In a move to strengthen its financial position, i2 is selling
its Content and Data Services (CDS) unit for about $30M U.S. to IHS, Inc. The sale is a sad end to i2's supplier relationship management (SRM) business, which it initiated through its acquisition of Aspect Development in 2000.
I've been corresponding with some former employees of i2 and Aspect Development about this deal, and most of what appears in this post reflects their insights. They tell me that the deal with IHS has been a long time coming as i2 employees in the CDS unit have been migrating to IHS over the last 12 months or so. IHS is now acquiring all remaining personnel.
i2 originally bought Aspect Development an all-stock deal of over $9.3B (that's billion), making it at the time one of the largest--if not the largest--deals in the software industry. Aspect was a leader in component and supplier management (CSM) software and services. CSM services help companies, such as electronics and automotive manufacturers, maintain critical data on parts and vendors. Aspect's clients also included some of the largest energy companies in the world, such as Shell and Exxon. i2 is now selling what's left of that business now for a mere $30M.
Over the years, Aspect's products and services were lost in the swelling portfolio of i2's applications. Based on feedback from former Aspect employees, it appears i2 never really knew how to manage and grow Aspect's business.
- On the software side, i2 didn't make it easy enough for clients to upgrade. It didn't invest in the technology from the client perspective. Today, most if not all of the clients have migrated or are in process of migrating to competing products, such as product lifecycle management tools from vendors such as Agile, which hired many former Aspect employees. A telling sign of how badly i2 served this market: i2 hasn't sold a new SRM license in over two years.
- On the content side--providing data concerning vendors, parts, and product attributes--i2 made similar mistakes. The content side was the only profitable part of the business that was left. The databases and schema are valuable assets, but i2 never fully understood or embraced the business. Services account for roughly 10% of this business, but it is difficult to manage. The money is in the proprietary content, not the services. But the services are required in order to make the sale and keep clients buying the content. The sale of i2's content services effectively kills its SRM business, since content was the only real thing that differentiated i2's SRM offerings.
One former Aspect/i2 employee confirmed that i2's sale of the CDS unit effectively kills what's left of Aspect's business for i2:
Content services are crucial to a successful component and supplier management (CSM) application because they set up the database. In other words, the content services were necessary to clean up and classify the commodity hierarchies and technical attributes for parts so that procurement and engineering users could effectively search them. If i2 is selling the content services, it is giving up on all of CSM.
Compounding i2's problems is the fact that large players have entered this market, such as IRI, which was founded by Romesh Wadhwani, the original founder of Aspect Development. Verisign also competes here, with its Supply Chain Team selling RFID services and POS data stream subscriptions along with Verisign's infrastructure. Both IRI and Verisign are strongly industry-focused and tough competitors, with substantially more resources than i2.
i2 also faced increasing competition from the major ERP players, such as Oracle and SAP, both of whom have taken a huge bite out of i2's business. All of the SCM players have had difficulty competing against SAP and Oracle, but i2 got hit harder than the rest.
In related news
, Click Commerce has just acquired Requisite Technology. Requisite's Bugseye is a competitor to the content services that i2 is selling to IHS. Click's press release mentions that Requisite's software is embedded in "one of the world's largest Enterprise Resource Planning (ERP) provider's solutions." It doesn't mention who the ERP provider is, but my sources tell me it's SAP.
Update, 6:00 p.m.
Jason Wood, a hedge fund manager, alerts me to his post yesterday
on i2's sale of its CDS unit to IHS. He said that he considers it, "the final nail in the coffin of the B2B bubble in supply chain." He also writes,
Last time I checked...$30 million < $9.3 billion, right? That's 0.32% of the price paid for Aspect some five years ago. I guess it's better than writing the thing down to zero, but not by much.
Good point.Update, Nov. 23.
Another former i2/Aspect employee responds.
Amazing how fast a blog can focus insights to events quickly. The "$30M" still stuns me. Aspect actually sold their applications/services deals before the i2 acquisition for $5-10M (about 60-70% software). Siemens deal was in excess of $20M. Wow.Related postsi2 fires 300, struggles to refocusi2 founder gives up top spot to new CEOClick Commerce buys Xelus, continuing acquisition strategy