Questions & Answers: Greg Brady, chief executive, i2

"Some people change chief executives because they are in a position of weakness, others because they are in a position of strength."

So says Greg Brady, the newly appointed chief executive of business-to-business (B2B) supply chain management company, i2.

The former company president is quick to dismiss as pure coincidence the fact that he took over the helm from outgoing chief executive Sanjiv Sidhu in the same week in May that rival Ariba decided to swap its top dog.

But the two companies have been mirroring each other's tactics for more than a year as they squabble to expand their share of what AMR Research defines as the enterprise commerce management market, which it claims will be worth $264 billion by 2005.

We're talking about enterprise resource planning (ERP) but extended to include applications and services that companies are using to connect their suppliers and partners.

Ariba and others such as Commerce One have been trying to dominate the ECM market from their position of strength in procurement - supplying software to allow companies to source materials and services.

i2 has grown out of the area of supply chain management - software to control the movement of materials, information and finances as they travel from supplier to manufacturer to wholesaler to retailer to consumer.

Both Ariba and i2 have cut staff, missed revenue targets and attempted major acquisitions.

Unfortunately, while i2's purchase of procurement firm Rightworks was a success, Ariba was forced to pull out of its attempted buyout of raw material supply chain specialist Agile. If it had succeeded, it would have enjoyed a major leg-up into the supply chain space. Fortunately for i2, the procurement specialist's stock took a nosedive shortly before the deal was due to be approved.

But now with Ariba fighting rumours of a buy-out, Brady has inherited an i2 free from the pressure of a former competitor. But there are still battles to be won, with Commerce One and Manugistics still very much alive.

The former Oracle man will also have his work cut out with his eventual aim: to challenge ERP giants such as SAP and PeopleSoft.

Computing: i2 and Ariba used to have an alliance that has basically been dissolved now. Was it fair to take on 12 mutual customers, given that you were always destined to move into each other's markets?

Greg Brady: Our only problem with Ariba was that it kept stating it was going to get into our space. It made an acquisition, it did partnerships, so it was kind of in our face. I just want to own this new backbone and provide the management of an order across the network. I will support Ariba as an onramp to that system forever or as long as it is a major force.

C:If we accept that you've grown out of your struggle with Ariba, who do you see as the competition in the future?

GB:I think our competition is what the ERP guys are known for, FUD - fear, uncertainty and doubt. It is all based on the ERP guys trying to make out that the ERP model is the right model.

C: What is your problem with ERP systems at the moment?

GB: i2 is saying that there is a real flaw and fallacy in existing ERP applications. If you look at large companies, there is not one single enterprise in the world that has its whole system on one ERP application. Siemens has hundreds of SAP installations, IBM has seven, I think, and Compaq has 10 plus.

When you look at these large companies, they have no common face to the customer. Their sales force cannot sell across different divisions' products.

They cannot co-ordinate products within their own company, let alone third-party products.

C: What are you suggesting as a replacement?

GB: We stood back and started buying the components necessary to do this.

Our strategy is that ERP is there and we should support it because companies have spent four, five, six hundred million dollars implementing it. So to say it is wrong and we are not going to embrace it is crazy.

We are putting a layer on top of it that will allow any number of transaction systems to work together as if they are one, and to allow new divisions just to use that layer and not have to put in the old ERP system.

We will be able to do the complete commerce solution: the buy, the sell and the fulfilment inbetween.

C: Do you think you can really take on the ERP vendors on your own?

GB: Our focus is to provide the backbone and then use partners to provide lots of stuff around it. We did a big deal with Wells Fargo and Citibank on the financial settlement side of the equation.

It is a perfect example of where ERP concepts are just old. If I come to you and say I want to buy your product and agree that I will pay when you ship it, the system should be able to track it and a financial transaction should occur that gets bank one to pay bank two.

Today a lot of paper shuffling goes on behind the scenes, trying to figure out how to match the purchase order to the receipt. For retail it is the most inefficient thing they do, because it doesn't integrate with the rest of their process.

C: What was the reason for replacing Sanjiv Sidhu?

GB: Once we thought we were far enough along to take on the ERP guys head to head, we made a conscious decision that it would be time to reorganise the company and step on the gas.

C: So, it wasn't just an attempt to appease shareholders after you laid off 10 per cent of your staff in April?

GB: We announced at our quarterly call that we were going to trim the fat but not cut the muscle. We are only going to go through that process once; it was about getting our act together more than cutting back.

C: Given the downturn in the economy that has already hit the US, do you think European companies will want to buy into your potentially disruptive technology at such a sensitive time?

GB: The difference between the US and Europe is the US moves faster on trends.

However, European companies think through the trend more effectively - so they may be a bit slower on the uptake but they usually end up doing it and doing it right. The US is more of a trial-and-error kind of environment.

C: So which one is the right approach?

GB: At the end of the day, it's the one that works, right? I think there are successes on both sides.

i2's highs and lows at a glance

• The company's software helps manufacturers plan and schedule production and related operations such as raw material procurement and product delivery, but also allows companies to create electronic marketplaces that link employees, customers, suppliers and trading partners.

• i2 serves customers including DaimlerChrysler, Ford and Barnes & Noble in industries including automotive, software and semiconductors. i2 has used its position in supply chain management software to expand into related fields, including procurement and customer relationship management (CRM).

• The company suffered a major setback in February when Nike blamed its TradeMatrix product for the shoe manufacturer missing its quarterly earnings target. The companies eventually settled their differences, but not before i2 lost 22 per cent on its shareprice.

• i2 signed a high-profile deal last month to integrate its CRM software with Sun Microsystems hardware and web services. The combined suite is being developed in tandem with iPlanet, the joint venture between Sun and Netscape.

• The firm is expected to announce a partnership with a CRM vendor in the near future to strengthen its position.

Summary

• Supply chain specialist i2 is challenging the ERP giant

• Chief executive Greg Brady says ERP is essentially flawed

• Brady is credited with being the guiding force behind i2's successful IPO

www.i2.com