Manugistics Group Inc. to announce next week that it is expanding into the execution side of supply-chain applications, a move that comes at a crucial point as the company faces stiffening competition from large enterprise vendors.
At its enVISION 2001 e-business conference, which kicks off Monday in Orlando, Fla., the company will announce a partnership with a strategic sourcing vendor that will ramp up its suite of SRM (supplier relationship management) solutions, according to an analyst who has been briefed by Manugistics. The suite will include product-design collaboration, strategic sourcing, and support of direct procurement, said Bob Ferrari, an analyst at AMR Research in Boston.
The announcement will mark the company's first foray into the execution side of supply-chain applications. Before now, it has focused only on planning applications.
It comes at a time when the company is facing tough rivalry in the supply-chain market by established ERP (enterprise resource planning) vendors, such as Oracle Corp. and SAP AG, said Dwight Klappich, an analyst at Stamford, Conn.-based Meta Group Inc. In fact Klappich said several large Manugistics enterprise customers are moving to install SAP's supply-chain product, Advanced Planning and Optimizer (APO).
"I know five [Manugistics] clients that are moving to APO," Klappich said. "As the ERP vendors release reasonable APS [advanced planning and scheduling] functionality, ...it's going to make it difficult for [Manugistics] to sit back on their core. It puts their core at risk. They need to reinvent themselves."
Manugistics' customers have been drawn to the SAP solution because it provides easier integration with their SAP back-office systems, Klappich said.
"[SAP] is trying to make it a reasonably priced solution to migrate to," Klappich said. "It's not necessarily the sexiest system, ...but it works. It doesn't appear to be a major switching cost."
Rich Bergmann, Manugistics president, said he is aware of several global customers that have had their strategic IT business vision "moved to APO." However, he noted that many of these companies, including Nestle and Unilever, have multiple divisions. Those divisions that have already deployed Manugistics' supply-chain management product are sticking with it, he said. However, some divisions that have never deployed a supply-chain solution are going with SAP's solution, he added.
"We haven't lost any, but we are aware of these initiatives that are coming on," Bergman said. "We're well aware of the competition. We're well aware that they are making some aggressive moves in pricing."
Bergmann said Manugistics has integrated its supply-chain product to SAP's back-office systems for 130 customers. In addition, he said SAP's APO does not seamlessly integrate to all versions of SAP's ERP system.
"They have to go through the same integration ...that best of breed does," Bergman said.
William Wohl, director of public relations for SAP America, said SAP is seeing growth in demand for its supply-chain management solutions in the process manufacturing, high technology, and consumer products markets.
"Customers are understanding that supply-chain management extends a lot further than planning and scheduling," Wohl said. "They want a standard user interface. Now that our solution has matured, ...these companies are beginning to make the move to a more centralized SAP approach."
AMR's Ferrari said the move by Manugistics to tap the SRM market is a response to i2 Technologies Inc.'s recent move into the arena. In addition, it indicates that Manugistics is expanding it product footprint, he added.
"It's the next natural point of integration," Ferrari said. "If you take supply-chain planning, strategic sourcing is key because 80 to 90 percent of cost is established at the product design and sourcing stages. Companies are starting to understand that."
The enVISION 2001 conference is scheduled to run until July 18.