Retalix Acquires Integrated Distribution Solutions

Analysis of News Events
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On April 1, an Israel-based software vendor let the world know that it intends to be the dominant solution provider to the food distribution and food services industries. The vendor, Retalix, announced that it has acquired the assets of Integrated Distribution Solutions (IDS), the leading provider of iSeries-based solutions for food distributors. Retalix also announced an agreement to acquire TCI Solutions, a provider of strategic pricing and inventory management software for grocery stores. With the acquisitions, Retalix is positioning itself as the one vendor that can most effectively synchronize entire supply chains for grocers, convenience stores, and food services firms.

While Retalix may be a new name to many iSeries customers, it is well known among companies in the retail food industry. For over 20 years, the vendor has been developing software for grocery and convenience stores as well as for fuel retailers. However, the company has lacked a solutions suite for the distributors that supply its customers. That picture changes with the acquisition of IDS, a food distribution software specialist that netted over $27 million in software revenues last year. Retalix paid $44.4 million in cash and stock shares to acquire the assets of IDS and gain the industry expertise of its 240 employees. With the acquisitions of IDS and TCI Solutions, Retalix will become a company with over $170 million in revenues and more than 1,000 customers across 50 countries.

As the executive team at Retalix has been quick to emphasize, IDS will play a substantive role in the company's growth plans. Indeed, as I learned from IDS President Todd Michaud, the iSeries software vendor will become the core of Retalix's new Supply Chain Solutions Division, a group that will be led by the IDS executive team. In addition, Retalix is offering jobs to all members of the IDS development and support teams. These teams will enhance and support the company's Power Enterprise solutions suite--including all iSeries applications--in line with the plans and policies that were in place before the acquisition.

In addition, the IDS teams will take charge of a portfolio of supply chain and warehouse management applications that Retalix gained when it acquired OMI International last year. The applications, which run on UNIX servers such as IBM's pSeries, will give Power Enterprise several new capabilities. For instance, OMI's MDS helps distributors to manage shipping yards and docks, while CAIRO helps to optimize stock picking by warehouse employees. According to Michaud, the IDS team will integrate these and other capabilities into Power Enterprise as it modernizes the OMI product line. This does not mean that Retalix will port the OMI products to OS/400; instead, the company will continue to run the products on UNIX operating environments. Since one of those environments is AIX, Retalix will be able to integrate IDS and OMI applications on AIX and i5/OS logical partitions within IBM's eServer i5.

As Retalix uses IDS to expand its supply chain management capabilities, the merged firms will also enter markets that are new to them. For instance, IDS will use the worldwide customer base of Retalix to expand its operations in Europe, Latin America, and Asia. The combined firms may also expand into industries such as beverage and consumer products distribution.

In addition, Retalix's greater size and product breadth will make it a more attractive choice for grocers, convenience stores, and restaurant chains. For such firms, Retalix can now offer a full suite of supply chain management applications as well as a more robust set of retail solutions. Much of the additional retail functionality will come from TCI Solutions, a firm that specializes in software for merchandising, product pricing, and promotions.

In short, Retalix's acquisition of IDS and TCI Solutions enables the software vendor to integrate food supply chains from wholesale distribution centers to the point of sale in several industries. This will make Retalix more competitive with software vendors that focus on being "best of breed" supply chain software vendors but lack food industry expertise. Such vendors will continue to do well in other industries but could have a tougher time gaining new food industry accounts.

As for the companies in that industry, Retalix will now be higher on their short lists. The company will even gain greater consideration among many of the largest grocers and food service firms, especially those that are looking to integrate the operations of their distributors more tightly with their own. As Retalix figures more prominently in the IT plans of these large firms, it will also become a competitor to Oracle and SAP, the giants of the enterprise application market. Since both companies have made enormous investments in the distribution software market--including Oracle's recent purchase of Retek--they will undoubtedly be watching Retalix to see what it does next.

On the whole, I believe that Retalix's acquisition of IDS will prove to be positive not only for the company, but also for iSeries customers and the iSeries itself. Since Retalix is asking IDS to guide its supply chain management strategy, the chances are good that the combined firms will build a more robust suite of supply chain solutions around IBM's midrange server. It is also likely that IDS will lead Retalix into a closer partnership with IBM and the iSeries Division. While this is just a forecast, it is one that I feel confident in making. I also have a hunch that many IBM executives are getting that same confident feeling.

Lee Kroon is a Senior Industry Analyst for Andrews Consulting Group, a firm that helps mid-sized companies manage business transformation through technology. You can reach him at This email address is being protected from spambots. You need JavaScript enabled to view it..