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September 23, 1999
Smooth Sailing Through Business Waters
Radhika R Shankar in Houston
Defining one's limitations and devising successful ways of achieving one's goals is a mantra in the corporate world. Sanjiv Sidhu should know; it's making him and his company i2 technologies richer every day.
More than 600 companies including Compaq Computer Corp of Houston, Hewlett-Packard of Palo Alto, California and Texas Instruments of Dallas use I2's Rhythm suite of supply-chain software to automate their global production and inventory management processes.
To give you an idea of Sidhu's way of thinking, imagine you are given a basketball, a lemon, a car, and a spoon and asked to figure out the best way to pass two objects through a garden hose -- you would probably focus on only the lemon and spoon.
The judgement used to make the decision is also the basis of an artificial intelligence concept called "constraint propagation", offering a way for companies to identify their limitations and then use those limitations to determine how best to achieve a smooth supply chain management.
Sidhu's company, i2 Technologies, makes software that helps companies with their supply chain cycle of buying-making-moving-storing-selling decision.
While the idea paved the path to riches for the immigrant from Hyderabad, it takes a lot more than a creative mind to make it to the Forbes list of millionaires. The soft-spoken 41-year-old founder and CEO of i2 Technologies Inc was relentless in his quest to make the firm the world's top seller of supply-chain software.
The company, founded in Dallas, Texas in 1988, went public in April 1996 and is today truly the leading provider of supply chain optimization solutions, with customers worldwide.
Today, i2 is the acknowledged leader of supply-chain management software. "What i2 has delivered, the market believes, is the greatest supply-chain product there is," says Catherine Moore, vice-president of investment bank First Albany Corp in Albany, NY, who tracks the stock. Headquartered in Irving, Texas i2 has approximately 2,500 employees and maintains offices worldwide.
The 11-year-old company hit $ 362 million in revenue in 1998 and is projected to reach more than $ 520 million in 1999 and $ 680 million in 2000. That translates to 15 per cent of the supply-chain management market and 24 per cent of the supply-chain planning market in 1998, according to AMR Research Inc of Boston.
Fortune magazine recently named I2 as one of America's fastest-growing companies. The company's success is the result of a successful partnership between Sidhu and Ken Sharma, another executive from Texas Instruments.
Though they had both worked for the same company, they had never met at work. When they finally met it was through a common friend in 1988. They discovered that they had a common belief about running a company where egos have no place and where work was streamlined and ethical, and where customer service was given top priority.
Sharma joined Sidhu's fledgling software company two years after it was started. The marriage between Sidhu's analytical mind and Sharma's keen business approach helped the management planning software company grow from a self-funded operation into a multinational company. Though i2 Technologies has been growing rapidly, until recently, the co-founders did most of the sales work.
So he teamed up with Sharma who had years of experience in management consulting. Born in Burma, Sharma grew up in the UK but went back to India and got a bachelor's degree in electrical engineering from the Benares Hindu University before heading to graduate school at Cornell University.
Together, they produced and marketed software solutions that offered more than their competitors did. It was more efficient and provided a way to order forecasts, monitor inventories, audit production capacity, and record due dates. With clients 3M, Caterpillar, Mary Kay, Merck, Motorola, Bell Helicopter, and Sony Music, the company clearly has found its niche in the business. According to Sharma, "The i2 family of software solutions, Rhythm, is "configurable to meet the needs of a specific business environment, but is also multifunctional, so we rarely have to come back and rewrite a code."
Though he has become a millionaire less than a decade after starting his company, Sidhu does not let success get to him. The bearded, slightly-built Sidhu, whom friends and acquaintances all characterize as "stunningly brilliant," is a bundle of contradictions.
An accomplished storyteller, he's uncomfortable with small talk. That need to excel has manifested itself throughout Sidhu's life. Thanks to his father, a distinguished chemist who headed India's government laboratory system, Sidhu grew up in an environment of privilege based on merit. He also attended the elite Hyderabad Public School, where in the sixth grade he became fascinated with sailing.
A few years later, while still a teenager, Sidhu made the Indian national sailing team, and went on to win a Southeast Asia sailing championship. Following his father's path, Sidhu studied chemical engineering, earning his bachelor's degree at Osmania University in Hyderabad.
After Osmania, Sidhu followed a sailing pal to the US in 1980 and earned a master's degree in chemical engineering at the Oklahoma State University, where he worked on methods of converting coal to liquid fuel.
