What About ILOG’s SCM Products?

Whether as a sort of “collateral damage” (given IBM’s foremost interest in beefing up its SOA/BPM infrastructure product) or maybe not, the acquisition also leaves IBM with the supply chain management (SCM) applications business that ILOG has recently been developing in pursuit of a more profitable custom solution strategy. This strategy was going to complement ILOG’s tried-and-true “technology & platform” strategy of providing business rules management system (BRMS), optimization engines, and visualization tools.

ILOG saw custom SCM applications as a higher-margin business promising a better opportunity for profitable growth than the stable technology tools market. To date, however, the applications division has not grown significantly. ILOG’s more recent efforts to establish itself in the SCM application market have included in-house development of custom solutions and the acquisition of LogicTools, a strategic inventory optimization and network design application vendor in 2007.

Founded in 1995 by David Simchi-Levi, professor at MIT, LogicTools has over 250 corporate customers (over 70 of which are Fortune 500 members) that benefit from its sophisticated solutions. While ILOG has since made some inroads in selling the acquired LogicTools applications, the solutions it has developed in-house have had limited success.

Although “ERP- system-agnostic” in principle, LogicTools’ SCM applications strategy has long been to fill the so-called “white spaces” within the SAP SCM suite [evaluate this product], in terms of inventory optimization (IO), supply chain network design, planning and scheduling for process manufacturing, and planning and scheduling for multi-stop transportation.

IBM has yet to unveil any plans for the ILOG SCM applications. The giant states (or merely lives in a denial) that it is not in the applications business, though it offers a few own specialized SCM applications, primarily through its consulting business. In fact, SCM products like the IBM Dynamic Inventory Optimization Solution (DIOS) and IBM Carbon Tradeoff Modeler have come into being as a result of a number of special client engagements.

Although these consulting experiences have subsequently been productized, these offerings are strictly offered as toolkits that support and facilitate IBM’s new SCM consulting engagements. These IBM SCM products’ respective numbers of installations count in dozens rather in hundreds.

In his recent blog post, Jason Busch believes that based on this and other recent software acquisitions, and its already strong services and business process outsourcing (BPO) practices, IBM is the most logical vendor to step in and acquire a spend management solution provider like Ariba (which offers a somewhat non-traditional combination of software, services and supplier network enablement).

Given that i2 Technologies has lately, prior to the JDA Software merger agreement, groomed itself into a more specialized SCM consultant for complex environments, with a possibility of offering its software tools where appropriate, I was at some stage suspecting IBM as a possible suitor. Oh well, i2 might have had much more SCM software than IBM currently needs and wants.

Is There any Logic to Keeping These Tools?

For that reason, and given no mention of the SCM products and strategy in the IBM’s merger announcement for analysts, it is difficult to predict exactly what IBM will do with ILOG’s SCM applications, such as ILOG Plant PowerOps (PPO), a solution for manufacturing planning and scheduling for process manufacturing or ILOG Transport PowerOps (TPO), a solution for shipment planning and vehicle routing for retail/consumer packaged goods (CPG) and third-party logistics (3PL) providers.

Furthermore, the ILOG LogicNet Plus XE suite tackles the strategic network design (to determine optimal number, location, and size of warehouses, plants, and production lines), multi-site production sourcing strategies, production and procurement planning, and contingency planning. Last but not least, the ILOG Supply Chain Analyst suite consists of the following modules that can be thought of as separate products:

1. ILOG Inventory Analyst is the flagship product that has been around since 2001 for multi-echelon inventory optimization [evaluate this product]. It can be deployed strategically (to determine inventory strategies per location) or tactically (feeding ERP system safety stock targets on a periodic basis); and
2. ILOG Product Flow Optimizer, for distribution-focused analysis, is a new product that is a spin off from Inventory Analyst. It is a strategic tool for retailers and distributors with multiple echelons of inventory storage.

