Given our current economy lulls, the Manhattan Associates User Conference was well attended. Although I don’t know the exact count of attendees I was told the participant account was approximately 70% of last year. If were to guess I would say there were over 500 people at the conference. Regardless of the attendance Manhattan Associates hit the mark with their user conference. Pete Sinisgalli’s message was clear, concise and to the point. More importantly it was authentic. He made no excuses for Manhattan’s down turn in business and made it clear that he and the other executives have a fiduciary responsibility to their share holders and the company will take the necessary actions to maintain profitability. Over the last months (beginning of October 2008) Manhattan Associates has been reducing their workforce (I am aware of two major layoffs in the last six months). However the last reduction of workforce cut deep into their core. The last cuts were more than a meager attempt to reduce non-performers or “fat.” Manhattan reduced a significant amount of its sales force and realigned their overhead with the current market conditions and future revenue projections.
Manhattan will bounce back because they “get it.” Manhattan is the only Supply Chain Software provider providing Supply Chain Planning, Optimization and Execution (SCOPE) across multiple industry verticals. No disrespect to their competitors but Manhattan can Plan, Optimize and Execute inventory, orders, transportation and returns from source to consumption and back. I state for the record, if you are a retailer (multi-channel) and B2C you don’t need a Tier 1 ERP solution to manage your enterprise. Manhattan provides solutions that manage the Life Cycle of an Order and Inventory. Manhattan’s gap to finish out the enterprise technology and solution foot print is financials (including purchase order execution), point of sale and human resources. I don’t foresee Manhattan acquiring a financial or HR solution provider however developing a POS or acquiring a POS company could be in the cards. JDA has successfully demonstrated that having (Windows and Java) based POS can win business; sometimes your best offence is a defense. JDA has proven this model by giving away POS to secure Demand Planning and Forecasting opportunities that range in the six and seven figure $$ license arena. The other advantage of securing a POS solution is that demand signals are improved and variability is minimized by having the lowest common denominator of data to improve forecasting error.
I had a chance to sit in on an interview between Dan Gilmore of Supply Chain Digest and Pete Sinisgalli. The interview will be aired on Supply Chain TV in the upcoming weeks. However the high light of the interview was Pete’s public strategies (paraphrased) for Manhattan Associates:
- Manhattan will continue to strive to be the World Leader in Supply Chain Planning, Optimization and Execution. Manhattan will continue to focus on solving COMPLEX supply chain problems in multiple verticals and extend beyond retail which include but not limited to (3PL, Food & Beverage and Hi-Tech).
My Comments: Although I agree with Pete’s strategy, Manhattan has to break the stigma of being a retail centric solution provider. The fact is Manhattan has been riding the retail band wagon for a long time. I don’t need to remind anyone on how retailers are performing in this economy. - Manhattan will continue to invest in R&D. $200M has been invested in R&D to improve the solution print and build the SCOPE platform.
My comment: What I find amazing is that Manhattan has not reduced their R&D spend during these economic times. They continue to invest heavily in new technology and solutions. It would be easy (tactical) to reduce R&D, but point 1 (above) could not be realized without the significant investment in R&D. My question is will Manhattan get it right this time. This is not their first rodeo. Meaning they have developed a number of WMS solution (i-series, Open Systems and now ???) Who will be the earlier adopters of this new technology and platform? - Manhattan will provide clients a full print of solutions and go beyond just software.
My comment: As a partner of Manhattan we have seen Manhattan build out their industrial engineering foot print to support their Labor Management System . This strategic move has created considerable conflict with their partner community and it will be interesting to see where they expand their consulting services offering. Will it be in Supply Chain Optimization Consulting (Network Analysis, Inventory Optimization and/or Business Management). Although, Manhattan is a software company make no mistake their Professional Services Group is a cash machine. However, PSG organizations typically feel the pain six months after a soft quarter. Manhattan has had two quarters that have been les s than stellar, I predict another round of right-sizing. As a Partner we feel the effect as well, Manhattan’s success is our success. - Last Manhattan will continue to maintain and grow their Global foot print.
My comment: I think this is simpler stated than executed. Manhattan has been trying for years to expand their solutions into EMEA and APAC. However, their success has been less than stellar compared to their competition. I do believe the opportunity is significant in APAC and South America but Manhattan requires a different and dedicated strategy. Most likely revolutionary vs. evolutionary GTM strategy. Manhattan must diversify and must be committed to global expansion (China and India). My personal experience is that Europe is in a very similar economic crisis. Not to mention that professional services rates in Europe are low compared to the US.
The Manhattan User Conference was a great event. The presentation materials by their clients, and Partners were intriguing and educational. As I stated before Manhattan Associates has what I call the “Get It” factor. The challenge; equal opportunity is how will Manhattan continue to execute their business objectives (global growth) in the current economic down turn?
I believe Manhattan has to go beyond just providing software. They have the ability to become a logistics utility hub and provide data and information across supply chain(s). Notice I use a plural version of supply chain. ERP providers are limited in their ability and provide optimization around ONE supply chain. The next generation of solution providers (Supply Chain 2.0) will provide collaboration (multiple trading partners), data integration and synchronization across an entire vertical industry (Food & Beverage)
In my humble opinion what will hold Manhattan back from becoming the dominant leader in this space is Manhattan themselves. I read an interesting quote this week, “50% of ALL companies fail because they get in their own way.” I would like to see Manhattan go beyond what has been their traditional business model and build a technology foot print that has a higher purpose which revolutionizes supply chain management.
Unfortunately Manhattan is a publicly held company (which I believe is the death of a software company less than $300M) but Manhattan’s traditional perpetual software licenses (old school) thinking will be their Achilles tendon. They need to explore alternative “revenue recognition policies.” They need to move their solution print (exception WMS) to a SaaS (on demand) foot print and provide a utility network by which trading partners plug into. They could learn from the likes of GT-Nexus, Arrow Stream, and Sterling. I am not advocating they mirror these models, but evaluate and ask the proverbial question what make their model successful.
If you read the CSCMP definition of the Supply Chain Management the truth and vision of the next Dominant software/services providers lies within the WORDS: “Supply Chain Management encompasses the planning and management of activities involved in sourcing and procurement, conversion and all Logistics Management activities. Importantly, it also includes the coordination and collaboration with channel partners, which can be suppliers intermediaries, third party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and ACROSS companies.”
Manhattan will bounce back strong, they are resilient, they have an excellent leadership team, innovative in solving real supply chain problems and commitment to success and a HUGE install base.
Always enMotion
Jim Barnes
