JD Edwards’ Alliances: Is It Too Much of a Good Thing?

JD Edwards' Alliances: Is It Too Much of a Good Thing?
P.J. Jakovljevic - April 11th, 2000

Event Summary

Enterprise application vendor JD Edwards has forged a number of alliances since September 1999 as the company looks to expand the availability of its OneWorld product suite.

In a two-pronged attack, the company has secured an agreement with Andersen Consulting and extended its existing deal with IBM Global Services. It will concentrate on the consumer packaged goods market, and a co-development deal with Andersen will provide collaborative brand management and promotions applications.

The JD Edwards storefront for e-business will be powered using IBM's Websphere Commerce suite and will be available in the spring. Doug Massingill, chief executive of JD Edwards, said: "We have to give customers a solid, integrated platform that scales, and for us, that means reselling Websphere. We're going for the one-to-few rather than one-to-many sector with Andersen and IBM, providing customization services."

JD Edwards has also reviewed its reselling agreement with Siebel to include Siebel's entire suite of front office applications. Alongside these agreements, JD Edwards will focus on its demand planning, scheduling and product configuration products that include applications from last year's Numetrix acquisition and the partnership with Synquest. JDE has also decided to enter the arena of B2B electronic exchanges with Active Marketplace. The TRADEX Commerce Center platform is the basis for this and as with other exchanges, the idea is to link trading communities in an on-line marketplace. Yet another partnership is with Extensity, a vendor that delivers automated travel and expense reporting software.

Mike Schmitt, senior vice president of product strategy at JD Edwards, said: "Mid-market enterprises need to respond to competition from customer-driven digital exchanges. These applications add value to their businesses." Schmitt conceded that JD Edwards' own development needs to move forward so that customers get access through a full HTML client, which will be available in June. This will allow ASPs to host on a one-to-many basis, which is not possible under client/server architectures.

JD Edwards is repositioning itself as an enterprise vendor to convince medium sized manufacturing enterprises that it is worthwhile extending their activities into e-business. But managing a large application portfolio, much of which involves partnering or extensive integration and customization, is difficult. "We have to show offerings in all these markets, but today it's hard to know where the demand will concentrate itself. It will be tough for the foot soldiers out there selling," added Schmitt. Asked whether the company is comfortable with having many critical components outside its immediate control, Schmitt said: "We think the OneWorld architecture insulates us from incremental application change issues."

Market Impact

J.D. Edwards has entered 2000 with a bitter taste of a dismal 1999 and a great deal of painstaking integration efforts remaining, both with its recently acquired products and with products of its partners, such as Siebel, Ariba, Extensity, and Synquest. We condone J.D. Edwards' move to reposition itself as an enterprise vendor to convince medium sized manufacturing enterprises that it is worthwhile extending their activities into e-business. Consequently, it has launched ActivEra Solutions, with the idea to present it as an integrated set of front office and back office functions.

The first component of the solution is Active Supply Chain, which combines supply chain planning and execution. This includes advanced planning capability along with traditional functions like warehousing and transportation. It also allows full collaboration with business partners who are given a window into the system through a self-service Internet front end.

The next component is Active Customer Relationship Management, which is mere a repackaging of Siebel's CRM solution along with an electronic storefront solution from IBM.

There is then Active Enterprise (another inventive way to avoid using the infamous word ERP) and finally, Active Procurement (Ariba) to round off the core system components. The whole suite is complimented by Active Knowledge Management, which provides business intelligence and document management capability.

However, we believe that managing this large application portfolio (a kind of a software Frankenstein), much of which involves partnering or extensive integration and customization, will be cumbersome despite its highly marketed flexible product architecture. One should never neglect the inevitable intricacies of managing softer, people issues.

Complementary product alliances can often be a good thing. Nevertheless, it is puzzling why J.D. Edwards needs them more than most of its competitors. Ten alliances have been highlighted in announcements since September 1999. Of these, at least seven deal with functional areas that are included as standard, not only by larger rivals like SAP, Oracle, PeopleSoft, and Baan, but also by its smaller competitors like Great Plains, Epicor Software, Symix Systems, and IFS AB.

