Business Sanjiv Sidhu
The software savant has cracked the code for success.
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Sanjiv Sidhu is one of the richest, most successful men in Texas and, for that matter, the world. Never heard of him? Don’t fret. His name certainly doesn’t command the recognition of other Texas business luminaries, like Perot, Hunt, and Bass. But Sidhu, a New Economy guy, has become far wealthier than those Old Economy icons. As the founder, chairman, and chief executive of i2 Technologies in Dallas, the 42-year-old Sidhu has made a fortune developing software that helps companies like Coca-Cola, Best Buy, Dell Computer, General Motors, and Home Depot plan and track inventory levels and shipments from suppliers and make better and faster production decisions. In the crowded and fragmented market for so-called supply-chain management software, i2 has had an impressive run. Since its founding in 1988, the company has gained more than a 30 percent market share, and i2’s success has made Sidhu the second-richest person in Texas—Michael Dell is the richest, of course—with an estimated net worth of $6.5 billion. Forbes recently ranked Sidhu forty-eighth on its list of the world’s richest people—way ahead of computer-services pioneer Ross Perot, oilman Ray Hunt, and investment giants the Bass brothers. The soft-spoken Sidhu, who could pass for a college professor with his neatly trimmed beard and wire-rimmed glasses, is ready to emerge from his relative obscurity. He is positioning his company to be a key player in the hot business-to-business, or B2B, electronic-commerce market. Though supply-chain management software had once been viewed mainly as a niche product, it has emerged as the cornerstone of the new B2B e-marketplaces, or private business exchanges, that companies worldwide are rushing to build. Businesses plan to conduct billions of dollars in transactions with each other over such exchanges, which allow them to locate supplies rapidly, track the parts and supplies they buy, find the best prices on raw materials, and even set up collaborative relationships.
Sidhu’s i2 is at the forefront of building the framework to make the exchanges happen. Last fall the company unveiled its key e-business technology product, Trade-Matrix, a software platform from which the marketplaces can operate. In March Sidhu forged an alliance with IBM and Ariba to power and manage the new e-marketplaces. He also orchestrated the largest merger in the history of the software industry, a $9.3-billion deal to acquire Aspect Development, a Silicon Valley-based maker of B2B e-commerce software. Customers are coming around: So far i2 is involved in more than ninety e-marketplaces, including the WorldWide Retail Exchange—an independent organization that includes Albertson’s, Best Buy, J. C. Penney, Kmart, Target, and Walgreens—and e2open.com, an independent marketplace for the computer, electronics, and telecommunications industries.
Wall Street has been betting on a huge payoff from i2's strategy: The company's stock hit a record high of $223.50 a share in March, with a market capitalization of $26 billion, before it came crashing back to earth with the rest of the tech stocks and hit a low of $134 in July. Certainly, the company's growth was on the fast track even before the new focus. Revenues exploded from $38.5 million in 1995 to more than $571 million last year, and profits rose from almost $4 million to $23.5 million during the same period. Over the past five years i2 has grown from just 330 employees to almost 5,000. Still, the e-marketplace business could add a rocket booster to i2's growth. In the most recent second quarter, i2 racked up $242.6 million in revenues—almost half the total for all of last year. Sidhu predicts that this year i2 could hit $1 billion in revenues.
For someone who runs one of the shining symbols of the New Economy, Sidhu is something of a contradiction. He moves in a cutthroat industry dominated by high-profile characters like Oracle's outspoken CEO, Larry Ellison, yet Sidhu is not a publicity seeker—in fact, he declined my request for an interview, saying that he's just too busy. He comes across as a brilliant but basically shy techie and eschews the flashy lifestyle of a software mogul. His base salary of $150,000, plus an annual $75,000 bonus, is modest for the CEO of such a high-flying company (although, according to the company's last proxy statement, Sidhu owns almost 40 percent of i2's stock). Indeed, friends and colleagues describe him as "egoless," yet they're quick to add that he's also "paranoid" of getting beaten by competitors and can be as ruthless as Microsoft's Bill Gates when it comes to making deals. "He's very aggressive," says Sidhu's friend Bruce Richardson, a senior vice president of research at AMR Research, a Boston e-commerce analysis firm. Richardson has seen Sidhu in action: He previously worked at a software company that beat i2 for a big contract. When Sidhu lost out, he called the customer and instructed him to get the best possible price out of Sidhu's competitor. "For someone who's so calm, he hates to lose," Richardson says. "He's relentless."
The drive to succeed was instilled early on. Sidhu was born in Hyderabad, India, to an affluent family, and his father was a chemist who oversaw that country's national laboratories. Though Sidhu's early interests led him to become a member of the national sailing team, he eventually followed his father's career path and studied chemical engineering at India's Osmania University. He then came to the United States, where he earned a master's degree in chemical engineering at Oklahoma State University in 1980 and worked on a doctorate in systems engineering at Case Western Reserve University, in Cleveland. Before finishing it, however, he took a job at Texas Instruments' artificial intelligence laboratory in Dallas, one of the nation's most respected AI labs. Sidhu designed computer software that used artificial intelligence and advanced simulation techniques to juggle numerous variables in decision making so that TI planners could better manage their production processes.
Convinced that he was onto something with greater commercial potential, Sidhu quit his job in 1988 and began writing code in his small Dallas apartment. He founded i2 with his friend and business partner Ken Sharma, who died of a brain tumor last year (Sharma was also from India, which caused Sidhu to joke that i2 stood for "two Indians"). The company's first software product, called Factory Planner, optimized the flow of materials within a factory. A long list of blue-chip customers signed up for that product and for a suite of increasingly sophisticated software called Rhythm that manages the entire supply chain, from procurement of raw materials to customer service. For instance, Barnes and Noble has licensed i2 software to optimize its inventory-management, warehousing, and transportation systems. Home Depot formed a strategic partnership with i2 to collaborate on ways to maximize the transfer of information and decision making between the home-improvement retailer and its seven thousand suppliers.
Sidhu is so convinced of i2's ability to save companies money that he hired an independent auditing firm to document the results. He has pledged to add $50 billion of value, in growth and savings, for i2's customers by the year 2005. The company's Web site (www.i2.com) keeps him accountable, posting the savings on a constantly ticking counter. So far he's more than a fifth of the way toward making good on his promise, nearing $12 billion in cost savings. The future, though, is anything but certain as i2 plunges into the largely uncharted waters of e-marketplaces. Formidable competitors like Oracle and the German firm SAP are making their own moves into e-business, and some Old Economy companies are bypassing third-party operators like i2 and forming their own e-marketplaces. The competition is bound to get even fiercer, and i2 admits that its TradeMatrix strategy is unproven. One of the biggest challenges ahead for i2 and Sidhu personally, analysts say, will be fighting complacency and staying ahead in the game.
Sidhu, despite his outwardly calm demeanor, has a reputation for rallying his troops and aggressively recruiting top-notch technical talent. "They have built the Green Berets of their market," Richardson says, "and they take no prisoners." Now Sidhu and his elite tech force are about to be put to the ultimate test: Competitors may have been fooled in the past by the quiet man who emerged out of nowhere to become a dominant player, but they're not likely to be fooled again.