He married Lekha Singh, a fellow Indian with a master's degree in social sciences two years his senior. She would later become his venture capitalist.
By 1982, Sidhu was in Cleveland pursuing a doctorate in systems engineering from the Case Western Reserve University. Though he never got the degree, Sidhu found a job at Texas Instruments' Tennessee facilities and in 1985 moved to Dallas to work at Texas Instrument's artificial intelligence laboratory. His work at the lab exposed him to the mathematics that enabled a computer to model various constraints in a system and create solutions.
In 1988, convinced that he was onto something with broad commercial applications, Sidhu quit his job and began the programming that would lead to the founding of i2. For two years, he worked alone in his apartment to develop, refine and eventually patent the AI-based technology that is the basis of i2's pioneering supply-chain products.
The word most often used to describe the i2 CEO is, "egoless", a rare description for someone with a personal worth estimated at more than $ 700 million.
"I'd say Sanjiv subscribes to the role that only the paranoid survive," says George Gilbert, VP of e-business applications equity research at Credit Suisse First Boston in San Francisco.
Coupled with his vision and ability to simplify complex problems Sidhu has been considered as being a cut-throat competitor. "Sanjiv wants to win at any cost," says Bruce Richardson, Sidhu's long-time friend and VP of Research Strategy at AMR.
"I used to work for a software company that competed against i2. When my company won a big contract, he sent a letter to the customer on why i2 should have gotten their business, then told the customer to at least get the lowest possible price from us (the firm he used to work for). When I called him on it, he said it makes good business sense: If we can't win, I didn't want it to be a big deal for you."
Gilbert says that Sidhu keeps himself motivated partly by the belief that elements out there are waiting to get him. Sidhu plans to maintain a lead through the use of its supply-chain expertise to offer "electronic business-process optimization". Stripped of its marketing hype, EBPO represents the new positioning of i2's entire product line.
Manufacturers who have met Sidhu are impressed by his ability to quickly sort through lot of confusion and get right to the heart of moving thousands of products through various process-product paths and developing a tool that provides the solution. i2's vision is to add $ 50 billion of value for its customers by 2005.
Friends and peers have said that Sidhu is very much driven to dominate and if things aren't going his way, he will stop at nothing to plow through everything else.
"I take my profession extremely seriously and, like an artist who wants to produce the best art, I'm driven to produce the best work we can do," says Sidhu. "I want my work in my field to be as good as the work Michelangelo did in his field."
Says Shari Temple, supply chain planning director, Texas Instruments, "Our decision to go with i2 was based mainly on the fact of where i2 was at that point in time, and the company's willingness to work with us to achieve our vision." Says Temple, "We expect to see much better responsiveness to our customers and reductions in inventory, as well as making sure that we best utilize our assets."
With Sidhu's Rhythm software, the manufacturer can plan his production runs so as to minimize the chances that bottlenecks will occur. If they do occur, Rhythm helps the plant managers combine components and machinery so as to give all customers the most satisfaction possible at the least possible cost.
Production planners have always tried to do this, of course, but the job has required a great deal of guesswork, especially in large and complex manufacturing organizations. Sidhu's Rhythm program helps eliminate guesswork.
Rather than try to beat i2 at its own game, big manufacturing software manufacturers -- Oracle, SAP, Baan and others -- have opted to team up with Sidhu. They offer i2's software as an added high-end feature when selling their basic MRP database systems to manufacturers. Sidhu says his primary insurance against a big company's developing a product to compete directly against Rhythm is the sheer complexity of i2's software.
"The biggest challenge they face is executing their vision of becoming more of an Internet player," says Rick Sherlund, managing director, the Goldman Sachs Group Inc, New York.
Articulating this strategy is just one of i2's challenges in the coming months. The company must add 20 new products, including some for processes in which the company has practically no expertise. That represents a formidable risk for a company that already lives on the edge, relying each quarter on a few big sales to high-profile customers such as Compaq and IBM.
Sherlund of Goldman Sachs predicts that while i2 has a terrific growth opportunity over the next several years, with its big-ticket sales the company could be in trouble if a sale falls through.
"It's a reasonable concern," Sidhu admits. "We see that software companies have to move fast and take risks. We do that. We are expanding our product line very rapidly, as we move to provide all of the capabilities a company needs to successfully use the Internet for doing business with both suppliers and customers. We want to be known as the provider of intelligent e-business solutions."
"A clear measure of the value of what you're doing comes when people pay for it," Sidhu says. "If you create something and people don't pay for it, you're doing something wrong."
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