TMS arms race heats up with latest WiseTech acquisition

TMS arms race heats up with latest WiseTech acquisition

 

WiseTech Global.

The arms race among freight forwarding enterprise systems should be a boon for forwarders and their beneficial cargo owner customers by extending the number of applications available through a single platform. Photo credit: WiseTech Global.


WiseTech Global’s
purchase this week of cloud-based transportation management system (TMS) developer SaaS Transportation is the latest example of a burgeoning arms race between the top global freight forwarding enterprise software providers.

The deal, for which financial terms were not disclosed, is a continuation of the Austrialia-based company’s aggressive acquisition spree since going public in 2016, and parallels moves by its top competitor Descartes Systems Group to add North American transportation technology tools to its platform.

Growing demand for forwarder solutions software

The race is on between these companies to bolster their portfolio of solutions to account for growing demand in freight transportation, customs compliance, e-commerce fulfillment, and last-mile logistics, among more niche tools. Since going public, WiseTech in roughly two years has built regional footholds in a number of markets to complement its core CargoWise One platform.

The company primarily competes with Descartes and BluJay Solutions in providing multifaceted systems for forwarders. Increasingly, that means offering tools that go beyond the core shipment management, finance, and back office functions that defined these systems in the past.

WiseTech acquired 11 companies in 2017 and has added seven more in the first half of 2018. Those acquisitions include providers of customs, warehouse, and transportation management in France, Belgium, Ireland, North America, Australasia, Italy, Germany, Turkey, the Netherlands, Argentina, Brazil, Uruguay, and Taiwan. Comparatively, Descartes has acquired 22 companies — ranging from customs, final mile, freight transportation, visibility, and e-commerce solutions providers — in the last six years. BluJay is the rebranded, merged entity from Kewill’s 2016 purchase of TMS provider LeanLogistics.

SaaS Transportation’s system is focused around less-than-truckload (LTL) management, with integrated quoting, booking, and tracking. The company, founded in 2011 by TMS software veteran Ken Pehanick, sells predominantly to US freight brokerages and aside from providing TMS also sells individual functionalities to companies needing specific tools to complement their own existing systems. The product will help WiseTech customers (the company says 7,000 logistics providers globally use its solutions) manage LTL shipments in the United States alongside other modes in a more cohesive manner.

SaaS Transportation connects to numerous national and regional LTL carriers, including FedEx Freight, Con-way Freight/XPO Logistics, Day & Ross Freight, Old Dominion Freight Line, UPS Freight, and YRC Freight, and its customers include R2 Logistics, NFI, Redwood Logistics, Cardinal Logistics Management, Sunteck/TTS, and Pepsi Logistics.

The company is part of a recent wave of cloud-deployed, browser-based TMSs designed to make carrier selection, shipment execution, audit, payment, and tracking simpler and accessible to a broader market of potential users than heavier-duty TMSs traditionally reached in the past.

“Where they play is in providing a slick web interface, and it automates tendering,” a brokerage customer told JOC.com. “If you’re a small or mid-sized provider, it can help you manage your LTL for the day.”

SaaS Transportation has also been a proponent of application programming interfaces (APIs) for system connectivity. For instance, their system pulls rates from LTL carriers to provide them to a broker via a clean interface.

“They have powerful functionality in grouping and unifying LTL rates via API connectivity,” said Andy Ashbaugh, chief technology officer at Chicago-based Redwood Logistics, a SaaS Transportation customer. “We use them as an aggregator of LTL rating, not for their core TMS product.”

Redwood, which offers brokerage and broader supply chain management services, manages a few different TMSs for its various customers, including MercuryGate and its own proprietary system, and “didn’t have a rate engine built in for LTL.”

SaaS’s API-led approach — effective developing a varied group of users

Ashbaugh pointed to SaaS Transportation’s API-led approach as effective in developing a varied group of users.

“If you can isolate functionality through APIs, it broadens your customer base,” he said.

Pehanick told JOC.com that discussions about how the SaaS Transportation system will be integrated in the broader CargoWise One platform are still at an early stage.

“For now, it’s business as usual for us and for our customers,” he said. “We’ll be looking at ways to outline the integration with CargoWise. We have big picture ideas from both sides, but haven’t sharpened the pencil on those yet.”

He said the companies found their cultures meshed well and that WiseTech liked that SaaS Transportation knew its niche and focused intently on that.

“They are trying to extend and deepen the capabilities of the software and they felt we met that opening they were looking for,” he said. “And they have a global network to accelerate our product development. We know our niche, and don’t try to go outside our space. WiseTech understood we knew our niche well.”

More broadly, WiseTech’s offer fit into Pehanick’s growth plan, especially as the market for North American freight transportation software has heated up in the last year. Descartes’ recent acquisitions of MacroPoint and Aljex, and Trimble’s acquisition of 10-4 Systems, are recent examples.

“We’ve seen the market start to change around software acquisition, and there was no way for us to grow without internal or outside investment,” he said.

WiseTech CEO Richard White said in a statement that the acquisition “fits into our adjacency acquisition strategy and will extend our road booking and road rates offering to our customer base.” Pehanick said being acquired “brings to us a global infrastructure and significant innovation capacity that will help us accelerate our product development and expand our customer reach.”

Pehanick will remain at the helm of SaaS Transportation, similar to WiseTech’s strategy for many of its bolt-on acquisitions.

WiseTech went public in 2016 and since then has used acquisitions to build top line revenue and expand its customer base and offerings. Its share price, as of Wednesday, had nearly quadrupled since its initial public offering and is up 53 percent since April 4. The company last week announced a $100-million share sale to the Los Angeles-based Capital Group's SmallCap World Fund, a move that financial watchers of the company in Australia reportedly found curious given its strong cash position.

White told The Australian Financial Review that the investment was opportunistic to continue the company’s acquisition momentum.

Contact Eric Johnson at eric.johnson@ihsmarkit.com and follow him on Twitter: @LogTechEric.