Electronics multinational Panasonic Corporation has announced the acquisition of digital fulfilment and supply chain management specialist Blue Yonder, formerly JDA Software.
Panasonic - which has hardware and software strengths in industrial engineering, automation, the Internet of Things (IoT), and edge technologies - acquired the remaining 80% of Scottsdale, Arizona headquartered Blue Yonder on 23 April for $5.6 billion ($7.1 billion with debt repayment), having picked up a 20% stake in July 2020. The acquisition should complete in the second half of this year.
Blue Yonder CEO Girish Rishi tells diginomica that his company will continue operating under its own name beneath Panasonic's umbrella. Both companies see a strong - if to outside observers unexpected - fit, as the IoT and edge services spread and supply chains become smarter, both locally and globally.
The dance began with an exploratory partnership in January 2019, when Panasonic was a JDA Software customer, followed by a joint venture in Japan that Spring. Panasonic then announced it would take a minority stake and a seat on what was now Blue Yonder's board in May 2020, completing the move last July.
Rishi fills in the blanks of the story and says:
Three years ago, Panasonic had decided to upgrade their supply chain capabilities in one division, and our team worked with them to lay out what that evolution looked like. They became our customer, their management team met here with us and we talked partnership.
I floated the idea of a potential joint venture because Japan is a big market. We had a good presence there, but as an American company having an iconic Japanese company to partner with was an advantage, and they agreed to it. That led to us announcing the joint venture in Japan in March 2019.
Now the full acquisition completes a five-year transformation under Rishi's leadership of the former JDA Software. During that time, it has shifted from being a solid enterprise supply chain player with no cloud strategy into a cloud platform valued at $8.5 billion, informed by the AI, machine learning, and predictive systems of Blue Yonder, the data science company which JDA acquired in 2018 (adopting its name in February last year).
Rishi looks back at the journey and adds:
The two big assets that JDA had [when I came onboard] were our supply chain talent pool or associates and our portfolio. But two weeks into the job I got very concerned about the viability of the company. In 2017, it did not have any cloud strategy or cloud product, or a cohesive, cross-functional path to elate our customers. It was living off its legacy. And I said, ‘We have 18 months here to change things.'
We began by reinventing ourselves, which started with our values. We changed our cloud platform to Microsoft Azure, and we put together a provocative portfolio strategy that was very different from other enterprise software companies. And that has to do with the edge.
Especially in pandemic times, the supply chain happens at the point of impact, in the warehouse, in the truck, in the retail store, at your doorstep when things get delivered, and we wanted to build a cloud company that was focused on the edge. And five years later, that's the manifestation you're seeing.
IPO plans scrapped
Yet Panasonic's takeover of the company comes barely a month after Blue Yonder made its S-1 filing with the US Securities and Exchange Commission (SEC), signalling its intention to go for IPO. What happened to that plan?
We were on a singular IPO path and we submitted our S-1 to the SEC three weeks ago. Panasonic approached us when we were on that path. We evaluated their proposal, and their strategy to leave us standalone within the company to progress the vision of an autonomous supply chain. We already had cultural alignment over the last three years, so there was a lot of mutual trust between the two teams.
We had had interest from very large companies to acquire us in the last year, in the last couple of months, but as we evaluated our options we decided to go with Panasonic. This was a management decision that we recommended to the Board of Directors.
They have the capability, sensors and IoT on the edge that will be part of our ecosystem. We looked at everything - the valuation, but largely the welfare of our customers and associates, and the standalone aspect of the entity within Panasonic was attractive to us.
That said, Rishi acknowledges that acquisition did not come completely out of the blue. When Panasonic took its initial, unsolicited stake last year, it apparently hinted that it might be interested in acquiring the company.
Now that it's a done deal (subject to regulatory approval), will Blue Yonder become a sales channel for Panasonic hardware at the edge? And will Panasonic sell Blue Yonder solutions into its supply chain and retail customers, on the back of its IoT/edge presence?
Rishi is at pains to keep all existing relationships open. He says:
That hasn't been planned. We want to be careful, because we have a very strong ecosystem base, who have similar offerings. So, it's natural that where tools are available, where that happens, we will encourage and work with that, but not at the cost of working with other ecosystem partners. Panasonic has an ecosystem of other software providers, and we don't want to encumber that either.
Panasonic is a pit stop. There have been no big celebrations, it's a pitstop. What was attractive to us about going under the Panasonic umbrella is that our vision, our strategy, our culture will be preserved, and it will get accelerated. We will organically, and very selectively, continue to build a company for posterity's sake.
Panasonic aside, how has 14 months of pandemic treated Rishi's company, since it became Blue Yonder last February? In July 2020 - as Panasonic's minority stake completed - Blue Yonder acquired SaaS commerce and fulfilment microservices provider Yantriks.
Since lockdown #1, Rishi says that 134 new customers have joined a roster that includes Walmart, DHL, Petco, Diageo, and Marks & Spencer. That customer list maintains the longstanding balance of 50 percent retail, 40 percent manufacturing, and 10 percent third-party logistics, with no single client contributing more than five percent of revenues. He explains:
The pandemic has proved to us that we are an essential platform. At the end of the day, we deliver food, water, clothing, medicines to families worldwide. Our customers have one mission to deliver, effectively, efficiently, their goods to consumers, and we have stood up agile capabilities.
As the virus was blanketing the Earth, we were overlaying factory floors, warehouses, fleets, retail stores, identifying inventory and dispatching it closest to the consumer. And we did that with manufacturers, we did that with logistics companies, we did that extensively with groceries and pharmacies. We have accelerated our roadmap.
So where next on that roadmap? Rishi says:
I don't like big, big transformational acquisitions. We like tuck-in acquisitions that add to our capability and to our talents, and you may see that. You will see us come out in the logistics execution space, even more so than you've seen.
In 2021-22, we want to come out with some provocative offerings that are attuned to today's world. I don't want to open the kimono too much, but you will see greater representation of our open platform, where we incorporate our partner ecosystem a lot more.
That's a huge change from two years ago. The partner ecosystem, and nurturing our partner ecosystem on our open platform, will be a big area of emphasis.
Abandoning IPO for acquisition when customer numbers and cloud supply chains are soaring is a bold move, albeit one that leaves Blue Yonder only having to keep a single, supportive shareholder happy.