In-Depth Report by Nucleus Research Finds Costly, Lengthy Implementations Overwhelm Potential Benefits from i2 Supply-Chain Management Implementations

According to the results of an independent study issued today by Nucleus Research (NucleusResearch.com), more than half of i2 (NASDAQ: ITWO) customers listed as references on the company's Web site have not achieved a positive return on investment (ROI) from their i2 deployment. i2 Technologies provides companies with an integrated suite of supply-chain management software for optimizing the efficiency of business operations. Nucleus Research's independent report revealed that prolonged deployments, caused by software glitches and consultants' inability to successfully deploy the tool, slowed the realization of benefits for many companies.

The report is the latest in a series of independent financial analyses from Nucleus Research that identify best practices for companies to achieve positive ROI from enterprise technology investments. The full report is available at www.NucleusResearch.com

An increasing number of manufacturing and services organizations have invested in supply-chain management software with the aim of optimizing the efficiency of business operations and reducing the costs of distributing goods to partners and consumers. Nucleus Research's objective in surveying i2 customers was to assess whether supply-chain management applications resulted in a positive ROI for companies.

In conducting the report, Nucleus intended to examine the customers listed on i2's Web site—ostensibly, their best customers—to identify best practices for achieving a positive ROI from i2. Surprisingly, the majority of the customers interviewed revealed they had spent more on, and recognized fewer benefits from, their i2 implementations than planned, and these implementations took longer than initially anticipated.

Long Deployments, Poor Consulting Delay Returns

Delayed deployments, which increased consulting and personnel costs, slowed the realization of benefits for many i2 customers. Fifty-five percent of the i2 customers interviewed did not believe they achieved a positive ROI from their i2 investment, after an average of 2.2 years of use. The average three-year cost of an i2 deployment was $7.2 million, including the costs of software, hardware, consulting, training and personnel. Most of these customers attributed their negative ROI to the length of time necessary to deploy the i2 solution. Nearly 70 percent of i2 deployments lasted longer than planned, an average of nearly three times more than the project team had expected. In addition, several companies were forced to reduce the scope of their deployments in order to avoid further delays and project costs.

Several customers whose deployments were prolonged—or ultimately unsuccessful—attributed the problem directly to i2's consultants. They identified the consultants' lack of understanding of i2's own software, an inability to fix problems inherent in early versions of i2's software, or an overall inability to successfully align a company's business processes with the technology as key roadblocks to fast implementations.

"When Nucleus analysts study references listed on a vendor's Web site, we expect to be able to identify best practices for achieving rapid ROI, given these companies' status as marquee customers," said Rebecca Wettemann, Nucleus Research's vice president of research. "In studying i2's reference customer base, we instead found customers that were disappointed by slow deployments, lack of consulting expertise, and lesser benefits than they were led to believe i2 would deliver."

Additional findings from the Nucleus Research report included:

• Reference customers: "i-Who?" - Surprisingly, 10 percent of the organizations listed as reference customers on the i2 site reported that they were no longer using i2 technology. One customer, who was quoted on the site lauding their i2 implementation, told Nucleus a conflicting tale: "Once we bought the software, i2 consultants did not know the software well enough to deploy it to our specific situation."
• Hardware requirements make up a significant portion of i2 deployment costs - Almost every company interviewed made a standalone investment in servers needed to support the i2 infrastructure. Nucleus found the average expenditure on hardware to be more than $400,000, in addition to the cost of the software itself.
• i2 solutions require significant training - Nucleus found that i2's solutions involve a significant learning curve and require extensive training, an average of 74 hours for each end user.
• Inventory costs reductions from i2 fall short - Sixty-four percent of i2 customers reported reductions in inventory costs following their i2 implementations; however, only four of these customers saw savings that were large enough to outweigh the costs of the deployment and yield a positive ROI. Several others noted that their inventory reductions could not be entirely attributed to the technology, but were also subject to demand and supply functions and economic conditions.

Study Methodology

Beginning in September 2002, Nucleus contacted the 70 customers profiled as success stories on the i2 Web site. Twenty-two agreed to participate; seven companies reported that they were no longer i2 customers; 30 did not respond to repeated requests for interviews. Those who agreed to participate were asked questions relating to various factors of their i2 implementation that would affect ROI. These included:

• How long have you been using i2?
• How long did the deployment take?
• Did you stay within the deployment budget?
• Has i2 led to any gains in productivity?
• What have been the greatest returns from i2?

The study is available at no charge at NucleusResearch.com.

About Nucleus Research

Nucleus Research is an independent global research and advisory firm that provides CFOs and CIOs with the financial and technology expertise they need to evaluate and manage their information technology investments the same way they evaluate and manage other capital investments. Nucleus Research is the first firm of its kind to blend "Big Four" financial analysis with comprehensive technology expertise to deliver 100% impartial return-on-investment (ROI) data and financial analysis services to organizations worldwide. Nucleus Research uses an uncompromising set of processes and tools to evaluate the financial return on IT assets throughout a technology's life cycle, from selection and deployment to upgrade and retirement. Nucleus Research's ROI assessment methodology can be applied to virtually any technology investment.