Moves last month by SAP broke a critical link in the supply chain software marketing plans of i2 Technology Inc when the Germany- based giant re-structured a long-standing joint development agreement with the Irving, Texas supply chain specialist (CI No 3,233). SAP and i2 agreed to disagree over a two-year-old plan that would have seen i2’s Rhythm constraints-based planning engine embedded into SAP R/3 Version 4.0. SAP is to go it alone, planning to offer the 11,000 or so SAP R/3 sites new supply chain planning software of its own design by the second quarter of 1998, and promising some soon-to-be-published open industry standard BAPI Business Application Programming Interfaces, that will enable users to embody more supply chain management functions in their business applications without the need for built-in Rhythm software reliant on proprietary interfaces. These interfaces mean that, in theory, users can run any third party supply chain tools supporting the standard that they wish. There is a snag, however: prospective users would need to buy the planning engine separately. Had i2 and SAP been able to square their differences, thought to revolve around arguments over sales margins, the engine would have been delivered as part of R/3. i2 charges at least $150,000 for Rhythm – but a more representative bill would be $1m and more.

Bad news for i2

In light of this extra cost, SAP is clearly hoping businesses will hold back from implementing supply chain management until it has knocked together its own offering which it is likely to bundle with future versions of R/3. SAP’s efforts center around an initiative dubbed Scope, for supply chain optimisation, planning and execution, really a melding of SAP’s existing products for the supply chain market into a more easily identified and marketable offering. SAP expects to charge Scope customers a $100,000 one-time integration fee on top of the standard R/3 user-based package price. What is new about Scope is an Advanced Planner and Optimizer module, slated for mid-98 delivery, and it’s this that is bad news for i2. However, given the huge demand for supply chain planning, there appears to be plenty of room for specialists to prosper. And investors have been reassured lately with i2 adding a $24m deal with Texas Instruments Inc, and multimillion sales to VF Corp (the name behind the Wrangler and Lee brands), Compaq Computer Corp and Philips Semiconductor Inc to an already impressive customer list. Market capitalization of the Irvine, Texas-based software supplier now stands at a striking $1.478bn, based on a $50 share prices, thanks to even more impressive sales growth approaching 150-200% this year. i2 is expected to earn about $.45 a share in 1997 and at least twice that in 1998. Meanwhile, PeopleSoft Inc, which acquired Red Pepper Software Inc for $225m last year, says it has now tied the ResponseAgent supply chain software of its Red Pepper application units into SAP’s manufacturing suite via a Databridge interface certified for use with R/3, enabling customers to pass information between the two.