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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.

Budget Quick-Wipe

We agree with many observers that there is no sign of a traditional budget flush—money 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 quarter's work.


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 selling.

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 with PeopleSoft.

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 managers—not 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 maintenance.

Pricing Models

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 intellectual property.

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.

Sourcing Space

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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