i2 absorbs RightWorks
Deal highlights fast-changing B2B software market
Sidney Hill Jr., Executive Editor -- Manufacturing Business Technology, 4/1/2001 7:00:00 AM
The announcement early last month that Dallas-based i2 Technologies plans to purchase RightWorks, an e-procurement vendor based in San Jose, Calif., illustrates how fast things are changing in the business-to-business (B2B) software arena.
It was slightly more than a week before the deal—Feb. 28 to be exact—that RightWorks officially unveiled the latest version of its software platform, along with a new business strategy. The new strategy was designed to remove RightWorks from direct competition with top-tier providers of tools for building Internet-based trading exchanges. Those top-tier providers include companies like i2, Ariba, Mountain View, Calif., and Pleasanton, Calif.-based Commerce One.
RightWorks executives said the company was going to focus on selling applications to help medium-sized companies create their own e-Business strategies. In most cases, those strategies would involve creating an infrastructure for conducting Internet-based transactions with key trading partners, and then possibly connecting to trading exchanges.
It is now apparent that even as it was announcing a new strategic direction, RightWorks was seeking a merger partner. RightWorks CEO Mary Coleman said as much during a March 9 conference call in which the deal with i2 was announced. "While it was clear we have the best e-procurement technology in the industry, we needed a strong partner to help bring that technology to the market," Coleman said. "Several companies were candidates, including those we have partnered with in one way or another over the past several years. But from the outset, we believed i2 was the best fit.
"No company can evaluate e-Business solutions without talking to i2," Coleman added, "and most ultimately select them as the provider of choice."
During the conference call, i2 Vice Chairman Romesh Wadhwani said i2 would use 5.3 million shares of i2 stock, which is worth roughly $114 million, to purchase RightWorks.
Coleman indicated that she will stay on during the transition phase of the merger, but has "decided not to remain in an ongoing role on the i2 senior management team." Most of RightWorks' 400-person staff is expected to continue working in San Jose.
Sensible from both sides
In purchasing RightWorks, i2 gets what many industry experts believe is a leading-edge e-procurement platform. A key feature of the RightWorks platform is a unique multi-site capability. This feature enables companies to practice what RightWorks calls "distributed e-procurement." This means a large corporation can exercise centralized purchasing control, while allowing each of its divisions to institute unique procurement rules.
Wadhwani said i2's customers have been asking for this type of functionality, and RightWorks "is the only company that actually has it working in customer sites." Wadhwani also said the RightWorks acquisition would enable i2 to round out its recently introduced supplier relationship management (SRM) product suite.
Currently, the i2 SRM suite contains functionality that i2 acquired last year through the purchase of two other software vendors: Aspect Development and Supplybase. Aspect Development offers a series of products that aid the process of designing products and procuring production components, while Supplybase has a set of applications for locating key component suppliers.
Wadhwani said adding the RightWorks technology to this mix will produce a solution that gives companies greater control over their procurement processes.
And now, the endings
The purchase of RightWorks effectively brings about the long-anticipated end to i2's partnership with Ariba. It also ends a partnership that RightWorks had formed with Manugistics, Rockville, Md., which is a major competitor of i2. "It is unlikely that Manugistics will want to continue that agreement," Wadhwani says. "So, we will have to find a way to bring that to a close."
Wadhwani indicated that the alliance had closed roughly 15 joint deals that produced about $20 million in revenue for the three partners over the past year, but i2's acquisition of RightWorks "reduces our need for outside partnerships." But he also said i2 expects to continue its working relationship with IBM.
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