JDA hosts a great event…but what does the future hold?

I just came back from Nashville, well actually Las Vegas but was in Nashville to start the week. The JDA Focus 2016 event was being held in the Music City. It brought together a large gathering of some of the top supply chain professionals from the around the globe. Per usual, JDA put on a good show, at least the first day since that was what I was able to attend! But even being in Nashville for less than 24 hours, I took away some observations from the event and JDA:

• Talking a good game – The main stage presentations by CEO Bal Dail and Chief Revenue Office Razat Guarav were in stark contrast to the former administrations. How? Much more focused on the disruptors facing the market and with a keen eye on the future. Bal focused on the company embarking in a “big pivot” focusing on how customers are impacting our businesses. While Razat hit on the major disruptors that face supply chains and our industries. More on both later. What was refreshing was a message from main stage that called out and hit on many of the trends and drivers that we are all facing. Both Bal and Razat also started giving the audience a glimpse into how JDA will address these shifts, whether it is the new retail.me offering, greater emphasis on JDA labs or creating a digital hub, all promising efforts to address their customers’ needs. Coupling their willingness to address new disruptors head on coupled with solutions that are poised to take on these changes was refreshing to hear from this leadership team, not always what would come from main stage.
• Facing disruptors…and making the pivot – One of the big threads that we at Constellation Research have been working on with our customers were reflected on main stage in Nashville (as much as I would like to take credit for those ideas…alas I cannot). Razat hit on 5 big themes of disruption: mobile, IoT, social, cloud and big data. We speak at length about these disruptors; feel free to read our research, but what is the biggest underlying driver is the rise of the consumer. Many of these disruptors have empowered the consumer, given the consumer a growing voice in the ecosystem. When it comes to the supply chain whether you are B2B or B2C the consumer has become the driver – your business must make this the center of their strategy. The same goes for the technology providers that are servicing these businesses. Bal and his team have a great challenge ahead as they look to pivot themselves to help their customers’ better address the consumers and the disruptors that have made chaos the new norm.
• So where does JDA go from here? So JDA is painting a picture of awareness and willingness to pivot to meet their customers’ needs. Good. But what does the future hold for JDA? Over the past decade the company has absorbed Manugistics, i2 Technologies and Red Prairie. All were best of breed supply chain solution providers. JDA became, on paper, a supply chain powerhouse being able to address a wide array of industry needs. Ranging from process and discrete manufacturing, retail and logistics. Impressive. But the question remains – what does New Mountain Capital have in mind long term for this asset? While other supply chain players have been focusing their efforts on specific industries – players like Plex focused on manufacturing, Aptos being spun off from Epicor to focus on retail while Epicor can concentrate on ERP. Can JDA continue to find success competing on all fronts? Or do they need to consider following a similar strategy as Epicor and break up the parts? Maybe the pieces competing on their own are more powerful than the whole? I do not believe this is the only direction JDA can take, but at some point New Mountain Capital will want to reap the rewards from their investment. How that happens will be interesting to observe.

JDA remains a major player in the field of supply chain. The leadership and culture have an aggressive level of expectations of themselves and the business – it is now up to the solutions and software to catch up. They are clearly aware and in tune with the disruptors that are impacting all businesses. The next few months will be crucial for the JDA leadership team to implement their pivot strategy and find success.

 

Disclosure – I worked at i2 Technologies from 2004 to 2009, i2 Technologies was acquired by JDA in 2009.

Infor acquires GT Nexus – bolsters their supply chain offerings.

The following blog post was jointly written with Ray Wang – click here for bio.

On August 11th, 2015, Infor announced the $675M acquisition of GT Nexus, a private supply chain and procurement network solution vendor.  GTNexus brings $150M in cloud revenue, 28,000 companies on their network, 100,000 users across 66 countries, and $100B of goods each year on the procurement network. Constellation believes this will have long term consequences for both client bases. The largest impact might be in the continued transformation of Infor into a true cloud solution powerhouse. Constellation sees three main takeaways:

 

1. Manufacturing is no longer an island in the digital economy. Both companies have a strong presence within manufacturing. GT Nexus completes the network economy by including a procurement network and supply chain orchestration.

