Software applications are often referred to as "tools," and just as with any tool—say, a hammer or table saw—you have to use them properly to get good results. Although it's relatively quick to teach someone how to wield a hammer, that's not the case with most software applications. Sure, the vendor may provide support in the form of classes or training, but the user still has to spend time learning how to use the software.
But in recent years, a few supply chain software vendors have begun offering clients another option for using their apps—a service in which the vendor runs its application on the customer's behalf for a fee. These arrangements are known as "managed services," a term that comes from the information technology (IT) sector, where this has been common practice for years.
This past September, at the annual global conference of the Council of Supply Chain Management Professionals, JDA Software Group Inc. of Scottsdale, Ariz., announced plans to begin offering managed services for its transportation and logistics management software. In its announcement, JDA said it was targeting its new offering to companies that wanted to incorporate transportation management software (TMS) into their operations but lacked the IT and capital resources to do so.
By the way, JDA's new transportation offering is only its latest foray into managed services. The vendor has been offering this option for some of its other software apps for years now. In the supply chain software area, for instance, the company has been providing managed services for its supply chain design solution for about five years and for its carrier bid procurement application for seven, says Dawn Salvucci, a product director at JDA.
Although JDA made a splash with its recent announcement, it isn't unique among supply chain software vendors in taking this route. Several other software providers have been quietly offering managed services for some time now. GT Nexus of Oakland, Calif., for instance, offers managed services to clients of its trade and logistics pOréal. Greg Kefer, the company's director of corporate marketing, says about a quarter of the company's customers retain the vendor's data services organization to manage the network for them. For these clients, GT Nexus handles tasks like partner integration and data standardization to ensure that data quality remains high, which is critical for supply chain visibility. Kefer adds that GT Nexus employees also work alongside select customers to help them manage the freight spend process from initial bids through freight bill auditing.
Another software vendor that provides managed services is i2 Technologies Inc. of Dallas, which offers support to users of its planning and forecasting apps on a contract basis. "We provide the pilot and plane with managed services," says Adeel Najmi, a vice president at i2.
For a monthly fee, i2 personnel will use the software to develop sales forecasts for individual stores down to the stock-keeping unit (SKU) level. "We take over the day-to-day work of maintaining the (forecast) model, publishing the plans, and doing the analytics," says Najmi. Although i2 employees develop the plan, he notes, the client still reviews and "blesses" it.
The service is not new; i2 has been doing this for five years now. So it's interesting to note that JDA, which is now jumping into managed services in a big way, announced last month it would be acquiring i2 for some $396 million. Among other benefits, the deal paves the way for the two to work together on managed services.
It appears that JDA's move comes at an opportune time. Najmi says he's seen an uptick in interest in managed services in recent months, particularly among consumer packaged-goods manufacturers. As for what's driving the interest, he believes it's the prospect of speedy access to the information his time-pressed clients need for decision making. "The number one reason (for the current interest in managed services) is the time to value," he says. "We can get them seeing results quickly."