i2 Technologies Bets Future on New Platform

VentanaMonitor™

Summary
Back from near disaster, i2 Technologies - a brand once synonymous with supply chain management (SCM) - reassured its customers and explained its way forward at its annual conference in Las Vegas. Central to i2's comeback strategy is an application creation platform built on a service-oriented architecture (SOA). The company promises that the i2 Agile Business Process Platform will help customers create supply chain planning and execution applications specific to their companies and create supply chain analytics using a unified data model. Ventana Research believes that i2 will need to bolster its messaging, sharpen its midmarket positioning and provide a better performance management offering if it is to prevent niche players from continuing to erode its customer base.

Assessment
After years of negative earnings, legal battles and bad press, CEO Michael McGrath shared i2's vision of the future at i2 Planet, its user conference and showcase in Las Vegas. Even though the company missed revenue targets for the first quarter, McGrath pointed to four consecutive quarters of profit, $117 million in cash, the release of nine new planning solutions, a software-as-a-service (SaaS) offering and 35 new customer implementations to assure the audience that i2 is here to stay and driving forward. McGrath expressed optimism about the fall-out created from competitor JDA Software's planned purchase of Manugistics and said i2 is directly targeting JDA's non-retail customers and perhaps hiring some of its dislocated sales force. The latter would be an important step because the complexity of supply chain planning sales requires domain experts. Importantly, he also noted that with the deployment of on-demand services i2 is moving toward a mixed revenue model that includes revenue from both subscriptions and up-front licenses.

i2's new strategy relies on its service-oriented architecture platform, the Agile Business Process Platform (ABPP). Using workflow and Web services elements of SOA, the new platform is an environment for integrating and extending supply chain management applications. Its core services include workflow, execution and monitoring, business rules definition and generation of Web-based user interfaces. The platform provides application development using a visual studio-like interface for modeling, testing, deploying and maintaining new or extended solutions. ABPP's prepackaged services integrate all of i2's existing supply chain optimization and execution applications, as well as applications from others such as SAP and Oracle. The integration layer includes Web services for messaging and events and for extraction, transformation and loading (ETL), which are provided by i2's partner Informatica.

Informatica also provides a foundation for i2's reporting and analytics solution, i2 Performance Manager, which marries planning and execution data with prepackaged integration connectors in a common data model. In this product i2 packages more than 400 metrics and 150 reports that measure and monitor various aspects such as forecasting, inventory, procurement, manufacturing, fulfillment and transportation. Packaged and custom analytics can be combined in role-based dashboards, alerts and analytic workflows. Separately, i2 rolled out a rebranded version of the multi-enterprise supply chain collaboration tool from RiverOne, which i2 acquired last year. The product is now called i2 Multi-Enterprise Interactive.

Many companies need a common supply chain data model. Most supply chain managers lack comprehensive supply chain business intelligence, and many are frustrated by their own company's efforts to standardize on a common BI platform. Now i2 satisfies this requirement by offering its own front end and connectors to Business Objects' and Cognos' BI tools. But i2 still does not close the performance management loop of understand, optimize and align. While it offers capabilities to optimize in its planning solutions and to understand in its performance manager, it does not offer alignment capabilities in the form of a scorecard that would tie corporate strategic objectives to supply chain initiatives and the key performance indicators that cascade from the top. For this, companies will need to turn to vendors such as ActiveStrategy, Pilot and ProForma.

Market Impact
This news will relieve existing customers who have worried that i2 would not be around to support them. Its implementations are large and complex and of extended duration because the supply chain problems that i2 solves are complex and growing more so as companies globalize. Switching SCM platforms is expensive. While i2's SOA front end allows application hosting, we see some positioning and pricing hurdles that prevent the company from getting better adoption in the midmarket, which is clearly where the lion's share of new business is. Nevertheless, current i2 customers have more supply chain applications to purchase. Fortunately for i2, most of them are not convinced that providers like SAP and Oracle can give them the expertise they need at the cost that i2 offers. To some degree i2 has hedged that bet with its SOA strategy. Its pre-built connectors and unified data model lower the total cost of ownership. But still it has far to go to in making its message clear to prospects. For example, even though i2 has sales and operations planning (S&OP) and integrated planning capabilities in its demand management solution (and customers that use it), it does not communicate this well. The murky message has allowed niche vendors Interlace, John Galt, Kinaxis, and Steelwedge to target i2's accounts.

Recommendation
Dedicated supply chain BI platforms capture and model the intricacies of global supply chain networks. They also reconcile disparate data definitions, establish a common business process reference model and provide managers with meaningful, forward-looking metrics. Business users will have to augment their existing BI tools and platforms with applications like i2's to support the growing complexity of managing supply chain performance. Ventana Research believes that organizations that buy and sell globally should look at dedicated SOA platforms and supply chain business intelligence like i2's to extend and complement their supply chain planning and execution systems. SOA platforms can increase supply chain agility by enabling rapid introduction of new business process models, help companies derive maximum value from investments in existing technologies and speed deployment.

About Ventana Research
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2006 Ventana Research