Why The “Mighty” Fall: Customer Base Echo Chamber Bias, Failure To Understand Fundamental Impacts Of New Enabling Technology & Competition!

IBM Loss of Market Dominance

Remember IBM, one of the most admired, highest market cap, and best corporations to work for in the world in the 1980s? As of December 2023, IBM has a market cap of $148.05 billion. Compare this to the market caps of Apple, Microsoft, and Google at $2.7 trillion, $2.5 trillion, and $1.8 trillion, respectively. IBM now ranks No. 74 in Fortune’s “2023 list of 100 Best Companies to Work For.”

IBM fell from its esteemed position due to its inability to recognize and internalize the changing fundamentals of the market it dominated:

• IBM lost touch with customers’ interests and complaints.
• Hubris and corporate inertia blinded it to see what corporate customers were beginning to understand as economic reality: PC clones, software, and networking tools were just as good as IBM's products. Also, the cost of performing a calculation on a PC dropped so much that it was significantly cheaper to use a little machine than a mainframe.
• IBM believed that PCs — especially their software — should undergo the same rigorous testing as the rest of their products. All other PC software developers valued speed to market over quality:  it’s better to get something out sooner that worked reasonably well, let users identify problems, and fix them quickly.
• They continued squandering R&D money on building a larger mainframe, the business it knew. This was at a time when its profit margins on mainframes were already beginning to decline precipitously.
• IBM remained wedded to the 286 chip and was slow to embrace the faster chips that Intel was producing, most notably the 80386 chip. This new Intel chip had just the right speed and functionality for the next generation of computers. Even as rivals moved to the 386, IBM remained wedded to the slower 286 chip.

By 1986, IBM’s mainframe business had entered a long, slow decline. The PC business had gone into a more rapid fall, and the move to billable services was just beginning. The new CEO then did what most CEOs typically do when IBM had sagging fortunes: Trim the ranks by offering an early retirement program. But too many employees took the buyout, including too many of the company’s best and brightest. Then came the iPhone, cloud computing, and AI innovations, and IBM fell even further behind Amazon, Microsoft, and Google and is trying to play “catch-up.”

The Evolution of Transportation Management Systems Software

Fast forward to 2023, and history repeats itself in other high-growth tech-enabled sectors like transportation management systems, commonly known as TMS. Today’s market-dominant TMS products are antiquated, and they were often founded in the 1970s and 1980s. They are built on inflexible mainframes and servers from suppliers like IBM. They started by digitizing manual processes and paper-based workflows. They offered basic features like planning, visibility, and execution while centralizing shipment data. They focused on serving operations for enterprise carriers, brokers, and shippers.

Legacy TMS Software Providers Fall Into Four Categories

1. The original software vendors like McLeod, TMW, PCS, and Prophesy started in the 1970s, 1980s, and 1990s, primarily serving the mid and large-size carrier market. Later they developed, as an afterthought, an adjunct add-on software package to help carriers run broker operations.
2. The same vintage supply chain software vendors as E2Open and Descartes.
3. MercuryGate launched its broker and shipper TMS in 2000.
4. ERP software vendors like SAP and Oracle have expanded into logistics.

Like IBM, legacy TMS products have not kept up with the needs of their customers. Incumbent solutions are challenging to train and use, limited in features, expensive, and slow. Their UI/UX is dated and feels like ‘Web 1.0’. Implementation times and ramp-up periods are long and cumbersome. The total cost to the customer is orders of magnitude higher - per delivered load processed – when compared with what it would be using contemporary cloud-based technology.

It’s no surprise, then, that most users dislike their existing legacy TMS platform. We’ve heard complaints in nearly all conversations with supply chain companies and users. Everyone is on the spectrum between growing dissatisfaction and outright dislike (see 2023 TMS Report by Activant Capital).

Yet the Market Dominance Continues …

Despite these issues, legacy TMS vendors have continued to dominate and retain major market share, usually for one or both of the following reasons:

• The “system of record” nature of TMS platforms. The reluctance to change to new technology cloud-based infrastructure is explained using “faux” concerns from risk-averse customer CIOs and staff. This is self-serving in many cases and perpetuates the legacy TMS vendor-customer CIO “echo chamber” to the detriment of company interests.
• As the outdated saying goes, “Nobody gets fired for buying IBM.”

