Q+A: i2's European chief operating officer Jim Contardi

Jim Contardi, the European chief operating officer at i2, has witnessed the good times and the bad times at the supply chain software specialist. He remembers the boom days of the late 1990's and early 2000 when the organisation generated annual revenues of $1bn and employed 6,000 staff.

But all that has changed. The company spent last year axing half of its workforce and watched its profits dwindle, while addressing questions about accounting regulations.

In June, Contardi moved from the US to try to boost the company's European business. Now he believes the company has turned a corner and will return to the privileged position it enjoyed a few years ago.

The demographics of the supply chain sector have changed in the past couple of years. How does i2 now position itself?

We have realised that what we do best is supply chain management, so we pitch ourselves as a supply chain management business. I think the world has become a bit more sophisticated about what supply chain means. Now, even in the business person's thinking, it includes connections between suppliers and customers and the business processes that connect to them. There is going to be evolution in supply chain and we intend to be part of that evolution, but we are no longer trying to be all things to all markets.

How big is the company today, and how does that compare to your peak?

We have 3,000 staff and revenues of around half a billion dollars. At our peak we had 6,000 people and over $1bn in revenue. We were managing the business for growth when the market was growing rapidly. We are now managing it for efficiency.

You made a profit in the fourth quarter, but analyst Gartner says you still have a lot of challenges in the coming months and years. What do you perceive to be the biggest challenges?

2002 was really a year of transforming the business. 2001 and 2002 saw a pretty dramatic cut in spending by our customers. Last year we managed to stabilise the business and broke even.

2003 really represents a period where we need to become more efficient as an organisation. We have made changes and altered our focus and we have to build ourselves around that and become more effective. We feel 2004 will really be the year that we can turn on the growth engine and start building market share.

The industry is predicting wide-scale consolidation in the short to medium term. How will this impact on the supply chain sector?

We are starting to see a divergence. There will always be a call for the small start-ups with a very good idea. And there will always be room for the bigger companies because IT directors want products they can count on in the future. It's the middle space that will go away, and it's anyone's bet who will survive. These companies will either go away or become big companies. We believe we can go from where we are today and get to be one of the biggest providers of enterprise applications.

So how long will it take to do this?

If you look at our current state and apply the market growth rate, pretty soon the company becomes $1bn, without much time passing. This will take a period of years. We'll become a large company in a relatively short period.

You still have a problem with perception though, and your accounting practices are being investigated by the US Securities and Exchange Commission (SEC) at the moment. How are you dealing with this?

Some ex-employees made claims about our accounting in 2000/2001. To make sure that was a non-issue, we elected to go through and check back. Because Arthur Andersen - our auditor at the time - is no longer in business, we couldn't go back and get them to do it. We chose to do this out of integrity and told the SEC who are now conducting an informal enquiry.

You have just moved from the main Nasdaq exchange to the Nasdaq SmallCap, which is for smaller companies. How concerned are you about this?

Nasdaq has rules about stock prices and shareholder quality. As a company we could have done some engineering to stay on the main board, but we didn't see there would be any particular benefit for shareholders or customers to do this. This is likely to be temporary, but it's not important.

Most experts say that in difficult times IT directors move away from best-of-breed software to packaged, integrated applications. How would you respond?

We are focusing on partnerships with business process companies, or system integrators such as IBM Global Services, Cap Gemini Ernst & Young and Accenture. We believe the age of pre-packaged enterprise applications is ending. IT directors won't put up with that anymore, and that will make it hard for SAP, for PeopleSoft and Oracle.