i2, webMethods Expand Partnership

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March 12, 2001 (3:16 PM EST)

I2 Technologies Inc. and webMethods Inc., both large players in the business-to-business software market, said Monday they have expanded their partnership to make webMethods the preferred integration platform for i2 supply chain applications.

Under the agreement, the two companies will resell and co-market each other's products, and form a business unit focusing on product development. I2 (stock: ITWO) plans to sell its TradeMatrix software incorporating webMethods technology by the third quarter of this year.

Phillip Merrick, chief executive officer for webMethods (stock: WEBM), said the four-year contract could generate as much as $100 million of additional revenue.

I2, Irving, Texas, specializes in software that can run online marketplaces and help manufacturers collaborate with suppliers to better manage inventory and improve factory planning.

WebMethods, Fairfax, Va., sells integration software that can automate the process of buying and selling online by connecting organizations' ERP systems.

Joanne Friedman, industry analyst for the Meta Group, Stamford, Conn., said the partnership will supply more tools for each company's IT customers to automate their supply chains.

Within the market, the partnership could present a serious challenge to i2 rivals Ariba Inc. (stock: ARBA) and Commerce One Inc. (stock: CMRC).

However, Friedman cautioned that i2 and webMethods together still don't let manufacturers and suppliers collaborate on all levels of product design, manufacturing, inventory, and shipping.

As an integration platform, Friedman said webMethods is "some of what it needs to be."

Simon Yates, industry analyst for Forrester Research Inc., Cambridge, Mass., wrote that i2 is "throwing in the towel" on building its own integration tools so it can focus on its core business of developing software for collaborative planning, forecasting, and replenishment of supplies and collaborative product design.

However, the arrangement does little to alleviate the reality that most third-tier suppliers lack the technological sophistication to conduct business effectively online, Yates said, noting that "your supply chain is only as good as your weakest link."

Yates agreed with Friedman, saying webMethods "must expand its capabilities to model, implement, and support sophisticated business processes."

Also as part of the deal, webMethods issued a warrant to i2, giving it the right to purchase up to 750,000 shares of webMethods common stock.

In late afternoon trading on the Nasdaq, webMethods stock was at 24.75, down 0.9375, or 3.65 percent. I2 Technologies was at 18.875, down 0.625, or 3.21 percent.