With an eye toward bolstering its supply chain management software, i2 Technologies Inc. this week said it will buy privately held RightWorks Corp. in a deal valued at US$114 million.
The acquisition, rumored for weeks, will round out i2's TradeMetrix supplier relationship management software suite and give it RightWorks' e-commerce and transaction technology. With the RightWorks additions, i2's TradeMatrix package will let customers manage and automate purchasing and inventory.
Analysts say i2 owns the raw material procurement market, and the RightWorks acquisition positions the firm strongly against competitors such as Ariba.
The procurement market suddenly became competitive, forcing i2 to move beyond supply chain management, says Joshua Greenbaum, from Enterprise Applications Consulting in Daly City, California. "Customer needs are all over the map - portals and back- and front-office connectivity," he says. It's not enough for i2 to be a best-of-breed vendor solely for supply chain management, it needed to be able to offer broad-based functionality for procurement.
Tom Harwick, an analyst at Giga Information Group, says i2 customers will have a better handle on the design process for products.
"If customers want software and then need to add business functionality, it's not meaningful until [the software is] integrated," Harwick says. With RightWorks products, such as its eBusiness Application Suite, i2 customers will be able to design products and source the components for these designs, he says.
While analysts say i2 and RightWorks products complement each other, the companies' big issue will be integration.
"For [i2 and RightWorks], the question is how fast they can integrate their environments because it usually takes more than a few minutes," in spite of what customers think, Greenbaum says. I2 says it expects the first integrated product to be rolled out by May.
Now that i2 has snagged RightWorks, analysts say the Ariba-i2-IBM alliances are all but dead. The companies last year announced a deal that would have their products interoperate with each other to develop a business-to-business platform, as well as working on business-to-business standards.
"Since the agreement was announced, everyone was waiting for the moment it would fall apart," Greenbaum says. Neither Ariba nor i2 signed exclusive agreements to offer their products to each other. "It was doomed to fail, but the question was when." According to AMR Research, the two companies have consistently bought competing software products outside their areas then wound up competing in each other's territory.
IBM Corp. will continue to work with Ariba Inc. and i2 on projects, looking at IBM customer needs and decide if either company or the partnership will work best, AMR says.
Under the terms of the agreement, approximately 5.3 million shares of i2 common stock will be exchanged for all outstanding RightWorks stock in a deal based on i2's closing price of $21 last week. The acquisition is expected to close by the second quarter, pending regulatory and customary conditions. RightWorks CEO Mary Coleman will not stay with i2 once the deal is completed.
I2 Technologies: www.i2.com