 

Point of view (POV): Network economies require three things: content (Product) , network (distribution), and arms dealing (software).  Infor brings a huge base of manufacturers and retailers (products) while GT Nexus brings the procurement (network).  The combined clouds (arms dealer) bring technologies to the manufacturers to enable direct to customer and go from product ideation to commerce.

 

2. Platform play opens up additional total addressable markets. GT Nexus has made major efforts to grow their platform – to become the network of networks.  The platform provides Infor with an untapped market opportunity.

 

(POV): GT Nexus has demonstrated the power of the platform via success stories such as Caterpillar who has leveraged the solution to better manage their network of products. Via the cloud based platform, Caterpillar is not only able to manage this vast range of products but is also able to pull insights from the large amount of data that is being created from the platform. Truly taking the community information and adapting new business use cases. This platform development will open up new opportunities for Infor customers.

Especially when it comes to verticals such as retail where Infor has been working hard to reworking in some cases developing an entire new suite of offerings. the knowledge and experience that GT Nexus brings to the equation will accelerate these efforts. Which could mean that Infor lwill be able to integrate this cloud based platform into their current offerings. The networks that Infor will add, such as the one exemplified by Caterpillar, will bring a tremendous asset to a company that is looking to become “the world’s first industry cloud company.”

 

3. Combined force can become major player for retail. As stated during Infor’s analyst day in March of this year, the company was building “everything from scratch”  for retail.

 

(POV): With the addition of GT Nexus to the fold, where ever those efforts where they will only get a tremendous boost from what GT Nexus already has in the fold. Working with the likes of Patagonia, Brooks Brothers and Deckers (makers of such brands as UGG and Teva), GT Nexus has addressed a wide array of retailer issues. From better supplier relations to cross channel order management, the GT Nexus platform has been tackling major issues facing retailers. This focus on the retail supply chain is an important piece of the Infor puzzle. This is an area that Infor has expressed a strong desire to become a major player in, with this news it might just achieve that goal.

The Bottom Line: Network Economies Democratize The Disruption Of Digital Businesses

Mergers are nothing new in the world of enterprise software and customers should not be surprised.. GT Nexus was one of the few large supply chain and procurement vendors that could be an acquisition target. Others vendors such as Manhattan Associates, Logility and Kinaxis remain strong tragets for mergers and acquisition in supply chain.  On the procurement side, hot startup Coupa is giving SAP Ariba a run for the money.  The result, it makes sense for large players such as Infor to turn their eyes to such a move and iit fulfills a need that cannot be allowed to wait for development to satisfy.

Recommendations: Rationalize Your Vendors In The Cloud Post Merger

For Infor customers this should prove to be highly beneficial. GT Nexus will add a host of new offerings that Infor customers should be able to take advantage of immediately. Infor customer’s in manufacturing or retail should determine what parts of GT Nexus they can immediately address for supply chain orchestration and procurement network issues. For GT Nexus clients, things should be business as usual. However, be aware that supply chain and procurement networks are not the only priority for Infor. On the contrary, Infor has been more successful in ERP and HCM. Customers should ensure that they are clear as to how they will fit in the new organization and what efforts will be made to ensure that their solutions continue to command the attention it warrants.  As many customers overlap, they should evaluate how the merger streamlines existing contracts and improve the ability to create network economies.

Plex manufacturing makes happy customers – which leads to healthy growth

I recently attended PowerPlex, Plex Systems’ annual user conference, the largest in their history with over 1000 attendees. It was hosted in the biosphere that is the Gaylord Opryland in Nashville Tennessee; I think I have finally figured out how to navigate the vast property (anyone who has been there knows that the place is absolutely massive, over a beer I am happy to share a funny experience…it involves different shades of green and trying to enter the wrong room).

