IBM supply chain solution diaspora

   In recent weeks, I happened upon a vendor guide from 2007 compiled by the analyst Gartner.
   What led me to this document was the news in early April that the supply chain design software provider LLamasoft had purchased the IBM LogicTools solution.
   I wanted to know more about the background of LogicTools, previously a direct competitor of LLamasoft. The company was founded by renowned MIT professor David Simchi-Levi, and in 2007 was still a standalone solution.
   But since then, it had gone through two acquisitions—first, ILOG and then IBM—where it has largely languished, not because of the strength of the underlying technology, but because updating and supporting the tool did not seem to be a priority for IBM.
   What struck me about LLamasoft’s purchase was not just the purchase in and of itself, but that it’s one of three interesting developments in recent months surrounding current or former pieces of IBM software. In October, the transportation management and trade compliance software provider Kewill purchased IBM Sterling, a software-as-a-service multimodal transportation management system.
   And more recently, IBM has begun working with supply chain planning and execution software provider JDA by linking its distributed order management tools with JDA’s fulfillment and labor productivity solutions. The JDA-IBM tie-up, with a release due in the second quarter, is really about addressing the needs of omni-channel retailers.
   But back to LLamasoft and its purchase of LogicTools. In a discussion with Toby Brzoznowski, executive vice president at LLamasoft, he said the move was motivated by several factors.
   First, bringing LogicTools into the LLamasoft family increased the company’s customer base from 250 to around 400. Second, it will allow LLamasoft to integrate some technology in the LogicTools solution into its future releases, as well as use the experiences and needs from LogicTools’ customers to inform future development.
   But perhaps as importantly, the acquisition allows LLamasoft to remove a low-cost competitor from the market. He said IBM bought the LogicTools suite from ILOG for its rules engine technology, not for the supply chain applications, which became a “forgotten stepchild.”
   “We were involved in many competitive situations where we were perceived as the better solution at this point, but it was still difficult for us, since [IBM] didn’t care about the technology,” he said. “They could give away the software, basically wrap it in a global services deal. So that was hurting the market, in our perception.”
   For instance, if LLamasoft was selling its supply chain design software to a third party logistics provider, it would charge something like a $200,000 annual subscription license. But when that 3PL would go to its purchasing department to get the software, that department might insist on putting the project out to bid, at which point the 3PL would bring in IBM as a bidder. As opposed to an annual subscription, IBM would offer the 3PL to bring in as many users as it wanted for $50,000 on a perpetual license, with relatively small annual maintenance fees.
   “They were dragging the market down,” Brzoznowski said. “You want people supporting this market, so you can innovate.”
   The product languished, as did customer support for it, because IBM moved on to other priorities. But the quality of the underlying technology remained.
   “IBM’s supply chain tool was particularly known for its ‘solver engine’ that was well-suited in analyzing the makeup of complex supply chains,” Boston-based analyst Nucleus Research said in an April note about the acquisition. “Despite the lack of recent development Nucleus had given high marks to LogicNet Plus for the tool’s functionality. However, sources also told Nucleus that LogicNet Plus required ‘power users’ to take full advantage of its functionality.”
   LLamasoft, by contrast, has been prodigiously upgrading its solution the past five years, making it more user-friendly and developing browser-based products in an attempt to help companies think of supply chain as a continuous discipline, not a one-off exercise.
   Brzoznowski said LLamasoft will support the LogicTools product (which includes three modules that help companies optimize transportation, inventory and the flagship network design tool) for three years. But it will release new versions of the LogicTools product, and incorporate certain elements of it into future versions of its own products.
   There’s clear overlap between the two product suites, and though LLamasoft is acknowledged as a market leader in the pure supply chain design software arena, Brzoznowski said the company will surely incorporate some key elements of LogicTools.
   The solvers that underlie the two suites are essentially the “Hertz and Avis” of that universe, Brzoznowski said, with IBM retaining ownership of the underlying solver.
   “There’s no discernable difference [between the solvers],” he said. “There are some ways they approach problems, some algorithms around transportation routing we don’t use today that we can embed,” he said. “Our next version will be more of a merger of these two. We’ll retain all the good-looking features, and leave all the ugly ones.”
   The Sterling Transportation divesture can be considered in the same vein as the LogicTools one – IBM shedding a piece of software for which it was not really interested in investing long-term to a company very interested in doing that. The acquisition of the Sterling TMS gives Kewill a more relevant product for mid-market shippers looking to acquire transportation management capabilities in a SaaS-based pricing model.
   The landscape of TMS providers has shifted substantially in the last decade, as the traditional enterprise-class vendors compete on one level and emergent cloud-based vendors compete on another. And looking back at that Gartner note from nearly a decade ago shows that the supply chain design landscape has changed significantly, too.
   After all, LLamasoft was merely an “other vendor of note” in that 2007 guide. Now, it’s a market leader and ready for bigger things to come.

This column was published in the June 2015 issue of American Shipper.