Finance & Investment Club Fall 2012 Supply Chain Management Software and Services

2 Industry Rating: Industry Summary Key Factors: Cloud based software is a new field that is experiencing rapid growth The cheap costs and growing security of cloud servers are drawing in more customers Supply chain management is a key component in the growing internet retailing sector

3 Industry Definition  Firms in this industry specialize in supply chain management (SCM) solutions that provide strategic planning, optimization, and execution for business processes across a wide range of industries.  These firms develop, deploy, and maintain a variety of software and services that are highly tailored and industry-specific. Key Companies of Focus DSGX: 40-F E2OPN: S-1 Descartes Systems Group (NASDAQ: DSGX) Market Cap: M Aspen Technology, Inc. (NASDAQ: AZPN) Market Cap: 2.31B SciQuest, Inc. (NASDAQ: SQI) Market Cap: M American Software, Inc. (NASDAQ: AMSWA) Market Cap: M Manhattan Associates, Inc. (NASDAQ: MANH) Market Cap: 1.17B JDA Software Group, Inc. (NASDAQ: JDAS) Market Cap: 1.42B E2open Inc. (NASDAQ: EOPN) Market Cap: M

4 Technology Goods and Services Sector Summary Breakdown Technology B (100%) Information Technology B (13.6%) Business Software and Services B (5.5%) Application Software and Services 640.0B (0.83%) Industry Breakdown by Market Cap ($BN) JDAS M MANH M AMSWA M DSGX 99.2 M AZPN M SQI M EOPN M

5 5 SaaS SubscriptionProfessional Services FY2011 Revenue Segments Software LicensingOther

6 Revenue Generation Develop Provide Maintain Software Package Software-as-a- Service Customer Professional Services License Fee Subscription Fee Additional Fees Training and support Technical Maintenance

7 Trends  af IT and Software Spending Growth Rising E-Retail Sales Increasing Adoption of Software-as-a- Service (SaaS) Platforms

8 Trend I: SCM Software Spending Forecast CAGR 5.4% IT 2011: 3.6 TN 2015: 4.1 TN  SCM software prime consumers include North America and Western Europe with nearly 79% or market revenue.  Asia/Pacific IT spending is on pace to reach US$743 billion in 2013, a 7.9% increase from  Shift towards diversified suppliers  Increasing complex and fragmented supply chains due to globalization and outsourced manufacturing Software 2011: 268 BN 2015: 334 BN SCM Software 2011: 7.7 BN 2015: BN  SCM software is used worldwide IT 2011: 3.6 TN 2015: 4.1 TN Software 2011: 268 BN 2015: 334 BN SCM Software 2011: 7.7 BN 2015: BN Source: Gartner Research – Worldwide Supply Chain Management software growth

9 Trend II: SaaS-based Technology Expected to Gain Momentum  Low cost of installation  Larger audience outreach including small and medium- sized enterprises  High demand for productivity in developing countries  Eastern Europe CAGR: %  Latin America CAGR: % Source: Research and Markets: Global Supply Chain Management Software

10 Trend III: E-Retail as a Growing Channel of Sales 6%7% 8% % of total US retail Sales $BN  Consumers rely more and more on online research before purchases.  Consumers use Brick-and-mortar stores to sample and then buy online at a lower price.  Three product categories (computers, apparel, and consumer electronics) represented more than 45 percent of online sales($67.6 billion) in 2011  Convenience, Cost, and Speed are important strategies for online retail Source: Forrester Research - Forecast Online Retail Sales; Marketing Charts $M

11 Risk  Heavy Competition from large ERP vendors developing new SCM technologies − ERP vendors can devote more resources to creating SCM software and services −Oracle and SAP are slowly developing SCM technology which increases buyout risk for smaller companies  Highly complex and sophisticated software may contain defects and errors that are hard to detect and may lead to software inaccuracy −Defects or errors in software lead to inaccuracy and hurt both the customer and company’s revenue and reputation.  Research and Development activities may not generate significant returns −Product development activities are costly and recovering investment in product development may take a significant amount of time. −Cannot estimate with any certainty the revenue from R&D investments.  Large portion of revenue comes from professional services, which is very reliant on prior sales of software −If software sales stagnate, professional services revenue will consequently suffer.

12 Industry Porter Five Forces DSGX: 40-F E2OPN: S-1 Rivalry High Suppliers Low New Entrants High Buyers Low Suppliers Low  Low Cost of Production Substitutes  In-house production of software  Difficult for customers to drive down prices on very specialized software  Complex software for superior supply chain results

13 Supply Chain Management Software and Services Industry Rating: Industry Conclusion Key Factors: Cloud based software is a new field that is experiencing rapid growth The cheap costs and growing security of cloud servers are drawing in more customers Supply chain management is a key component in the growing internet retailing sector