ILOG/LogicTools’ customers cite the following reasons for selecting these tools:

* The ease-of-use and the vendor’s willingness to prove it;
* The staff’s consulting experience and SCM savvy;
* The approach to customers, in terms of: costs and listening to clients’ issues; often starting with a small project and growing as required, and even providing leasemand/or hosted options as required;
* The portfolio’s capability of network design, production sourcing, and inventory optimization from a single vendor (since LogicNet Plus XE complements Inventory Analyst solution); and
* Out-of-the-box functionality, plus the ability to integrate with third-party solutions like SAP.

All of the abovementioned SCM applications products have either the “Certified by SAP NetWeaver“ (i.e., ILOG LogicNet Plus XE) or “Powered by SAP Netweaver” designation(i.e., ILOG Inventory Analysts, ILOG PPO and ILOG TPO). Other ILOG applications such as ILOG JRules and ILOG Optimization Decision Manager (ODM) are also “Powered by SAP NetWeaver.”

Such a set of products might be as equally tempting for the new owner to continue selling and developing as to possibly curtail it. The latter would be so that IBM would not lose its focus on infrastructure, and also not get in a conflict of interest with its SCM ISV partners, like SAP, Oracle, Lawson Software or Infor. Thus, I concur with Gartner’s assertions that, post-acquisition, there are the following possible scenarios for the ILOG SCM applications:

* Moving them under the IBM SCM consulting group, though as offerings with premium services wrapped around them that will likely cost more and will receive less focus than when they belonged to ILOG;
* Either limiting future product development or perhaps leaving the SCM business as independent, with the research & development (R&D) investment commensurate with the unit’s performance;
* Spinning off the SCM applications, given the existence of overlapping products like IBM DIOS;
* Delegating to partners to peddle the products. This seems to have already been the case with Maximo (from former MRO Software) for the enterprise asset management (EAM) market, since IBM acquired the product to fill the information technology (IT) asset management gap within the Tivoli product line.

While Maximo has not really disappeared from the EAM market, it has somewhat lost its erstwhile leadership luster, and thereby allowed much higher profiles in the market for Infor, IFS, Mincom, Ventyx or Lawson, to name some.

A friend/peer of mine, and a great SCM market connoisseur, who prefers to remain incognito, gave me his two cents worth below:

“My guess is that IBM will either wrap consulting services around ILOG SCM since IBM’s SCM practice is rather large (and since it was more of a service offering anyway) or investigate buyers and spin it off, though the list of buyers is probably pretty thin. SAP has relationships with SmartOps and Optiant, so I doubt it would want to jump in the fray. I doubt the offering is big enough to make much of an impression on Oracle.

I could see a venture capital (VC) firm getting its hooks into and merging it with something or trying to make a business around it. I doubt IBM would want to sell it to another big consulting firm, even the ones in India that might have fun with it. I’d say it is 80/20 that IBM keeps it versus spinning it off.”

This statement made me think that Manhattan Associates could be one of a few viable suitors. The vendor has been making some noise with its own IO capabilities, but I doubt these are as powerful as those of Optiant, SmartOps, LogicTools or ToolsGroup. Also, LogicTools products could be embedded within the expanding Manhattan SCOPE (Supply Chain Optimization Planning through Execution) suite on top of its Supply Chain Process Platform (SCPP).

Certainly, JDA Software already has (or will soon have) some IO capabilities via acquiring Manugistics and i2 Technologies, while Oracle has combined the capabilities of Demantra’s demand planning [evaluate this product] and Numetrix’ scheduling and strategic network optimization (SNO). To refresh your memory, Oracle got the latter product via the acquisition of PeopleSoft in 2004, who in turn acquired J.D. Edwards in 2003, who in turn acquired Numetrix in 1999.

But again, IBM will most likely give the ILOG SCM applications to its consulting division, and leverage them into toolkits given to the IBM SCM consultants to market them as reusable services. The support model will likely gradually change to a service-based (consulting know-how) offering.

