Analysts weigh in on latest acquisition by the big (and getting bigger) "O"
Chicago — September 23, 2005 — Earlier this week, enterprise software provider Oracle announced that it was acquiring privately held G-Log, a North American provider of transportation management systems (TMS). The deal, financial details of which were not disclosed, is slated to close this fall, and analysts believe that it could have a significant impact on the supply chain solutions market.
"If Oracle can execute and all other market assumptions stay the same, the acquisition has the potential to propel Oracle past SAP to the No. 1 slot in 2005 supply chain management (SCM) market share," write Lora Cecere and Greg Aimi with AMR Research in a research note published on September 20.
Rising Importance of TMS
For those not familiar with G-Log, the company offers a platform, dubbed GC3, for planning, optimizing, executing, analyzing and reacting to every aspect of supply chain flow, according to technology consultancy ARC Advisory Group. "By bringing together logistics processes, data, knowledge and analysis in a single business engine, G-Log's products allow companies to lower the total cost of ownership while giving them the ability to drive an integrated, information driven enterprise," ARC writes.
Responding to the Oracle-G-Log deal, Adrian Gonzalez, with ARC, notes that TMS is becoming increasingly important in the mix of applications that enterprises are adopting to run their supply chains. In fact, in its recently published report "Transportation Management Systems Worldwide Outlook," ARC predicts that the market for TMS will reach over $950 million this year and hit $1.2 billion by 2009.
Gonzales notes that G-Log was the only privately held vendor to make the Top 10 list of players in this space, and that G-Log gained market share for the third consecutive year in 2004. "G-Log has primarily targeted companies that operate in multiple geographies, have multiple divisions, and work with multiple modes of transportation," Gonzales writes. "Not surprising, most of G-Log's client base fits this profile, including DuPont, Rohm and Haas, and many Logistics Service Providers (LSPs) such as Exel, BDP International, and Kuehne & Nagel."
A Matter of Survival
However, the analyst goes on to say that as transportation becomes more integrated with other business processes, it has increasingly difficult for standalone TMS vendors to compete. AMR's Cecere and Aimi agree, writing that while G-Log has 44 customers, the current market presents challenges for smaller software companies, and the deal assures that G-Log will be able to survive.
Meanwhile, for Oracle, the acquisition marks the company's entry into the supply chain execution market with a well-developed product. "Oracle plans to retain the majority of the 180 G-Log employees and use the G-Log assets to build a logistics hub," Cecere and Aimi write. "The logistics hub is critical to the success of Oracle's Retail industry product ... [and is] complementary to the Oracle Advanced Planning Suite and the Oracle Field Service applications."
In addition, they point out that architecturally, G-Log is a "good fit" for Oracle. "The product was designed using an Oracle database, and more than 50 percent of the G-Log customers are currently Oracle application users. G-Log also offers the product as software as a service (SaaS)."
Legacy Challenges
But ARC's Gonzales believes that along with G-Log's solutions, Oracle also will inherit some of G-Log's challenges. "The GC3 solution is too complex and pricey for the mid-market, the fastest growing segment of TMS," he writes. "While it might become more cost-competitive by leveraging Oracle's tools and infrastructure, it is unlikely that they'll be able to compete effectively from a cost standpoint with on-demand providers like Descartes, LeanLogistics and Nistevo unless they offer similar pricing and deployment options."
The impact on G-Log's competitors remains to be seen, the analysts believe. Cecere and Aimi believe that Oracle's latest move will put SAP and supply chain solutions provider i2 under heightened pressure. "For Oracle and G-Log, it's a hugely strategic move," the analysts write. For his part, Gonzales notes: "Oracle will likely have a difficult time selling TMS-only deals to non-Oracle accounts, thus easing the competitive environment for vendors like i2 Technologies, Manugistics, and Manhattan Associates. But these competitors will, in turn, have a more difficult time selling to Oracle accounts."
According to Gonzales, the biggest potential downside for current G-Log clients is that the acquisition results in a slowdown in product innovation. "Oracle already has its hands full with 'fusing' together its legacy solutions and acquisitions," Gonzales writes, referring to Oracle's recent acquisitions of a slew of companies, including (most famously) PeopleSoft (and J.D. Edwards, previously acquired by PeopleSoft), as well as such other companies as retail specialist Retek and customer relationship management giant Siebel. "GC3 is essentially a little fish in a big pond," Gonzales concludes.
Nevertheless, as Bob Ferrari, director of supply chain strategies with IDC company Manufacturing Insights, notes: "This latest acquisition of G-Log, coupled with the previous acquisition of retail industry provider Retek, provides further evidence that Oracle is serious in its intent to provide deeper supply chain, transportation and logistics execution services for its customers. When the integration is completed, Oracle's customers should reap the benefits."
Additional Articles of Interest
— Supply chain executives are discovering new ways to apply technology and innovative processes to the challenge of managing uncertainty. Read more in "Rethinking Risk," cover story in the August/September 2005 issue of Supply & Demand Chain Executive.
— Is it possible to preemptively address the business risks associated with product quality? One industry executive thinks so. Read more in "The Quality Risk," the Executive Memo column in the August/September 2005 issue of Supply & Demand Chain Executive.
— Learning the right things to say to your colleagues and your customers can help you win big for the Supply Chain. Read more in "The Price of Talk," the Final Thoughts column in the August/September 2005 issue of Supply & Demand Chain Executive.
