Blue Yonder looks beyond supply chain integration - interoperability key to true business value

Derek du Preez Profile picture for user ddpreez October 16, 2023
Blue Yonder is rearchitecting its software suite on Snowflake’s data cloud, so that customers can get real visibility into their supply chain.

Logistics, supply chain and delivery service concept : Fork-lift truck moves a pallet with box carton. Van on a laptop computer, depicts wide spread of products around globe © William Potter - Shutterstock
(© William Potter - Shutterstock)

Supply chain vendor Blue Yonder is undergoing a major transformation, following its acquisition by Panasonic, in a deal that was valued at approximately $7 billion. The company is now being led by Duncan Angove (CEO) and Corey Tollefson (Chief Revenue Officer), both of whom have a long history of working together - most recently at Infor, where they were directly involved in the turnaround of what was once a stagnant vendor into a leading ERP SaaS company. Infor ended up being sold to Koch Industries for approximately $13 billion, which is a testament to the change programme that the pair were involved with at that organization. 

Simply put, Angove and Tollefson have a good track record and with their leadership at Blue Yonder it’s worth paying attention to what their ambitions are. We spoke to each of them individually last year, where Angove highlighted the need for a best in class supply chain vendor in the market, and where Tollefson spoke about competing on service excellence. However, it’s now a year later and we got the chance to sit down again with Tollefson at the company’s user event in London last week to discuss how things are progressing. 

The key takeaway from the discussion is that Blue Yonder is rearchitecting its entire supply chain suite, to be built on Snowflake’s data cloud, in partnership with Accenture. With customers’ production data sitting in Snowflake, based on a multi-tenant architecture, Tollefson argues that organizations for the first time will not have to rely on data integration points to stitch together their supply chain functions, but rather will have an interoperable suite that gives full visibility end-to-end. 

The investment in this transformation project is estimated to come in at approximately $1 billion and Tollefson said that the whole of Blue Yonder is now reorganized around being an engineering-led, software development house - rather than one being led by sales. 

Tollefson said that when Blue Yonder was acquired by Panasonic, the thinking at the company was that most of the value would be derived from Panasonic’s experience in digital devices and pushing those out into the Blue Yonder ecosystem. And whilst there is still opportunity there, Tollefson added that Panasonic soon realized that there was much more value to be gained on the software side. The key, however, has been delivering a strategy that is a step-change for the business, rather than one that’s just incremental. Tollefson said: 

They asked us: how much do you need in terms of capital investment to transform Blue Yonder? And we said: we need a billion dollars. And that's just for development. That's not for anything else. 

And of course they asked: ‘How would it be game changing?’ And Duncan said, we're going to be the first company to build our apps on top of Snowflake. Not integrated into a data cloud, anyone can do that. We are building our data model on Snowflake. 

This is what led to the investment strategy between Blue Yonder, Snowflake and Accenture. According to Tollefson, Accenture CEO Julie Sweet recognized that there is plenty of pent up demand for supply chain in the market, with little full suite opportunity for buyers - just point solutions that tackle components of supply chain, or large scale ERP vendors that are ‘just good enough’, rather than best in class. He added: 

Accenture did co-development with SAP back in the late 2000s. They did co-development with Salesforce and Workday. And now the key for them is taking a next generation supply chain system to their customers. 

Blue Yonder’s thinking is that whilst you can go and buy a best of breed demand planning, best of breed WMS, or a best of bread OMS, and get an SI to tie it all together, or use a platform like MuleSoft to do it yourself - no one is offering all of these as an interoperable, multi-tenant suite, hosted on a data cloud, which creates network effects and delivers multiples of value thanks to the visibility that can be gained. Tollefson said: 

There's a difference between integration and interoperability. Interoperability means one plus one equals five or eight. That's what you get when you have demand planning that impacts your order orchestration and fulfillment - and ultimately the WMS. When those are all working in concert together, there's business value there. Anyone can integrate this stuff to work together. In fact, we already have pre-built integration to HANA and the latest release of Oracle. But that's just data integration. It's not business value.

If, for example, a retailer has something like 33% of their inventory sitting in someone's car that might come back to them - now you're gonna have visibility into that. On the demand planning suite, maybe we'll look through your history and know that 30% of that style comes back anyway, because people buy it and then they return it, which helps inform your business purchasing decisions.

A supply chain suite

Tollefson explained that Blue Yonder has acquired many of the features and functions necessary for an end-to-end Supply Chain suite over the last 20 years, but it's just never been reengineered into a coherent, composable architecture that’s useful for customers. This is the reason the Snowflake announcement is so significant. He added: 

And the reason why it's on Snowflake, is because we want to change the paradigm from integrating best of breed, and integrating data into other best of breed, to now being able to point your apps to the data. So all your production data is in Snowflake. And you presume your production data is clean, right? 

We estimated that 50% of an implementation is just simply cleansing data, transforming data, loading data - and now all of a sudden, it's in production. Now we can snap on applications fairly quickly.

