As companies continue to hold on tight to their ITpurse strings, supply-chain software makers areproving to be among the biggest victims in thesoftware sector because of stiffer competition from enterprise software makers and reliance on largedeal sizes.
becamethe latest supply-chain software maker to be hitFriday as it
warned earnings would fall short of WallStreet forecasts. Its shares plummeted $11.90, or 44%,to $15.10 in Friday's trading. JDA Software'spreannoucement came on the heels of a
warning lastweek by No. 1 supply-chain software maker
, whose shares ended flat Friday at $1.50. And lastmonth,
, whosequarter ends a month earlier than its peers, startedthe ball rolling with its own disappointing results.Shares of Manugistics rose 13 cents, or 2.7%, to $4.95 inrecent trading. Shares of
, which sells a suite of softwareincluding supply-chain products to retailers, fell$1.62, or 7.7%, to $19.54 in recent trading.
"We're seeing basically a customer rebellion,"said Joshua Greenbaum, a technology consultant andprincipal at Enterprise Applications Consulting inDaly City, Calif.
Part of the problem for supply-chain softwaremakers is that they are reliant on large deals, whichhave shrunk as companies have cut back on IT spending.In its press release Friday, JDA Software said itssecond-quarter results are lower than its previousforecasts primarily due to a change in timing of severallarge contracts.
i2, meanwhile, reported last week that it closedonly one deal worth more than $1 million. That was thelowest number of large deals closed by the companysince it went public; the previous low was five deals,according to Goldman Sachs analyst Chris DeBiase, wholowered his rating on i2 to a market performer fromoutperformer. His firm has done banking with i2.
i2 said its average deal size fell to $224,000.That's down 60% from $560,000 in the first quarter anddown 73% from $830,000 in the fourth quarter of 2001,noted Greenbaum. "This is the most rapid decline on aquarterly basis that I've ever seen from an enterprisesoftware maker," he said. "They're really just fallingoff the face of the earth."
Those numbers, Greenbaum said, reflect a change inhow companies are viewing supply-chain softwareprojects. "We're starting to see a real shift in themarket perception of what is supply-chain software andwhat's acceptable from a customer standing, movingaway from the big-bang view of supply chain that folkslike i2 and Manugistics have promoted in the market,"he said. "The customers today can't justify supplychain as an infrastructure-wide project anymore."
To make matters worse, enterprise software makerslike
, which both have alarge base of manufacturing customers, and to a lesserextent
, have stepped uptheir efforts to sell supply-chain software. And theymay have an advantage over pure-play supply-chainsoftware makers because in these tough economic times companies are increasingly trying to limit the numberof software vendors they do business with to reducethe need for integration.
"Integration is the No. 1 headache for the CIOthese days, and it's the No. 1 uncontrollable cost,"Greenbaum said.