BUSINESSWEEK ONLINE : AUGUST 28, 2000 ISSUE
INDUSTRIAL MANAGEMENT The "Velvet Hammer" of E-Commerce Persuasive Sanjiv Sidhu has made i2 a dominant player in B2B software In just the past year, the soaring share price of i2 Technologies Inc. (ITWO) has boosted Sanjiv S. Sidhu's personal wealth tenfold, to more than $7 billion, catapulting the Indian immigrant into the same league as Ted Turner and Charles Schwab. But Sidhu, the founder and chairman of the Dallas-based maker of e-commerce software, seems indifferent. He continues to log 70- to 80-hour workweeks and eschews what he calls the ''high-profile toys'' of other dot-com plutocrats. ''I was perfectly happy financially when I made $50,000 a year,'' says the world's least-known high-tech mogul. For those who know Sidhu, now the wealthiest Indian immigrant in the U.S., this dedication hardly seems surprising. He has spent most of the past decade consumed by a grand vision of what i2's business-to-business (B2B) software could achieve: ''I feel we're the leader, and on the cusp of the next Industrial Revolution,'' the soft-spoken 43-year-old boasts. ''Manufacturing costs could be cut in half. It would be a pity not to use this opportunity to the full extent.'' The breathless talk could easily be dismissed as part of the hype that has surrounded B2B exchanges. After all, everyone from the Big Three car companies to apparel makers has announced e-marketplaces that will link buyers and sellers over the Web in auction-based transactions. These keep promising to create the most liquid and efficient markets ever seen. Few have lived up to the dream, however, because of antitrust concerns and worries about sharing strategic data with competitors. But Sidhu is a believer. Trim and bearded, he speaks in a deliberate and concentrated way that carries the conviction of a preacher. An emotional man known to get teary-eyed at company Christmas parties, he has an uncanny ability to whip up crowds at annual customer meetings and inspire loyalty among his staff. Just ask Gregory A. Brady, i2's president. A former employee of Oracle Corp., i2's top competitor, Brady flew to Dallas in 1994 to try to buy a stake in i2 for Oracle. Instead, the next day Sidhu convinced Brady to quit and work for i2. ''He's like the velvet hammer,'' Brady says. Sidhu has been on a mission since 1988, when he quit a job at Texas Instruments Inc. to found i2. At TI, Sidhu toiled at writing software that managed the supply chain for chip manufacturing. But he saw an opportunity to create less expensive programs that could be used more widely. He hunkered down and began writing code in his two-bedroom apartment, where his wife was expecting their first child. He also brought technological savvy to the task. Supply-chain problems--such as predicting demand for a certain type of chip in a volatile market and securing a dependable source--can get extremely complex. So Sidhu wrote a program that isolated the 5% of the variables that determined 95% of the solution. The result was a program that could run on PCs instead of mainframes, and glean answers in minutes instead of weeks. BIG RISK. Sidhu's sales techniques were equally innovative. In 1995, he set a goal of saving i2's roster of customers a total of $50 billion by ironing the inefficiencies out of their supply chains. And he was willing to peg a portion of i2's fee to its ability to deliver on the savings. He is well on his way to the $50 billion mark. The aggregate savings level of the customers is measured by an outside firm and now totals $12 billion. This risky marketing technique helped him sell i2's planning software to early customers such as Timken, Solectron, and Dell Computer. Where other supply-chain specialists focused on the minutiae of delivery speed and volume, Sidhu's philosophy was something new: ''The approach was something very different in an industry prone to selling speeds and feeds,'' says James M. Pickrel, a senior analyst at Chase H&K in San Francisco. ''When i2 delivers savings, the customer is happy.'' Sidhu, the son of a prominent chemist in Hyderabad, says growing up in India helped him deal with the chaotic nature of Internet business. ''It was all a free-for-all,'' he recalls, noting how he and his buddies roamed the streets, dropped in on friends, and negotiated prices for everything, even bananas. ''It gives you the strength to try to bring structure where the natural environment is chaotic,'' he says. ''You need to be flexible.'' Flexibility has helped i2 catch up with the e-marketplace systems sold by the two monoliths of the business-software market--Oracle and Germany's SAP, both of which produce sprawling multifunction software products used to run whole companies. Although i2 is expected to book just $1 billion in revenue this year, vs. $10 billion for Oracle and $4.1 billion for SAP, Navi Radjou, an analyst at Forrester Research in Cambridge, Mass., considers i2's supply-chain and e-marketplace offerings the best in their class. Indeed, i2 sits at the forefront of one the hottest subsectors of the global software market. Forrester reckons that B2B online transactions will rise from $54 billion this year to $1.4 trillion in 2004, when 53% of total Internet trade will flow through e-marketplaces. So while the competition may be mounting, i2 is in a unique position to leverage its lead in supply-chain management software, which is increasingly seen as a cornerstone of online exchanges. ''Sanjiv brought supply-chain management technology into the mainstream. And in partnership with Ariba and IBM, i2 is poised to lead the emergence of more sophisticated electronic marketplaces,'' says Radjou. Among other deals, i2 and its partners have announced a global high-tech exchange involving Hitachi, IBM, and Matsushita, and another for car parts with Volkswagen that will compete with the Big Three's effort, Covisint. BIG GIVER. Even though these projects have yet to launch, they've helped i2's stock jump tenfold (chart), and Sidhu says he has no plans to slow down until 2005. That's when he expects his customers to have realized $50 billion in savings and i2's revenue to have risen to $5 billion. As for his personal fortune, Sidhu gives away millions each year to charity--an activity he leaves up to his wife and employees, who vote on various projects. ''To use wealth, you need time,'' says Sanjiv, his mirth tinged with regret, ''so in fact, I'm quite poor.'' By Steven V. Brull in Dallas _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS The ``Velvet Hammer'' of E-Commerce RESUME: Sanjiv Sidhu CHART: B2B Boom INTERACT E-Mail to Business Week Online

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