The Accenture/Snowflake partnership was announced in the middle of this year. And since then Blue Yonder has spun up over 300 scrum teams and will have its first release in December 2023 - it is investing $1 billion in new product innovations over the next three years. Tollefson said that one could argue it was the “biggest release in the history of the supply chain industry” - and since then it has been getting customers live on some of the new apps. 

One of the biggest benefits of building the new applications on Snowflake, Blue Yonder believes, is that it makes it easier for CIOs and buyers to decide on a best of breed system that isn’t tied to their ERP provider. Typically if a buyer uses an ERP from a certain vendor, they may be tempted to just use the supply chain offering from that vendor because it’s an easier implementation. Tollefson said: 

They don’t care that the ERP provider is three or four years behind Blue Yonder in terms of features and functions, because it's easier to deploy. But now you have your ERP data sitting in Snowflake, that argument the CIO makes goes away. The production data is right there, and they'll end up choosing what the best thing is. 

However, Blue Yonder isn’t demanding that customers take on the whole supply chain suite if they don’t want to. Of course that would be preferable, but ultimately what the vendor is doing is making the code more composable so that customers get more benefit and value out of their systems. And this will deliver other advantages down the line too, it believes. Tollefson explained: 

The other thing is, there’s network effects. Kroger is one of our top customers in the United States. Well, guess what? All of Kroger's partners are using our applications too, in some way, shape or form. 

What happens when we put all that data in Snowflake? Now there's some network effects. You can start telling your customers, such as Kroger, if you’re a manufacturer: ‘we're out of stock here, we’ve got production issues here, that's going to impact your store in these locations’. That ability to share information in real time gets really sexy.

An engineering organization

Underpinning all of this is Duncan Angove’s strategy for Blue Yonder, which has been reorganized to focus on engineering and product development, rather than marketing, finance or sales. 

Angove is the first engineer to be CEO at the vendor for twenty years, with the position previously being filled by finance or sales leaders. Tollefson said: 

Duncan’s now saying we're bringing in an engineering focus. One of the first things he said is: roadmaps are locked. Nobody can adjust it. Nobody. Strategy can't do it, sales can't do it.

And one of the dirty secrets in enterprise software, is that if a salesperson needs to close a deal, they'll guarantee ‘we'll do this for you, we’ll do that for you’. And what happens is your roadmap is constantly moving. 

And then what happens is your development teams never execute on the roadmap because it's constantly in flux. And that's one of the reasons why innovation doesn't happen as quickly. So Duncan is the only person that can change our roadmap. 

The second thing Angove has done is create what Tollefson calls a ‘say-do’ culture. What this means is that every month the entire executive team meets with the development team, where the development team explains what they’re going to develop over the next 30 days. At the end of that period, they come back and show the executive team what they have done and the executive team provides their thoughts, creating a consistent feedback loop to ensure that everyone is aligned around the product. 

And then thirdly, Angove has also made the Blue Yonder executive team pull all of its statements of work for what it calls its ‘transformative customers’. Tollefson explained: 

We have go lives all the time, technical go lives - but we had 200 transformational go lives in the last 12 months. These are bigger projects. And we looked at all the SoWs, all the areas of labor, and asked why hasn’t this been codified or digitized? So we're constantly looking at ways of shrinking that statement of work and turning that into product, so that customers don't need to do it.

Tollefson said that Blue Yonder is laser focused on delivering value to its customers and is making sure that it is fully invested, even when it comes to its commercial arrangements. For instance, some customers will pay a baseline figure, a flat fee, to get into the system, but then the rest of the fees are placed ‘at risk’. This means that if a customer gets $50 million of benefits from Blue Yonder, the vendor will take a percentage of that. He added: 

When you have those kinds of conversations the whole argument of ‘well, you don't have any skin in the game’ goes away - we have a lot of skin in the game.

Blue Yonder grew by 40% last quarter, year over year, which is its best quarter in its history. Tollefson put this growth down to the vision the company now has - something that has perhaps been lacking in the past. In addition to this, he argued, there is an executive team in place that can execute on this vision and the company is hiring talent from the likes of Facebook and Google to help accelerate it. 

When asked what the vision for Blue Yonder is in three or four years time, Tollefson said that it isn’t to make the company compelling to another buyer, but rather become the supply chain vendor that consolidates the market and is the best and only choice for a full supply chain suite. Tollefson finished by saying:  

What we want to do is we want to be the juggernaut. We’re doing roughly $1.2 billion a year in annual revenue. But the market is so hot, we should be doing a lot more than that. We want to be the company that aggregates the space.

My take

Much of what Tollefson describes in terms of how buyers think about supply chain rings true. The conversations we have with end users often lead to complaints about visibility and having to tie fragmented pieces together in order to ‘make something work’ - but struggle to get true insights end-to-end. Often processes rely on manual workarounds and limited data. Making a suite purchase an easy option for CIOs and other buyers, by building on Snowflake, is smart. It reminds me of how Infor decided to build its applications on AWS, so that buyers already using AWS felt comfortable to make that move. The opportunity is clearly there for Angove, Tollefson and Blue Yonder as a whole - now it’s just down to focus and execution. 

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