Amazon Supplies Manugistics With A Win
By Mel Duvall, Inter@ctive Week
June 7, 2000 9:21 AM ET
In Web-enabled supply chain management systems, Manugistics Group often finds itself playing second fiddle to i2 Technologies.
However, a landmark deal with online retailer Amazon.com has cast the Rockland, Md., company back into the spotlight. Securing arguably the world's best-known Internet company gives Manugistics a major vote of confidence and provides it with a marquee client to take to the marketplace.
The deal also came at the expense of i2, which Amazon executives says competed head-to-head with Manugistics for the contract.
"This is a major win for us, there's no doubt about that," says Greg Owens, Manugistics' chief executive. "We view this as a validation of our technology and our strategy."
Impressive rebound
The Amazon deal, announced last month, caps what has been an impressive revival for Manugistics. A little more than a year ago, Manugistics was on the ropes, suffering heavy losses and steadily losing market share to i2. The company's board hung out a "For Sale" sign for a while, but when a satisfactory offer failed to materialize, it decided to try to fix the company instead.
Owens was brought in from Andersen Consulting, where he headed the global supply chain management unit, to lead the recovery and put the spurs to internal efforts to develop a Web-based version of its supply chain management software.
During the past year, the company has shored up its client base and appears to be well on the road toward profitability. In its fourth quarter, ended Feb. 29, loses were trimmed to $1.1 million, compared with a net loss of $71.2 million in the year-earlier period. Revenue was $43.7 million, up from $40.5 million the year before. More important, licensing revenue was up 45 percent from a year ago. Owens says he expects the next quarter will show a similar gain.
"We're past the turnaround phase and clearly back into a growth mode," he says.
Amazon and Manugistics would not reveal the value of their pact, but Owens says the sale was north of $1 million.
John Derome, a senior analyst at The Yankee Group's business-to-business commerce practice, says the dollar value of the contract is second in importance to the marketing value.
"To get the best-known e-commerce company in the world as a customer is a huge win for them," he says. "It also underlines something we've been saying for some time - that one of the most overlooked pieces of the e-commerce puzzle is optimizing logistics."
Girish Lakshman, global logistics systems manager at Amazon, says the deal was about solving the old-world problems of how to get a product from the supplier to a warehouse and onward to the end customer.
Amazon has purchased Manugistics' NetWorks Transport software for streamlining logistics, and a NetWorks Strategy component to help analyze costs and plan global expansion.
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