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IBM seeks help in supply chain

Big Blue wants to slim down its supply chain, and it's calling on a small company called i2 Technologies for help.

IBM wants to slim down its supply chain, and it's calling on i2 Technologies for help.

i2, of Irving, Texas, announced today that IBM is licensing its Rhythm suite of supply chain planning and management tools.

The deal is a blow to SAP's supply-chain management initiative. IBM is one of SAP's largest customers, but analysts have predicted that large clients are not likely to hold off their plans in supply-chain management and advanced planning software while SAP's newly released product matures.

Also significant is that IBM is porting i2's product line to Big Blue's platforms and database products, which significantly expands i2's market as IBM's consultancy group pushes its way into the supply management arena.

It's a business that many want to join as the supply-chain market grows to be one of the hottest in the software industry. Advanced Manufacturing Research in Boston predicts that it will grow to a $2.7 billion market by 2001, a 45 percent increase from just a year ago.

"We see supply chain reengineering over the next five years being as important or more important than business process reengineering was over last five years," said Dennis Byron, analyst at International Data Corporation in Framingham, Massachusetts. "Users want to stretch the integration they put in internally in their companies over last few years into their whole line of partnerships and customers. The technology is there. Now they've gotta crank out the work."

Enter companies like i2, which make software that takes historic sales data and other factors and uses advanced algorithms to project supply needs. The result is companies can become more efficient by only keeping supplies on hand that they need.

But analysts say it won't happen until the market consolidates, a trend highlighted by i2 chief rival Manugistics recent earnings slide.