What About ILOG’s SCM Products?

Whether as a sort of “collateral damage” (given IBM’s foremost interest in beefing up its SOA/BPM infrastructure product) or maybe not, the acquisition also leaves IBM with the supply chain management (SCM) applications business that ILOG has recently been developing in pursuit of a more profitable custom solution strategy. This strategy was going to complement ILOG’s tried-and-true “technology & platform” strategy of providing business rules management system (BRMS), optimization engines, and visualization tools.

ILOG saw custom SCM applications as a higher-margin business promising a better opportunity for profitable growth than the stable technology tools market. To date, however, the applications division has not grown significantly. ILOG’s more recent efforts to establish itself in the SCM application market have included in-house development of custom solutions and the acquisition of LogicTools, a strategic inventory optimization and network design application vendor in 2007.

Founded in 1995 by David Simchi-Levi, professor at MIT, LogicTools has over 250 corporate customers (over 70 of which are Fortune 500 members) that benefit from its sophisticated solutions. While ILOG has since made some inroads in selling the acquired LogicTools applications, the solutions it has developed in-house have had limited success.

Although “ERP- system-agnostic” in principle, LogicTools’ SCM applications strategy has long been to fill the so-called “white spaces” within the SAP SCM suite [evaluate this product], in terms of inventory optimization (IO), supply chain network design, planning and scheduling for process manufacturing, and planning and scheduling for multi-stop transportation.

IBM has yet to unveil any plans for the ILOG SCM applications. The giant states (or merely lives in a denial) that it is not in the applications business, though it offers a few own specialized SCM applications, primarily through its consulting business. In fact, SCM products like the IBM Dynamic Inventory Optimization Solution (DIOS) and IBM Carbon Tradeoff Modeler have come into being as a result of a number of special client engagements.

Although these consulting experiences have subsequently been productized, these offerings are strictly offered as toolkits that support and facilitate IBM’s new SCM consulting engagements. These IBM SCM products’ respective numbers of installations count in dozens rather in hundreds.

In his recent blog post, Jason Busch believes that based on this and other recent software acquisitions, and its already strong services and business process outsourcing (BPO) practices, IBM is the most logical vendor to step in and acquire a spend management solution provider like Ariba (which offers a somewhat non-traditional combination of software, services and supplier network enablement).

Given that i2 Technologies has lately, prior to the JDA Software merger agreement, groomed itself into a more specialized SCM consultant for complex environments, with a possibility of offering its software tools where appropriate, I was at some stage suspecting IBM as a possible suitor. Oh well, i2 might have had much more SCM software than IBM currently needs and wants.

Is There any Logic to Keeping These Tools?

For that reason, and given no mention of the SCM products and strategy in the IBM’s merger announcement for analysts, it is difficult to predict exactly what IBM will do with ILOG’s SCM applications, such as ILOG Plant PowerOps (PPO), a solution for manufacturing planning and scheduling for process manufacturing or ILOG Transport PowerOps (TPO), a solution for shipment planning and vehicle routing for retail/consumer packaged goods (CPG) and third-party logistics (3PL) providers.

Furthermore, the ILOG LogicNet Plus XE suite tackles the strategic network design (to determine optimal number, location, and size of warehouses, plants, and production lines), multi-site production sourcing strategies, production and procurement planning, and contingency planning. Last but not least, the ILOG Supply Chain Analyst suite consists of the following modules that can be thought of as separate products:

1. ILOG Inventory Analyst is the flagship product that has been around since 2001 for multi-echelon inventory optimization [evaluate this product]. It can be deployed strategically (to determine inventory strategies per location) or tactically (feeding ERP system safety stock targets on a periodic basis); and
2. ILOG Product Flow Optimizer, for distribution-focused analysis, is a new product that is a spin off from Inventory Analyst. It is a strategic tool for retailers and distributors with multiple echelons of inventory storage.

