there is little money left for innovation. The merged company will therefore need separate development teams for each of the different architectures and another for integrating the suite.
In comparison, smaller SCM software companies such as Kinaxis, Anaplan and o9 Solutions are growing well and are focused on a common organic platform. Typically, the acquisition of a software company by a larger software company leads to a slowdown in innovation due to disruption, employee turnover and other transitional growing pains. It took a long time for JDA Software and Infor to digest their many acquisitions and decide on an affordable cloud platform with next-generation solutions. Will E2open create a laboratory with cognitive computing, business intelligence (BI) solutions and other software companies like JDA and Infor that have merged recently?
A number of recent acquisitions, such as Terra and Orchestro, are focused on the retail and consumer goods sectors, while the rest are more focused on the group's financial strategy. It will take time to cross-reference these capabilities to the relevant industries. In both cases, there seems to be more focus on make-to-stock (MTS) than on make-to-order (MTO) or manufacturing environments. There doesn't seem to be much in the way of Global Trade Management (GTM) functionality at this stage. Does this mean another acquisition, or perhaps more partnerships?
Conclusion
In conclusion, Steelwedge and E2open are certainly better off merging than remaining separate companies, but doing so will be the key to the success of the merger. Existing and potential customers should contact their integrators/publishers and ask them about the roadmap for their current products, as well as other solutions that may benefit them. We'll keep an eye on E2open and let you know as soon as the merger is complete and the vendor is ready with a clear product strategy and concrete roadmaps. Stay tuned for more information.
Article translated from French