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CEO Spotlight: Cyrus Hadavi, Adexa Software

By Angel Mehta, Managing Director, Sterling-Hoffman Management Consultants

Angel Mehta: Let's talk about the early days...Where did the original intellectual property for Adexa's core offering come from?

Cyrus Hadavi: I was at the University of Michigan for about 5 years or so until 1983 when I got my Ph.D. and then started working for Siemens Research Labs in Princeton, New Jersey. Back in 1983, I started to combine ideas from what was known at the time as Artificial Intelligence, and began applying them to real-life manufacturing issues. In other words, how can one create systems that can enable human beings to make the right decisions, work at a very high speed using some of the Artificial Intelligence techniques, and so on. That led us to build a prototype which essentially was a building planning system for very complex environments namely, semiconductor manufacturing and semi-conductors in general. You have 800 different operations as opposed to 3 or 4 in typical discrete manufacturing a problem that nobody had been able to solve before, so we actually created the algorithms as well the system for Siemens internal operations. So it was a successful transfer of technology from research labs into an actual working environment....

Angel Mehta: That doesn't happen often....

Cyrus Hadavi: No, it doesn't so it was very exciting for all of us. Our success basically continued inside Siemens because that same system was upgraded and transferred into other divisions of the company. Anyway, by 1992, I left Siemens and joined a small company (small at the time) called i2...I think was employee # 12. I was there for two years, running implementation and professional services. The company grew very quickly, as you know Angel...

Angel Mehta: So why did you leave? I can understand leaving a company that wasn't doing well, but given how quickly i2 was growing....

Cyrus Hadavi: Back in 1994, I felt strongly that the supply chain problem as a whole is very complex and needed to be looked at differently than i2 was doing. That was one reason. The second reason, which was equally as important, was that I always wanted to start a company....I was afraid I'd become 80 years old and look back and wish I had done it. So I did.

Angel Mehta: Let's talk about the supply chain market in general....it's littered with the corpses of dead supply chain vendors right now. So I'd ask, do you think that when venture firms poured all this money into the different supply chain plays, did they over-estimate the size of the market, or the severity of the problem? If not, what's going on?

Cyrus Hadavi: Well first, I don't agree at all that the market for supply chain is saturated. It depends on how you view the category. Sure, there are a lot of companies in the supply chain space that are very small ... or that there used to be, anyway. But these companies were mostly in supply chain event management which is a very simple problem. It's a system that can essentially send messages when something goes wrong. It's just about tracking and signaling what they need; any database can do that, and that's why you've got such a proliferation of these companies. They all died (or are dying) because there was no real value embedded in it. What we do is essentially modeling the manufacturing environment and the supply chain.

Angel Mehta: What exactly do you mean by modeling?

Cyrus Hadavi: Think of it this way: human beings are "intelligent" because they have models of the world inside their head. So if I want to go to the airport, I have a model of: I can get there by cab, or I can get there by walking whatever it is. And it's going to take me 2 hours to get there or 1 hour to get there, depending on which method I use to travel. Based on that model of how I plan my trips, I can plan the future. That's what I mean by "intelligence" the ability to model and, based on that model, to extrapolate and project the future. That's the difference between what we do and what the supply chain event management vendors do we give the ability to model the environment and extrapolate a view of the future that allows for decision making. Only a handful of companies even claim to do this. I2, obviously, and Adexa. But the kind of domain knowledge that Adexa has gathered....from over 100 customers....it's not easily available.

The problem with i2 is, they tried to address a very new and complex problem with very old technology. They made a lot of commitments that they could not keep...they over-promised, and tried to deal with it by acquiring lots of different smaller point offerings. Bringing those solutions together was just extremely hard, and it was too little too late.

Angel Mehta: So Adexa is better off for having grown organically?

Cyrus Hadavi: Actually, yes. The solution is a unified data model, which really leads to a much lower total cost of ownership. So back to your question of the market size, with the supply chain problem as a whole, it's not going to go away...It's very fundamental to every manufacturing company, and if anything, it's becoming more complex not less complex. The current estimates are that 50% of the world's manufacturing is going to be in China. In North America, we're going to have 9 out of 10 people being in the service industry. So these companies in North America...the fabless companies in semiconductors like the Cisco's of the world they're going to be relying on a very complex supply chain...Their manufacturing gets done 17 time zones away! They need to have visibility, they need to have planning, they need to move quickly and react to changes in the marketplace. All very fundamental stuff to any company. So the supply chain problem as a whole, if anything, is getting worse - it's not a threat that comes and goes. It does require very deep domain knowledge to solve, which we are fortunate to have at Adexa.

Angel Mehta: On the Adexa website, there's a link that speaks directly to I2 customers....

Cyrus Hadavi: Right.

Angel Mehta: I think it's the I2 exchange program. When and how did that come about? What inspired it as a tactic?

Cyrus Hadavi: It's pretty simple. There were a lot of "rumours" about I2's customer base not being completely happy with what they had received from I2. There was Nike, which was very public. There was K-Mart, and a few others. Then, recently, Nucleus Research which is an independent research company tried to identify the ROI of an i2 implementation. So they went to i2's "referenceable" customer base, and independently asked them about results. Fifty-five per cent of them came back and said, "We did not achieve the targeted ROI." So we compared that result with our own customer base, and felt that that this was a huge opportunity for Adexa to go to I2's customer base and show them what can be done, and what should be done. That's really all there is to it.

Angel Mehta: How does the recent consolidation or at least, intended consolidation by the larger ERP players affect Adexa? One entrepreneur told me privately that he's upset about there being fewer buyers in the market that he will have a chance to sell out to...does that ever enter your mind? If any of the deals does go through, would it make, say, Peoplesoft or JD Edwards more or less competitive?

Cyrus Hadavi: It doesn't matter. The bottom line is, if you look at the landscape of supply chain planning and the companies that have the domain expertise to address it...there are just very few players out there. Peoplesoft and JD Edwards do not have a comparable offering. If you look at SAP and Oracle...they've declared war on supply chain vendors just like they have declared war on Siebel with regards to customer relationship management. But SAP has been talking about this for the past 5 years, and still, their solutions are far from where they need to be. Oracle has sold to a few small fabless companies....but ultimately, we are in a very unique position from a technology perspective.


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