Supply chain management software maker Logility is the latest casualty in the
increasingly fierce battle for market share in the supply chain planning
The Atlanta-based spin-off of American
Software announced it is expecting a loss for the first quarter ended
July 31, 1998. The company expects the loss to be in the range of 22 cents
to 32 cents per share on revenues of between $5.5 million and $6.5 million.
Earlier this summer, Manugistics, one of the leaders in
the market space, also posted a
loss its recent quarter. And I2
Technologies Technologies, which leads the industry, posted a profit but its stock slid
because of admissions by company executives that growth is slowing as user
companies turn to their enterprise resource planning vendors like SAP for
the same functionality.
"The shortfall in revenue is primarily due to lower than expected license
fees," said Mike Edenfield, Logility's chief executive. "Recently we have
experienced a pause in the market which may be due to the time and cost
pressures of the Year 2000 compliance issue. Additionally, an increasingly
competitive environment with more companies pursuing the same number of
fewer prospective accounts has lengthened sales cycles."
Logility's plans to restore profitability include instituting a hiring
freeze and bringing senior executives into the sales cycle.
Analysts say the problem is indicative of an overcrowded market
with dozens of niche players competing for space, a problem made worse by
corporate computing giants in the enterprise resource planning market
like SAP encroaching on the territory.
"Generally speaking, this is mergers and acquisitions territory, and it is
going to have to happen soon," said Joshua Greenbaum, analyst at the Hurwitz Group, in Framingham,
Massachusetts. "These companies are just not big enough and there are too
many of them to hold SAP or others at bay in the market."
Enterprise resource planning vendors like
and Baan are all developing or
delivering software that allows companies to manage the flow of materials,
cut inventory levels, and better plan use of their supplies.
For Logility and the others, success is going to come by staying ahead of
the ERP firms by adding more features, such as warehouse management and more advanced planning, than the SAPs and PeopleSofts
can currently offer, analysts said.