I2 Returns To Supply-Chain RootsI2 Returns To Supply-Chain Roots

I2 Technologies Inc., which saw revenue freefall as it expanded into new markets, is returning to its supply-chain roots with the latest release of its product suite.

Last year i2 strayed from the basics of selling planning and scheduling software used to run factories, and tried to slug it out with Ariba Inc. and Commerce One Inc. by selling technology to business-to-business E-marketplaces. Now that the market has tanked, i2 is trying to reverse its dismal financial performance by adding product capabilities that it hopes will appeal to current customers in manufacturing and attract new customers in the retail and financial-services industries.

The latest upgrade to its product suite, i2 5.2, makes its order-management application, OMx, generally available. Also new are E-procurement features based on technology from software maker RightWorks, which i2 acquired earlier this year. I2 now has more to offer industries outside of its strongholds in automotive and high-tech, such as banking, retail, and hospitality, chief technology officer John West says. Besides opening new markets, the software creates new opportunities with current customers. West pointed to the recent signing of Home Depot Inc. as proof of success with i2's order-management strategy. "Prior to having an order-management system and a procurement application, we really didn't have offerings to go after people that weren't industrial," West says.

Meta Group analyst Carl Lehman says large corporations looking to Web-enable their supply chain prefer to buy from one vendor, so i2's strategy may be appealing to them. But he was skeptical of i2's commitment to the financial-services industry, noting that the company has not hired executives with expertise in that market. "I don't know how strong they're really trying to play in that space," Lehman says. "You've got to have a significant commitment in terms of management capabilities and expertise, integration capabilities, and a strong platform that's targeted toward specific types of service solutions, and i2 only has the components."

The financial backdrop to i2's product plans is reflected in the company's third quarter, ended Sept. 30. Revenue dropped nearly 20% from the second quarter to $194 million, and nearly 40% from the same period a year ago. License revenue dropped 36% to $68 million from the previous quarter's $106 million, and sales to existing customers plummeted 69% to $42.1 million. Not surprisingly, the company has started aggressive cost cutting, with plans to cut up to 1,000 jobs over the next two quarters.

In refocusing on the core software modules that made i2 successful, the company will find a different market landscape--one in which advanced planning and scheduling products from enterprise resource planning vendors are much more mature than a year ago. In addition, competitor Manugistics Group Inc. has built a strong presence in the consumer products industry and won't give it up without a fight. "There is a lot banking on the release of this new functionality, and it may yet open up the largely untapped consumer products market for i2," AMR Research analysts John Fontanella and Gerald McNerney said in a recent report. "For now, i2's future relies on a reset of expectations, a successful launch of OMx, and a strong bite of crow."