What Our Contacts Are Saying
News and notes about i2, Agile, Datastream, and SAP; some thoughts
on pricing and budget flush. All short.
Positive news about the i2 pipeline from several sources. An i2
product partner tells us that the pipeline for both SCM and SRM
has been solidifying. An i2 consulting partner reports that several
new deals have appeared in the pipeline. Neither partner said anything
about last quarter's results.
Internally, the reorganizing and repurposing continues. A former
i2 employee told us several months ago that there were too many
incompetent mid-level managers, people who had been promoted in
the go-go times to manage all the new hires. These people are slowly
being given less responsibility; the trouble is that the people
targeted to take more responsibility are leaving too.
Particularly worrisome for the product partner is the former Aspect
organization. The pipeline there is quite good, the partner says,
but the people may not be there to deliver. They point to the departure
of Dave Horn (last of the old Aspect management team) as an example
of the thinning.
Many observers think this is a good sign. "i2 has got to cut
back on its product set, so cutting the old Aspect makes sense,"
they say. I disagree. The Aspect business is naturally complementary
to the SCM business, providing a different way into the same customer
base, a long-term revenue stream, and a new area for growth. I think
it is worth preserving.
We agree with many observers that there is no sign of a traditional
budget flushmoney allocated for purchases that will be spent
in the fourth quarter or lost. We are seeing something milder, though,
which is a good sign for the fourth quarter next year.
In this version, IT directors use some tens of thousands of dollars
that they found somewhere for studies or pilots so that they can
hit the ground running in '03. Call it a budget quick-wipe. Not
everybody is reporting this, but several consulting firms and smaller
software companies report that it's making up a good part of their
Some new negative comments about SAP's last quarter. People who
were saying it was "not bad" are revising downward"horrible"
was one word used. The speculation in Germany is about how SAP will
handle this. One cynical observer there says, "If they make
their numbers, it will be a lie," which we quote only to show
the depth of feeling in some circles.
If the rumors are true (we hope not) and if (as reported to us)
management is worried about survival, the handling of this quarter's
results will be a real test of character. If Hasso is right, and
things are nowhere near as bad as the analysts make out, there's
nothing to worry about.
Positive news, too. It is worth repeating that SAP's APO (supply
chain) product is one of the few supply chain products that is actually
One final note. As part of cost control, we've seen a number of
moves whose effect is to slow development. One canny observer (not
me!) pointed out, for instance, that the xApp plans have been scaled
back. Much of our positive view of SAP the company is based on its
great new product stream.
Let a long-time SAP observer have the last word on what SAP should
do about this. "SAP's problem is 5000 lazy German developers'
don't slow development. They should get rid of the ones who don't
develop, but they can't."
We're on record as saying that a PeopleSoft acquisition of Agile
is a non-starter, but clearly the word hasn't gotten out. An investment
banker told a client of mine recently that Agile was no longer in
play because it was about to be acquired. The reasoning seems to
be that PeopleSoft is looking for an SRM analog to the Vantive CRM
acquisition and Agile is in SRM, is in play, and has a good relationship
I still think it makes no sense. Either a)PeopleSoft is trying
to buy customers or b) they're looking for a product that the key
players in their verticals want to buy. If a) remember that only
about half of Agile's 600-700 customers are still alive after the
dot bomb and every one of them has an incumbent ERP manufacturing
system. If b) we just don't see what Agile offers that would be
useful outside its core high-tech, medical, and automotive niches.
When it comes to excitement, he EAM space is right up there with
3 1/2 hour movies about Eskimos. But I think it's becoming a more
attractive space than it has been for some time. Datastream was
in last week, and they are seeing three industry trends that are
new and promising. For one thing, traditional buyers of maintenance
software are now looking to extend their reach to contract manufacturers
and captive subcontractors. For another, maintenance outsourcing
has created new buyers of the software. A third (and this may be
a fantasy) is increasing interest from facilities managersnot
just apartment or office complexes, but also universities.
Datastream has not yet seen Oracle and doesn't expect to see them
for another two years. They point out that progress is hard in the
space without salespeople and consultants who really understand
In the last month, we've seen two companies that have made long-discredited
pricing models actually work. Descartes has been able to convince its clients (mostly
people who create and carry ocean cargo) to pay for its tracking software by the transaction.
This makes sense. The more transactions, the more information about where your
pallet is. But the argument could be used in other areas.
Websense sells "Internet filtering" (e.g., porno-blocking)
software. The software maintains a database of offending sites,
which must be updated constantly. They have a pure per-employee
subscription model ($10/year, going up to $13, plus increments for
blocking pop-up ads, etc.) People accept the model and even accept
substantial yearly price increases. This is an example of a company
able to use a subscription model for combinations of software and
We are surprised at how little resistance to price increases these
models encounter. (I think Microsoft has been getting off easy.)
Until consumers get more sophisticated, this is a another argument
for subscription pricing.
Some shakeout in the space can be expected. Frictionless is laying
off back-office people in order to increase the number of salespeople.
B2eMarkets is reportedly selling product, but at greatly reduced
prices. The old eBreviate (now part of EDS) could use a buyer, even
though it has a new deal with Unilever. Motorola has apparently
committed to Emptoris, which should help, but the deal was onerous.
No hard facts on Ariba's quarter; my theory has been that a shakeout
helps them, because buyers turn to (relative) solidity.
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