While the best-of-breed approach can have its merits, we believe it invariably leads to additional integration costs and complicates service & support arrangements. Interfaces between significant components like ERP and CRM usually need some tailoring. This can be a barrier to future changes as further modifying already modified code is notoriously time consuming, costly, and risky.

J.D. Edwards' heavy reliance on other vendor's software flies in the face of its aggressive positioning around flexibility, which customers may find very disconcerting. To further rub salt in the wound, the vast majority of its customers are still running both its mature World and new, less mature OneWorld products simultaneously on a single, shared database. This coexistence, bundled with additional future integrations could be a perfect definition of an IT manager's nightmare.

Furthermore, J.D. Edwards has to be careful how it manages its alliances with "big stars" like Siebel and Ariba. In most of its key relationships the partner seems to be more influential and currently has a stronger brand. J.D. Edwards could therefore find it a challenge keeping control of its own destiny.

Both Ariba and Siebel have partnerships with its fierce competitors too. Great Plains, for example, points out that its integration with Siebel is well ahead of J.D. Edwards'. It is in its second phase, meaning the integration on a database level has been completed; the blending of user interfaces is the focus now. Moreover, Great Plains cites that it will not have a conflict of interest with Siebel's sales force in its SME market segment (companies with less than $250 million in revenue). This is not necessarily so in case of J.D. Edwards, which tends to target much larger companies as well.

The strategy also gives J.D. Edwards less control of its own business. ERP has taken a back seat in the market and hot areas like CRM and e-Commerce are driving much more activity. Oracle and SAP are increasingly starting to report wins of new accounts. They also see a broader product portfolio as the means to further mine their large existing customer bases.

J.D. Edwards is not well positioned to compete and develop its business in this way. Its income seems to be much constrained. As a result it will find it increasingly difficult to close the functionality gaps. The market is demanding more and more from vendors and broadening a product offering through R&D or acquisition is very expensive. We wonder whether J.D. Edwards having spent a hefty amount of its R&D expenses on resolving quality inconsistencies, missed functionality, poor performance, and Web-enablement of its OneWorld flagship product; is therefore reticent to undertake any internal development or acquisition of CRM and e-commerce functionality. While this may be a more prudent approach than the risk of following the steps Baan took, the 64,000 dollar question is whether J.D. Edwards' core competency is now going to be system integration.

User Recommendations

We generally recommend including J.D. Edwards in an enterprise application selection long list for mid-market and low-end Tier 1 companies (with $100M-$2B in revenue). Organizations whose requirements fall within the scope of the standard ERP offering, where manufacturing, logistics and financial modules are main pillars of an enterprise application, would do well to consider J.D. Edwards. We do not hereby intend to overlook the company's proven fair treatment of customers as well as its expertise within some industries like automotive, consumer packaged goods, electronics, manufacturing & distribution.

However, any organization evaluating J.D. Edwards should only consider the existing functionality, and, in case of final selection, should negotiate the incorporation of new applications components now. Future clients are also advised to request the company's written commitment to promised functionality, length of implementation, and seamless future upgrades, particularly for recently announced partnered offerings.

Improved technological integration is seldom guaranteed by joint marketing arrangements, and only comes after the arrangement yields considerable implementation experience. Furthermore, users are advised to ensure that J.D. Edwards is the main contractor that will assume overall accountability for the project. Failing to do so may result with customers being caught in a middle of contractors' recriminations and finger pointing when things start to go awry. The company's readiness to provide a number of reference sites where the installation of its partnership-enhanced product has gone without major glitches would additionally alleviate existing anxieties within users' community.

Nonetheless, if a complementary product beyond core ERP (e.g., CRM, e-Commerce, etc.) is of a critical importance, users should think carefully about the possible implications and may benefit from considering J.D. Edwards competitors' value propositions too.

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