… Even While Falling Further Behind the Technology Curve

As the supply chain grows ever more complex and the freight market more volatile, these are some of the ways legacy TMS platforms are falling further behind in applying new technology solutions that deliver the next level of customer productivity, efficient total cost per delivered load, enhanced revenue generation, and solutions that deliver fluid collaboration with trading partners:

• Most customers find basic TMS workflows to be inefficient and cumbersome to use – too many screens to navigate and too many clicks to do simple tasks.
• Customers ask for open TMS platforms with low-cost software with greater functionality – such as procuring freight capacity, offering real-time visibility, extending into the warehouse, and handling multiple transportation modalities. However, TMS vendors have been unable to follow through, and significant gaps have emerged in their solutions.
• Customers are using outdated reporting, analytics, business intelligence (BI), and decision support tools.
• Data integrations with key third-party service providers (e.g., risk management, insurance, analytics, telematics, receivable financing) are expensive and take a long time to deliver.
• TMS incumbents have especially not served mid-market or smaller customers well. They have yet to fully adapt their offerings for the cloud, which significantly lowers the upfront investment to smaller customers. High fees, long deployments, slow product development, and poor customer support have inhibited adoption.
• According to a recent survey, only 60% of current TMS providers offer procurement & sourcing, only 50% offer warehouse management capabilities, and visibility solutions remain surprisingly primitive, a lot of ‘dots on a map’, as do post-shipment reporting and analytics.

The “bell tolls” increasingly faster for the legacy TMS platforms. Several cloud-based TMS startups have taken root in the past five years and are growing fast.

In Fact, the Trend is Accelerating

In 2024 and beyond, these cloud-based TMS platforms will erode legacy share market share and profit margins at a faster pace due to:

1. An order of magnitude lower total customer cost to process a delivered load.
2. Much more intuitive and simpler workflow solutions.
3. Lower cost and superior third-party services integration solutions.
4. Fluid integration with trading partners.
5. Superior and easy-to-use visibility, optimization, decision support, and BI solutions.
6. Easier for all supply chain businesses to scale up using software configurations.
7. Superior customer service

Modern TMS technology infrastructure — cloud computing and AI — are now simplified enough to be affordably available to businesses of all sizes. Importantly, the optimal application of these technologies in businesses will accelerate the erosion of remaining strategic advantages derived from “large business size” versus small and medium size. Also, it makes legacy TMS platforms

very vulnerable to being “ripped and replaced”:

• The coincidence of increasing complexity and vulnerability of supply chains with new technologies that offer affordable and rapid response solutions to solve these pain points. This has motivated VCs to fund startups to build a modern TMS to assertively work to better serve unhappy customers, large and small. The stars have aligned for next-generation TMS vendors to gain real traction, challenge the incumbents, and build foundational businesses in 2024 and 2025.
• VC money is not only funding new TMS platforms but also new ecosystem services startups like Samsara for telematics and videomatics, FourKites and Trucker Tools for visibility, Greenscreens.ai for pricing decision support, Redkik for Insurtech, Denim for AR financing, HOPTEK and Optym for load-asset match optimization, and others.
• Cloud-based startups deliver new solutions and integrations to solve customer pain points at “warp speed” versus legacy TMS platforms. Also, they deliver the next level of customer service.

EKA’s Fresh Approach to TMS

EKA ‘s People-First TMS platform is one startup compound venture that solves real-life problems by delivering state-of-the-art technology infrastructure capabilities fully integrated into the platform. This enables its customers – carriers, brokers, and shippers – to take customer business workflow automation, decision support, risk management, and predictive solutions experience to a new level to maximize outcomes. It includes zero-based technology and workflow design premised on a vision of a common chassis to deliver the highest productivity. These trading solutions maximize revenue that enables fluid trade between carriers, brokers, and shippers. It has successfully served small and medium-sized carriers, brokers, and shippers in the past two years. In 2024 it will be ready to target to penetrate large carrier, broker, and shipper customers. EKA Platform delivers a TMS with new technology infrastructure coupled with deep domain knowledge and operating experience, and an uncanny ability to make the complex simple. Of equal importance, EKA’s work ethos powers fluid work with customers to configure and solve key management and operational pain points.

Don’t Settle for a TMS Following the Footsteps of IBM’s Downfall

Like IBM before it, legacy TMSs suffer from similar technology and business fundamentals blind spots and organizational inertia. They are likely to lose their primacy, just like IBM!

Who ultimately benefits from all this? The customer!

This is responsible capitalism doing what it does best!

Ready to lead in the evolving market? Don't let your business fall behind. Discover how EKA Omni-TMS™ can drive your success. Contact us today to learn more!