Show me some numbers!

Enough about my issues with hotel lay outs, what was not confusing from my time spent in Nashville was the positive energy that was running throughout the event. The high level of enthusiasm as well as the positive attitude flowed through the event – Plex truly is living up to their goal of making their customers “happy ERP customers.”

Some highlights from the event:

• It is all about being the best manufacturer possible – Plex’s community of customers is truly touching a large part of the global economy. From main stage, CEO Jason Blessing, highlighted some impressive numbers of what Plex solutions are powering throughout their installed base:
  • 6m items are being produced weekly.
  • 41m quality checks are taking place per year.
  • $25b worth of customer revenue generated annually.
  • 945b pounds of materials handled on an annual basis.

Some impressive numbers indeed. The lesson to be drawn from these figures is that, as manufacturing remains a vital driver for the economy, Plex continues to play an important role in making this happen. Bottom line as Jerry Foster, VP of Research and Development, said, “Our job is to ensure manufacturers can manufacture more efficiently every day.” It was clear from main stage as well my hallway conversations that Plex remains true to this mantra. They are completely laser focused on how they can partner with their customers to be the best manufacturers possible.

• The core is solid, but now it is time to improve the edges – The core functionality for Plex is humming along, while Plex certainly is not resting on their laurels, there was discussion around the work Plex has been embarking on with complimentary aspects of their solution. One such area was an emphasis on a new and friendlier user interface, calling it Plex UX. This is not a minor challenge for a company like Plex and the customers they are servicing. Unlike other software providers, the Plex software is truly being leveraged from shop floor to top floor. Plex UX has to be adaptive to a shop floor, which contains many environmental challenges, as well as users who maybe interacting with the software while wearing gloves or other manufacturing gear. At the same time a head of manufacturing, CFO or COO needs to interact with the same software in an office environment. Not a simple design challenge. Look for this to be rolled out in Q4 of this year. The interface is also only as useful as the data and insights that are available, that is where their Plex Insight comes into play. This offering empowers Plex customers to extract the right data from their systems, truly giving a full understanding of data that is being processed. A third new offering is Plex Connect, a platform to connect the vast expanse of data generating parts of the Plex environment. This is most exciting, to this author, when it comes to tying the data being produced from IoT enabled parts of the manufacturing and supply chains. Potentially a real game changer for Plex. In addition to these new offerings, Plex spoke at length of their partnerships with Workday, Demandcaster and Salesforce. Highlighting their focus on bringing together enhanced cloud based offerings to their customer base.

• Lets get serious about some toys – Apple watch, Google glass, wired clothing, GoGlove and wristband technologies from the likes of Myo and Nymi were all highlighted as areas of continuing focus for Plex. Good. At Constellation Research we are constantly challenging our customers to think about and to be willing to explore areas of digital disruption that can and are impacting their industries. Plex’s continue efforts to explore how they can leverage new technologies and more importantly how they can work with their customers to utilize these new offerings will continue to pay dividends. Plex’s work in the wearables space is of particular interest. For example, they discussed working with clients on connected vests to make the shop floor safer. Environments where heavy machinery, such as forklifts, are constantly in motion, being able to have safety measures such as IoT enabled vests, which can alert drivers of workers on the floor – preventing accidents. The opportunity for Plex is to take some of these learning and offerings and push into areas they currently do not have a presence – think warehousing and even yard management. As IoT, wearables and even drones become more prevalent on shop floors, look for Plex to continue to explore how to make sure these allow companies to manufacture more efficiently.

