Part 1 of this blog series depicted the rise and fall of erstwhile public software company Click Commerce based in Chicago, Illinois (US). At the end of the post, I mentioned the merger of Servigistics and Click Commerce’s Service Network Services (SNS) division. The private equity firm Marlin Equity Partners acquired both entities recently with the idea of forming a new combined company to solve the planning, optimization, execution, and analytics challenges associated with delivering post-sale service.
Part 2 then presented two blog entries with opposing views on the merger and its prospects. It raised the point as to whether any prospective company in need of service-oriented solutions would look for an all-in-one service lifecycle management (SLM) solution (platform) per se, or would maybe start evaluating the service capabilities of their incumbent enterprise resource planning (ERP) provider, possibly combined with more focused best-of-breed vendors.
Zooming Into Individual SLM Parts
To be fair, let me try to analyze Servigistics’ claimed leadership in the major individual parts of its upcoming SLM portfolio, starting with its roots in spare parts planning and optimization. In terms of install base, with 120 blue-chip corporate customers in parts planning (240 customers in total, as mentioned in Part 2), new Servigistics is the indisputable leader compared to, say, MCA Solutions and its fewer than 30 large customers. But in terms of the functional leadership, the verdict depends (and may vary) based on many factors.
Namely, if all of the capabilities of Servigistics Service Parts Management and Click Commerce Parts were in a unified SLM suite now, there would be no questioning the company’s functional prowess. But that is not the case yet, and it is difficult to discern whether either of these two once-competing leading products is better than, say, MCA’s SPO or Prophet by Baxter Planning Solutions.
In fact, during the recent briefing, I challenged Servigistics and SNS folks about the two overlapping spare parts management solutions. In their defense, they replied with the idea to position products for different industries; i.e., Servigistics Service Parts Management for automotive and high-tech vs. Click Commerce Parts for aviation & defense (A&D).
But I take issue with this idea, because “old” Servigistics certainly had some A&D customers where it has been competing with MCA for years (whereas Click Commerce’s solution has lately been much less present in contests for new deals). Does this mean that some of Servigistics’ A&D customers were either oversold or have had to tweak the product?
Should they now migrate to Click Commerce Parts or wait for the converged product (two years in the future at best)? Servigistics’ short-term priority will thus likely be in rationalizing the two SPP product lines it now has. This feat will take a while, and when done, the development priority might not necessarily be in investing in future development or advancing multiple product lines (i.e., one converged and two legacy products, since not all customers will migrate to the latest generation product).
Contrary to that, without similar distractions, MCA can continue to invest in its core spare parts planning product to move toward becoming the strongest in the market. While MCA’s claim that in the last few years (since mid-2006) it has won over 60 percent of the deals in which it has competed head-to-head with Servigistics (none lost to Click Commerce in rare face-offs) can be taken with a grain of salt, the two companies’ recent PRs on new wins might indeed reveal somewhat more activity on MCA’s side.
Being Tough on MCA Too
During the call with Servigistics I learned of Click Commerce Parts recently replacing MCA SPO at its very first customer, Cisco Systems. While this was a marketing blow for MCA, which the company heavy-heartedly acknowledges, it was a prudent business decision to walk away from the too-demanding contract. Namely, the heavily customized product that Cisco required would have required prohibitively hefty time and money expenses, with no likelihood of MCA productizing the immense effort for other customers.
Seriously speaking, MCA cannot really remain independent forever as a focused specialist on spare parts management only. Servigistics and Click Commerce have decided to extend their portfolios, and yes, they might have been struggling with cross-sale, customer uptake, etc. But what is MCA’s exit strategy, for the little company to be acquired or to merge with some company in an adjacent functional area?
A few dozen customers is not really significant growth over a decade, and in the longer term, I think that MCA’s venture capitalists (VCs) would like to see an honorable and lucrative exit. What is different from Servigistics, though, is that VCs own a minority share, so MCA is really controlled by its founders and employees. MCA has had relatively low turnover and could continue “as is” for a while, and with the market consolidating, the company believes sales will become easier.
