SCM Software Defies Downturn

Manugistics strives to be the number-one SCM software vendor

B2B may now mean boom to bust, but not for all e-commerce sectors. For example, AMR expects the market for supply-chain management software to more than triple to $21.1 billion from $6.7 billion by 2005.

The reason, explains Merrill Lynch analyst Craig Wood, is that "in tougher times, the need to deploy supply chain applications is highly strategic." He notes that "software may not be able to heal what ails the economy, but it can enable companies to operate more efficiently in these troubled times."

That type of thinking bodes well for Manugistics Group Inc., widely recognized as number two behind i2 Technologies in the B2B optimization business. Both companies' Web-based supply-chain management software lets customers use the Internet to link activities such as distribution, manufacturing, purchasing, and transportation.

Manugistics CEO Greg Owens put the once-floundering company in the horse race for market superiority since he arrived two years ago from Andersen Consulting, where he headed the supply-chain management practice. He has put Manugistics (for "manufacturing" and "logistics") in several strategic partnerships, among them agreements with Microsoft, KPMG Consulting Inc., Agile Software Corp., NetVendor Inc., and webMethods Inc. He has signed contracts with big names such as Cisco Systems and Juniper Networks Inc. He also has completed a string of acquisitions. Most notably, he recently announced the purchase of the intellectual property rights to order-management applications from now-defunct SpaceWorks Inc.

Those acquisitions were the reasons behind most of the company's first-quarter $23.4 million loss on record revenues of $89.8 million.

But Owens is sanguine.

He already showed his steel by keeping Manugistics on the fringes of the recent B2B marketplace flurry -- a wise move in retrospect. Consulting firm McKinsey & Company now estimates that of the 1,200 online exchanges created in the last two years, only 200 will survive. For Manugistics, combining SpaceWorks' order-management technology with its other offerings may launch the company into a growing and more lucrative market: private trading exchanges.

That just happens to be prime i2 territory.

Owens combines his market savvy with a solid business operations philosophy. He insisted on up-front payments from dot-com newcomers, for example. His acquisition strategy to quickly enhance Manugistics's product capabilities, such as adding crucial enterprise profit optimization technologies like price optimization, shows that he's really trying harder to make i2 number two in the market.