Panasonic's acquisition of Blue Yonder aims to build out Panasonic's software business, but how well the traditional hardware vendor can adapt remains to be seen.
Panasonic Corp.'s $7.1 billion acquisition of Blue Yonder, vendor of AI-powered supply chain software, marks a move by Panasonic to move beyond hardware, which it is known for, and into software.
"It's an interesting move," said Simon Ellis, program vice president at IDC.
"Panasonic has aspirations to do more than just hardware," he said, adding that Panasonic "clearly" has a strategy to become a holding company.
Panasonic's acquisition of Blue Yonder builds on an existing partnership between Panasonic and Blue Yonder, formerly JDA, established in January 2019. The arrangement, which saw Panasonic develop products with Blue Yonder, led to the companies creating a joint venture company in Japan in November 2019.
In July 2020, Panasonic took a 20% minority ownership stake in Blue Yonder.
Panasonic has aspirations to do more than just hardware.
Simon EllisProgram vice president, IDC
Panasonic has also drawn on Blue Yonder to improve its own existing technologies, including out-of-stock detection, facial recognition and flowline analysis of human behavior technologies, which aim to increase productivity in warehouses, factory floors and retail storefronts.
Supply chain management software
Based in Scottsdale, Ariz., Blue Yonder sells an end-to-end supply chain management platform that uses AI and machine learning to make predictions and identify potential problems in tasks such as demand planning, sales and operations planning, and inventory management.
The company was formerly named JDA until it rebranded itself in February 2020 as Blue Yonder, following JDA's acquisition of the AI firm Blue Yonder in 2018. The current company is competitive with other supply chain software vendors and has done well by integrating the AI technology of Blue Yonder into its supply chain software, Ellis said.
"They're quite a capable organization," he said.
Panasonic's acquisition is likely positive for Blue Yonder, as Blue Yonder can "get out from under the thumbs" of more traditional capital firms, Ellis said. Panasonic is purchasing Blue Yonder from Blackstone and New Mountain Capital.
Under the deal, Blue Yonder will remain its own company under the Panasonic Connected Solutions Company umbrella. Blue Yonder is retaining its management and senior staff and will continue serving its current customers.
Some doubts
Yet, to R "Ray" Wang, founder of Constellation Research, the acquisition doesn't make a lot of sense.
Many hardware vendors, like Panasonic, are realizing they need to get into the software business, he said. But "hardware companies often forget how hard it is to build software," he added.
"On a pragmatic level, Panasonic can benefit internally from Blue Yonder," he noted, but "software core competencies are not easy to develop."
Wang called Blue Yonder one of the better vendors in the supply chain management market, but said its technical debt is "tremendous."
"The products are old, they have been underfunded by [private equity] firms raiding the piggy bank and they lack a lot of advanced capabilities that are needed for modern software," he said.
Panasonic will need a lot of research and development to revamp Blue Yonder's software and make it useful for itself and its external customers, Wang said.
He estimated it would take a team of 30 people and 200 outsourced professionals about two and a half years to rebuild all of Blue Yonder's capabilities into a modern software stack.
"I'm not too sure that justifies the price paid by Panasonic," he said.
Wayne Usie, executive vice president and chief market development officer at Blue Yonder, said it's not Blue Yonder's technology that is out of date, but rather Wang's comments.
Over the past three years, Blue Yonder has integrated modern AI technology into its supply chain software and has worked to modernize its platform, Usie said.
"Today, we're delivering new innovations," he said.