ILOG/LogicTools’ customers cite the following reasons for selecting these tools:

* The ease-of-use and the vendor’s willingness to prove it;
* The staff’s consulting experience and SCM savvy;
* The approach to customers, in terms of: costs and listening to clients’ issues; often starting with a small project and growing as required, and even providing leasemand/or hosted options as required;
* The portfolio’s capability of network design, production sourcing, and inventory optimization from a single vendor (since LogicNet Plus XE complements Inventory Analyst solution); and
* Out-of-the-box functionality, plus the ability to integrate with third-party solutions like SAP.

All of the abovementioned SCM applications products have either the “Certified by SAP NetWeaver“ (i.e., ILOG LogicNet Plus XE) or “Powered by SAP Netweaver” designation(i.e., ILOG Inventory Analysts, ILOG PPO and ILOG TPO). Other ILOG applications such as ILOG JRules and ILOG Optimization Decision Manager (ODM) are also “Powered by SAP NetWeaver.”

Such a set of products might be as equally tempting for the new owner to continue selling and developing as to possibly curtail it. The latter would be so that IBM would not lose its focus on infrastructure, and also not get in a conflict of interest with its SCM ISV partners, like SAP, Oracle, Lawson Software or Infor. Thus, I concur with Gartner’s assertions that, post-acquisition, there are the following possible scenarios for the ILOG SCM applications:

* Moving them under the IBM SCM consulting group, though as offerings with premium services wrapped around them that will likely cost more and will receive less focus than when they belonged to ILOG;
* Either limiting future product development or perhaps leaving the SCM business as independent, with the research & development (R&D) investment commensurate with the unit’s performance;
* Spinning off the SCM applications, given the existence of overlapping products like IBM DIOS;
* Delegating to partners to peddle the products. This seems to have already been the case with Maximo (from former MRO Software) for the enterprise asset management (EAM) market, since IBM acquired the product to fill the information technology (IT) asset management gap within the Tivoli product line.

While Maximo has not really disappeared from the EAM market, it has somewhat lost its erstwhile leadership luster, and thereby allowed much higher profiles in the market for Infor, IFS, Mincom, Ventyx or Lawson, to name some.

A friend/peer of mine, and a great SCM market connoisseur, who prefers to remain incognito, gave me his two cents worth below:

“My guess is that IBM will either wrap consulting services around ILOG SCM since IBM’s SCM practice is rather large (and since it was more of a service offering anyway) or investigate buyers and spin it off, though the list of buyers is probably pretty thin. SAP has relationships with SmartOps and Optiant, so I doubt it would want to jump in the fray. I doubt the offering is big enough to make much of an impression on Oracle.

I could see a venture capital (VC) firm getting its hooks into and merging it with something or trying to make a business around it. I doubt IBM would want to sell it to another big consulting firm, even the ones in India that might have fun with it. I’d say it is 80/20 that IBM keeps it versus spinning it off.”

This statement made me think that Manhattan Associates could be one of a few viable suitors. The vendor has been making some noise with its own IO capabilities, but I doubt these are as powerful as those of Optiant, SmartOps, LogicTools or ToolsGroup. Also, LogicTools products could be embedded within the expanding Manhattan SCOPE (Supply Chain Optimization Planning through Execution) suite on top of its Supply Chain Process Platform (SCPP).

Certainly, JDA Software already has (or will soon have) some IO capabilities via acquiring Manugistics and i2 Technologies, while Oracle has combined the capabilities of Demantra’s demand planning [evaluate this product] and Numetrix’ scheduling and strategic network optimization (SNO). To refresh your memory, Oracle got the latter product via the acquisition of PeopleSoft in 2004, who in turn acquired J.D. Edwards in 2003, who in turn acquired Numetrix in 1999.

But again, IBM will most likely give the ILOG SCM applications to its consulting division, and leverage them into toolkits given to the IBM SCM consultants to market them as reusable services. The support model will likely gradually change to a service-based (consulting know-how) offering.