i2 outlines vision for growth

i2 has made its boldest move yet to broaden out the scope of its supply chain offerings as part of a bid to grow tenfold to become a $5bn company.

At its annual user conference in San Diego last week, i2 launched a number of new products and services, one of the most important of which was FulfillmentMatrix.

The trading exchange is intended to enable partners to manage the product fulfilment process better by helping them to improve their planning, forecasting and stock replenishment activities. FreightMatrix, a sister scheme, is intended to improve logistics planning and execution.

But another important plank in i2's strategy for growth is jointly building bespoke real-time order management systems with customers, which to date comprise Siemens, K-Mart and Caterpillar. The software is intended to help them manage their suppliers when undertaking product planning to improve order fulfilment processes and make production more efficient.

i2's president Greg Brady claims the system will also help organisations to communicate fully with their customers and suppliers - something that has, to date, been impossible - and enable them to completely redesign their businesses to make them more efficient.

"We thought of acquiring technology, but couldn't find anyone that had done this. We're going after planned replenishment for critical manufacturing components across the entire value chain," he said.

But Kevin O'Mara, a research director at AMR Research, warned that i2 has "set itself a big challenge. It's painting a picture about what can happen at the intergalactic level".

Caterpillar, a company that i2 has a long standing relationship with, claimed, however, that the system has enabled its engine products division to save $32m by reducing inventory, improved assembly times by 38 per cent and reduced assembly resequencing by 80 per cent.

The Siemens deal
While i2 would not disclose the value of the individual deals, Siemens admitted that it was investing about $870m in various supply chain initiatives over the next three years. The aim is to save several billion dollars by moving 80 per cent of its procurement activities and half of its sales online.

But because Siemens is a long-time SAP customer, the deal would appear to be a slap in the face for the German software supplier and a coup for i2, which to date has sold little into Europe, traditionally generating no more than 14 per cent of its total revenues in the region.

The contracts are believed to be based on an enterprise-wide phased rollout and implementation schedule, which means that each customer has the option to bail out if certain milestones are not reached. But the deals are considered of such importance that i2's chief executive Sanjiv Sidhu, Brady and vice chairman Romesh Wadhwani have become directly involved in the initiatives.

Analysts view the venture and this type of sales model as very ambitious, however. While O'Mara notes that customers were enthusiastic about the concept, he added: "If it does what it says, then i2 will redefine what it means to sell to the enterprise. But it will take three to five years - if it succeeds."

The company also said that it plans to work with BroadVision to integrate its supply chain planning applications, including the new order management system, with the ecommerce application supplier's personalisation software and order-taking package.

But the tie-up has reawakened recent speculation that the alliance between i2, Ariba and IBM to build business-to-business emarketplaces for customers may be in trouble. And despite putting a brave face on it, Ariba appears to be the partner most at risk.

Although it provides indirect procurement applications, i2 is not working with it on the Siemens deal but with rival and SAP partner, CommerceOne. If the alliance fails, i2 and IBM will still work together on a more ad hoc basis, but Gartner has already warned customers to plan for how they will deal with integration issues should Ariba be displaced.

The good news is that i2 has, for the first time, spelled out a message to customers that while complicated, is understandable. When Sidhu talked about it three years ago, his audience was bemused.

Today at least, customers are prepared to put ink on contracts that are thought to eclipse in value terms anything seen to date in the enterprise application space. But both i2 and its customers are taking huge risks and analysts will be keeping a close eye on how events unfold.