As I wrote a few months ago after attending the Plex analyst day, the company continues to push towards some lofty heights. Based on the financials the executive team shared with us this growth is being reflected in the numbers, especially impressive is their average annual revenue per customer, which is trending upwards. It is clear that Jason and the executive team are also putting more wood behind the arrow as they are targeting another 100% increase in quota carrying sales executives by end of year. It was also evident in the customer stories from the likes of Accuride, Sanders Fine Chocolates, Fisher & Co, American Axle and Floracraft to name a few.

Of course the road ahead is not without challenges. The company is pushing up stream into larger accounts, which will start putting them head to head with a new batch of formidable competitors. There is also global expansion. While their solutions are being used in over 20 countries, at some point Plex will need to target and close business with manufacturers that are not headquartered in the United States. While they argue there remains plenty of business in the domestic market, for Plex to truly achieve some of the goals they have they will have to target some global geographies.

A good challenge for Jason and his team, one that will determine how far Plex can go. As long as they focus on making “happy ERP customers,” Plex will continue to have success.

Plex – working hard to get their fill

Another week another analyst day…this time it was to Detroit and a meeting with Plex Systems. Between my attempts to discover where South Detroit was located and enjoying a great tour of the Sanders Fine Chocolate factory, I was able to spend an educational day and half with the Plex executive team. The time was well spent getting an update on where Plex ended up in 2014 and where they are heading for 2015. A few take aways:

Cloud remains the theme of the day. Plex continues to push and leverage the fact that they have been focused on delivering their solutions via the cloud since day one. That all their applications and solutions are 100% cloud focused. While the reality is that users are not 100% sold on going all in with cloud based applications, the tide continues to turn. By some estimates close to half of Chief Supply Chain officers are still hesitant about the value of the cloud. However it is our contention that much of that is due to only hearing terms like “multi-tenant,” “no version upgrades,” or “lower TCO” to describe the value of the cloud. There continues to be a gap in the market of solution providers demonstrating what NEW business models the cloud allows. The elasticity the cloud offers, the ability to quickly achieve network effects or even the fluidity the cloud offers need to be the reason to leverage the cloud. For example the ability for Plex to quickly get on line a factory gives their customers the necessary flexibility to make the business decisions necessary in the current manufacturing environments. The value of the cloud is in the new business models it allows the users of cloud applications to take advantage of, not simply that it will cost less than on premise. Plex has an advantage that they are fully focused on how the business models the cloud offers, but other vendors are quickly closing that gap.

Plex continues to get its house in order: What struck me from CEO Jason Blessing’s opening discussion was the pace at which they are ramping up quota carrying sales representatives. They have doubled the number of sales reps in 2014 from 2013 and plan to continue on that trajectory in 2015. But what is more important is their reorganization of the team. Separating the farmers from the hunters, as well as assigning a team to focus on the process industry, a new focus for Plex. I realize that at times banal items like number of sales reps is not as fun to discuss as new feature function, but the reality is I have yet to see a product that sells itself. You better have the boots on the ground to drive the revenue. Plex is also making continued investments in their R&D, more than doubling the amount invested year over year in 2014. What remains to be seen is can Plex hire the right people to their sales team and will their efforts in R&D keep pace with their renewed efforts in the customer acquisition side? Based on their domestic addressable market they should have plenty of targets to go after for their pipeline. But we will also keep an eye on their potential global expansion – where will Plex make their first true foray into the international markets? China, Germany or maybe India?

Is the portfolio ready for prime time? Plex’s approach to the market by offering a three level approach: full ERP, dual ERP or Hybrid ERP is just a fancy way of saying you can buy our full suite as a stand alone, use it in conjunction with existing ERP system or buy our point solutions. An underlying theme in the discussions was Plex’s move towards enhancing their overall solution portfolio but also starting to approach more sales opportunities with stand alone modules such as MES, Supplier quality, EDI or Inventory Management. This strategy resonates with what we believe the market has an appetite for. The days or major ERP overhauls are past, even if there continues to be disgruntled customers using large ERP solutions from the usual suspects. But point solution sales or tackling parts of the ERP puzzle will continue to be ripe. The challenge for Plex is around their portfolio. They mentioned many stand alone MES opportunities, but what about the other solutions. More importantly where does their product road map go from here? Whether they have more solutions to fill out their overall portfolio as well as sell as stand alone offerings. For example – warehouse management (WMS), forecasting and planning engines or even demand sensing analytical engines. Plex must be shrewd in their decision of where to invest moving forward.