Chicago — September 23, 2005 — Earlier this week, enterprise software provider Oracle announced that it was acquiring privately held G-Log, a North American provider of transportation management systems (TMS). The deal, financial details of which were not disclosed, is slated to close this fall, and analysts believe that it could have a significant impact on the supply chain solutions market.
"If Oracle can execute and all other market assumptions stay the same, the acquisition has the potential to propel Oracle past SAP to the No. 1 slot in 2005 supply chain management (SCM) market share," write Lora Cecere and Greg Aimi with AMR Research in a research note published on September 20.
Rising Importance of TMS
For those not familiar with G-Log, the company offers a platform, dubbed GC3, for planning, optimizing, executing, analyzing and reacting to every aspect of supply chain flow, according to technology consultancy ARC Advisory Group. "By bringing together logistics processes, data, knowledge and analysis in a single business engine, G-Log's products allow companies to lower the total cost of ownership while giving them the ability to drive an integrated, information driven enterprise," ARC writes.
Responding to the Oracle-G-Log deal, Adrian Gonzalez, with ARC, notes that TMS is becoming increasingly important in the mix of applications that enterprises are adopting to run their supply chains. In fact, in its recently published report "Transportation Management Systems Worldwide Outlook," ARC predicts that the market for TMS will reach over $950 million this year and hit $1.2 billion by 2009.
Gonzales notes that G-Log was the only privately held vendor to make the Top 10 list of players in this space, and that G-Log gained market share for the third consecutive year in 2004. "G-Log has primarily targeted companies that operate in multiple geographies, have multiple divisions, and work with multiple modes of transportation," Gonzales writes. "Not surprising, most of G-Log's client base fits this profile, including DuPont, Rohm and Haas, and many Logistics Service Providers (LSPs) such as Exel, BDP International, and Kuehne & Nagel."
A Matter of Survival
However, the analyst goes on to say that as transportation becomes more integrated with other business processes, it has increasingly difficult for standalone TMS vendors to compete. AMR's Cecere and Aimi agree, writing that while G-Log has 44 customers, the current market presents challenges for smaller software companies, and the deal assures that G-Log will be able to survive.
Meanwhile, for Oracle, the acquisition marks the company's entry into the supply chain execution market with a well-developed product. "Oracle plans to retain the majority of the 180 G-Log employees and use the G-Log assets to build a logistics hub," Cecere and Aimi write. "The logistics hub is critical to the success of Oracle's Retail industry product ... [and is] complementary to the Oracle Advanced Planning Suite and the Oracle Field Service applications."
In addition, they point out that architecturally, G-Log is a "good fit" for Oracle. "The product was designed using an Oracle database, and more than 50 percent of the G-Log customers are currently Oracle application users. G-Log also offers the product as software as a service (SaaS)."
Legacy Challenges
But ARC's Gonzales believes that along with G-Log's solutions, Oracle also will inherit some of G-Log's challenges. "The GC3 solution is too complex and pricey for the mid-market, the fastest growing segment of TMS," he writes. "While it might become more cost-competitive by leveraging Oracle's tools and infrastructure, it is unlikely that they'll be able to compete effectively from a cost standpoint with on-demand providers like Descartes, LeanLogistics and Nistevo unless they offer similar pricing and deployment options."
The impact on G-Log's competitors remains to be seen, the analysts believe. Cecere and Aimi believe that Oracle's latest move will put SAP and supply chain solutions provider i2 under heightened pressure. "For Oracle and G-Log, it's a hugely strategic move," the analysts write. For his part, Gonzales notes: "Oracle will likely have a difficult time selling TMS-only deals to non-Oracle accounts, thus easing the competitive environment for vendors like i2 Technologies, Manugistics, and Manhattan Associates. But these competitors will, in turn, have a more difficult time selling to Oracle accounts."
According to Gonzales, the biggest potential downside for current G-Log clients is that the acquisition results in a slowdown in product innovation. "Oracle already has its hands full with 'fusing' together its legacy solutions and acquisitions," Gonzales writes, referring to Oracle's recent acquisitions of a slew of companies, including (most famously) PeopleSoft (and J.D. Edwards, previously acquired by PeopleSoft), as well as such other companies as retail specialist Retek and customer relationship management giant Siebel. "GC3 is essentially a little fish in a big pond," Gonzales concludes.
Nevertheless, as Bob Ferrari, director of supply chain strategies with IDC company Manufacturing Insights, notes: "This latest acquisition of G-Log, coupled with the previous acquisition of retail industry provider Retek, provides further evidence that Oracle is serious in its intent to provide deeper supply chain, transportation and logistics execution services for its customers. When the integration is completed, Oracle's customers should reap the benefits."
Additional Articles of Interest
— Supply chain executives are discovering new ways to apply technology and innovative processes to the challenge of managing uncertainty. Read more in "Rethinking Risk," cover story in the August/September 2005 issue of Supply & Demand Chain Executive.
— Is it possible to preemptively address the business risks associated with product quality? One industry executive thinks so. Read more in "The Quality Risk," the Executive Memo column in the August/September 2005 issue of Supply & Demand Chain Executive.
— Learning the right things to say to your colleagues and your customers can help you win big for the Supply Chain. Read more in "The Price of Talk," the Final Thoughts column in the August/September 2005 issue of Supply & Demand Chain Executive.
- More research from AMR Research.
- More research from ARC Advisory Group.
- More research from Manufacturing Insights.
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