What About Other SLM Parts?
Apparently, Servigistics has tried to diversify into other areas beyond spare parts management, but in most of these markets there are already well-established competitors. The best example would be the workforce scheduling and optimization space, where Servigistcs has a budding install base (e.g., Coca Cola, Dell, ThyssenKrupp, etc.). Click Software has been a much stronger player here in my opinion, not only in terms of the “who’s who” customers mentioned in Part 2, but also in its ability to scale up and easily schedule and analyze the performance of thousands of field technicians.
The fact that SAP has recently elected to resell some Click Software products globally despite being a Microsoft .NET Framework-based solution speaks volumes about its robustness. ServicePower, Ventyx, and Astea International are other renowned solutions in this space.
A similar situation exists in the parts pricing space, with only a handful of brand new Servigistics customers (i.e., not inherited via the Profit Science acquisition), such as Mercedes-Benz and Komatsu. Vendavo (partly owned by SAP and also available on SAP’s price lists) has lately developed a broad solution, and has been a serious nemesis. Servigistics has recently also lost some deals to PROS Pricing Software, while Oracle has some decent pricing capabilities too within the recently released Oracle Price Management (OPM) suite.
The knowledge management (KM) offering was mentioned in Part 2, and Servigistics is certainly not a leader with only a single (pilot) customer and an embedded KM engine from Kaidara Software. Consona KM (formerly Knova) and inQuira Software are the undisputed tier-one KM leaders both in terms of install bases and capabilities. There are a slew of tier-two competitors such as Salesforce.com (formerly InStranet), ATG Knowledge, KANA Software, etc.
It is difficult for me to say who the leader might be in the still-morphing reverse logistics space, but new Servigistics might have a shot there. Former Click Commerce’s (formerly Kirus) returns and repairs solution was developed with Jabil Global Service in the early 2000s. Still, there is some competition coming from Sterling Commerce (formerly Yantra), TAKE Supply Chain (formerly Clear Orbit), and Mahattan Associates.
The sourcing capabilities (for managing and executing supply of service parts) and contract & warranty capabilities (for managing, determining and tracking entitlements) might be markets with new opportunities for Servigistics. Still, many big ERP vendors already have some of those capabilities, and I have seen a number of specialist vendors fail in this space.
At end of the day, there may be some opportunities for cross- and up-selling these extended service capabilities to each other. But Servigistics’ execution will have to be much better than in the past. From what I have seen thus far, Servigistics has had a broad strategic service management (SSM) suite for a while and hasn’t had much success in up-selling to its vast spare parts management customer base.
Despite my tough love for Servigistics, I do admire its vision and determination to become the SLM market leader with the broadest solution and largest client base. The merging companies do have a common vision and extensive domain expertise, but my point here is just that it is never easy to compete directly with SAP, Oracle, IBM, and Infor.
When presented with challenges and assertions from the blogosphere, Servigistics decided to take the high road this time and prove any doubters by delivering rather than talking. Servigistics pledges to continue to maintain and support installed client solutions and will not require clients to upgrade or change technology stacks prematurely. Where there is overlap, the vendor plans to migrate over time to a consolidated solution that optimally leverages the best of the combined intellectual property.
The company’s goal is an integrated solution footprint with a shared/common data dictionary and service-centric workflows. To that end, Servigistics pledges to solicit client input and guidance in its decision-making process. The vendor plans to provide clients with clear points of contact and escalation paths
Still, I agree with both Jason Busch’s and Bob Ferrari’s blog posts, which advise caution. It is also difficult to dispute the recommendations from MCA’s blog post (at least, it cannot hurt to ask these important questions in case of any merger of software companies):
Dear readers, what are your comments, opinions, etc., on Servigistics’ ambitious strategy? We would certainly be interested in your experiences with any of the abovementioned SLM software categories (if you are an existing user) or in your general interest to evaluate these solutions as prospective customers.