Overall it feels as if bright days are ahead for Plex. The market opportunity is ripe, they have been building on their extensive experience in the discrete manufacturing space, demonstrate a dogged focus on making their customers all “happy ERP customers” and have a cohesive management team. However, they are approaching a stage where many companies begin to lose their way or hit the proverbial wall. It will be up to the executive team to continue to have a laser focus on their primary markets and ensure they are judicious with the development of solutions and applications that complement this strategy. Often companies begin to chase shadows and false hopes while trying to maintain their growth rate. They spend too much treasure and human resources in solutions that are too tangential to their core business or chase markets that are just beyond the reach of their core competencies.

Some will win and some will lose, it is up to Plex to be the former.

Demand – it is a fickle beast

Understanding customer taste and their buying patterns remains a tricky exercise. The story of L.L. Bean and their snow boots is a great example of how challenging it is to accurately predict demand. The Maine clothing and outdoor company is already sold out of their iconic boot. According to the Yahoo report, click here, there is already a 100,000 name long waiting list for the boot. Wow. Talk about a good problem to have, well maybe.

L.L. Bean cannot just ramp up their manufacturing, well in the long run they might be able to, but not fast enough to meet this pent up demand. Based on their meticulous manufacturing process, it takes half a year to train someone to manufacture the product, you cannot just bring on seasonal labor or outsource to a contract manufacturer to bolster your assembly line. So what should L.L. Bean do? It isn’t as if these shoes are a new product that vastly exceeded the expected demand. These shoes have been around, for what seems…forever.

No…you can’t wear this LL Bean boot

Their popularity is clearly back. I remember my classmates wearing these when I was in high school…and that was a long time ago. I never looked at them as a trendy item, not like what UGGs did or other brands. But clearly the product has regained popularity with the “younger people.” Meaning it is appealing to the 15 – 23 year old segment where trends can truly go viral. When you do a Google search for “L.L. Bean boots” you get sub searches “women,” “men,” “frat,” and “preppy.” Clearly it has mass appeal for the kids!

Should L.L. Bean have had better demand sensing? Could they have anticipated this upswing in orders months ago? Granted, based on the lead time they need with regards to adding manufacturing capacity, it might not have mattered. And how should they monitor this demand moving forward? Will there be this level of demand next winter? Or will some other brand become the cool footwear on campus next winter? This is one area of Matrix Commerce that calls for a high degree of digital sophistication as well as some good old fashion intuition.

Clearly this season is over capacity and there is very little L.L. Bean can do to accelerate the production. Moving forward, L.L. Bean needs to apply some savvy digital monitoring to better gauge the demand for 2015 and beyond. For example – what is the reaction of the shoes? Are they trending on social channels? How are they being discussed on social channels? Are the returns on pace with historic returns? Or are there more or less? L.L. Bean should monitor the fake and knock off products – imitation is the sincerest form of flattery. Companies that can produce a similar product will rush into the market if they believe the pent up demand cannot be met or if there is another layer of demand at a lower price point. These are all digital data points that L.L. Bean will have to pull back into their planning and forecasting engines to better manage their supply chain. Of course there is the other strategy of potentially keeping the supply low, to create exclusivity of the product. Hmmm makes one wonder.

But this latest Christmas season and fashion trend story reminds all of us, that accurately predicting future tastes and demands remain a fickle beast. The digital world allows us to cast a wider and more detailed net of what is going on, but we are far from being able to create an precise map for demand.

Now where are my boots…we are having a Nor’Easter here in Boston!