Siskel and Ebert on i2
On 4/15, our Short Take about Greg Brady said, "Sanjiv needs to
develop a new style for the company,
one that emphasizes delivery, efficient
operations, profit, and smaller deals."
At i2's recent Planet, Sanjiv did exactly that. (No, we're
neither prescient nor influential; it's just obvious.)
Nevertheless, we both left Planet unsatisfied.
Are we too demanding? Probably. But I think there's also
a reason for our uneasiness. We both believe that
just cleaning up
operations will not be enough.
From there, the diagnoses and the remedies
diverge. Both Brian and I have cogent positions. So we're
taking a cue from the late, lamented Siskel and Ebert
and letting you be the judge.
Siskel (Brian Sommer)
This was a disappointing conference - no news of substance - lots
of
mea culpas.
I am concerned about the management team's ability to lead crucial
change at this juncture:
I expected, but didn't get the following:
- Answers as to how red ink will be stemmed
- A product vision that goes beyond just fixing problems
- Clues as to how they're improving employee morale
The corporation seems exclusively focused
on
internal matters when external competitors (e.g., ERP vendors) are
beating
them in the PR and vaporware race.
Thankfully, they have a large customer base to mine and customers
who appeared relatively pleased. (This is in contrast to the press
reports that focus on their few big blowups. Most folks at the conference
were surprisingly content).
i2's challenges are:
- Time (not a lot of it to spare. Must fix things now, not later.)
The one-month
delay in crafting a post-Greg strategy is not a good omen!
- The transformational nature of their product line. The market
currently
favors products that are sold to one buyer, implemented very quickly,
and,
deliver immediate value. Value Chain Management is something that
takes the
CEO, CIO and other execs to sign off on. While i2 people repeated
the line
that they will sell pieces and add-ons for the near future, the
marketing
messages and offerings may not be in sync.
- Overcoming negative PR. Prior deals (e.g., Nike, Kmart) will continue
to
haunt them. They need a lot of positive, success-oriented PR fast.
- Everyone sees them as a manufacturing solution and not a
broad
based play. The ERP players will continue to paint them into this
space and
prevent them from getting market share beyond manufacturing. Worse,
the
speakers and i2 (and prior PR) focus on manufacturing clients, too.
This
only perpetuates the stereotype.
- And, of course, new sales. Revenues need to go up quick. Will
the
re-organization impede new sales and new customer acquisitions?
I'm not betting on a big sales bump.
Ebert (David Dobrin)
I agree that time is the enemy and that the organizational changes
aren't sure to produce enough change quickly. But I'm not worried
about the size of the space (manufacturing is a big one) or PR.
PR issues are remediable, if you have something to PR about.
The ERP vendors, too, are a phantom. They have been going after
i2 for some time, and they have yet to put out a comparable product
set. (Any appearance of comparability in either sales or product
set is due largely to Power Point and accounting tricks.)
In fact, if you just looked at the numbers, you'd think the ERP
vendors were in trouble, not i2.
Let's assume that ultimately software vendors get paid in proportion
to the value they deliver. i2's market cap is $1.4 billion. SAP's
is 33.4 billion. That means that the market believes that SAP can
deliver 23 times the value that i2 can deliver over, say, the expected
life of the company (or five years).
Does that really make sense? Over the last three years, i2 claims
to have delivered $26 billion in value on $2.7 billion in sales.
To even match that claim, SAP would have to claim that they delivered
$180 billion in value on their $18.7 billion in sales, or $30 million
per customer. 23 times that claimed value in the next 5 years, would
be..., well, we're talking GNPs.
Clearly, something is out of whack, and it's not just Sanjiv's
claims. Here's what I think the problem is. i2's software and business
can deliver value in the range that Sanjiv claims, but the delivery
is uncertain.
Take two similar companies that buy Factory Planner, a package
that has been mature for several years now. One company succeeds
brilliantly, as Caterpillar did. Another is a horror story. Same
software, same issues, vastly different results. This happens a
lot. Why do I worry? a) i2 doesn't know why and b) they get punished
severely when it does. (It is much, much worse than a failed GL.)
The valuation reflects this. It is the valuation of a company that
is delivering chemotherapy, but promising cures.
Unless i2 can vastly improve the reliability of its product offerings,
it won't be able to justify a higher valuation. And I don't think
this is a matter of smaller deals and better customer service. though
these promised improvements will help. I think i2 needs to figure
out how to get more control over the success of its customers. In
all probability, this means a different service/software mix, better
customer qualification, etc. But it may also require them to redesign
what they go to market with.
I have talked to several i2 observers and executives off the record,
and all I can say is that these observations do not fail to resonate.
Time is the enemy for i2, because they only have so much time
to address this issue, before people give up on them. If they just
do what they said at the conference, it will not be enough. Even
if they are doing more, I'm not sure it will work. Though I certainly
hope it does.
Other Short Takes include:
- May 15, 2002
- i2 Becomes
Me Too. i2 Promises Reform. The Right Reform? Enough?
- May 1, 2002
- Ariba Tests
the Atmosphere. Landing on the world of Spend Management.
- April 26, 2002
- Baan Limps
Along. Baan is not dead. But it's not bursting with life.
For other Short Takes, see our archive.
|
