J.D. Edwards' CEO Retires Again; This Time For Good?

Event Summary

On January 3, J.D. Edwards & Company (NASDAQ: JDEC), a provider of collaborative enterprise business applications, announced that its Board of Directors has appointed Robert M. Dutkowsky as president and CEO, replacing C. Edward McVaney, the Company's founder and long-time leader, who is retiring. Although McVaney's retirement has been happening for several years and was actually even postponed when erstwhile successor Doug Massingill left abruptly in 2000 (see Yet Another 'Big 5 ERP' CEO Casualty), it appears this time that one of the true pioneers of the Enterprise Resource Planning (ERP) business is leaving for good.

Dutkowsky, 47, joins J.D. Edwards from Teradyne, Inc., where he was president of its Assembly Test Division. Previously he had been chairman, president, and CEO of GenRad, Inc., which was acquired by Teradyne in October 2001. Prior to joining GenRad in 2000, Dutkowsky was with EMC, where he served as executive vice president responsible for global sales, marketing, alliances and customer service. He was named president of Data General in 1999, when it was acquired by EMC. Previously, Dutkowsky held positions of increasing management responsibility at IBM during his 20-year tenure. After an assignment as executive assistant to IBM chairman, president and CEO Lou Gerstner, he served as vice president of distribution for IBM Asia Pacific and as vice president of worldwide sales and marketing for IBM's RS6000 Division. Dutkowsky joined IBM in 1977, on completion of his Bachelor of Science degree in Industrial and Labor Relations at Cornell University.

The company cites that Dutkowsky joins a strong leadership team. Hank Bonde continues as COO, and Rick Allen remains CFO. McVaney will remain a member of the board of directors and will retain the chairman's position until the company's Annual Meeting of Stockholders in March 2002, at which time Dutkowsky will assume the additional duty of chairman of the board.

Market Impact

Although for over two years J.D. Edwards has been plagued with a revenue and profit roller coaster ride, which is in a great part attributable to the above-mentioned unsuccessful leadership transition and, consequently, to frequent business model changes, soul searching, and staff departures/layoffs, we tend to believe that this change comes at a good time. Many may be skeptical because Dutkowsky spent most of his career on the hardware side, and the track record of hardware executives making the transition to the software business has not been impressive. Dutkowsky, however, brings some appropriate credentials. He comes from companies that focus on profitable product lines and on nurturing sales channels and alliances, one being IBM - J.D. Edwards' crucial partner both now and in the past. His experience with mergers & acquisitions will also come in handy given the company's acquisitions of YOUcentric very recently (see J.D. Edwards Fires Siebel, Hires YOU) and Numetrix in 1999 (see J.D. Edwards and Numetrix Ponder the Future as One).

Dutkowsky's likely focus on the company's improved financial performance and continuation of products portfolio integration should address two important issues: the proverbial perception of the company as having internal trouble and the difficulty of regaining confidence. While the new CEO indisputably has his work cut out for him, it would be unfair not to give credit to the former CEO for paving the way at least in part. McVaney not only founded J.D. Edwards, but he also navigated it through an Odyssey-like transition from solely the IBM AS/400 (now iSeries) platform to UNIX and Windows NT while keeping most customers committed and arguably content. This is in contrast to the experience of many AS/400-only ERP competitors, with some like SSA and JBA being fatally wounded. McVaney, often disparaged by his counterparts and Wall Street pundits for his unsophisticated but effective managerial style, has never managed to create a real software powerhouse, but he leaves behind the legacy of honest rather than glitzy competitiveness.

McVaney conscience may additionally be eased by the fact that under his helm J.D. Edwards has started to put its house in order. Particularly encouraging is the fact the company has recently achieved a fair balance between the product functionality scope expansion and the product architecture flexibility (see J.D. Edwards On The Mend; This Time Might Be For Real). One is to expect that the new CEO will continue to emphasize the recently breadwinning products like OneWorld and supply chain planning & execution suite (coming mostly from former Numetrix) and prospective breadwinner, customer relationship management (CRM) product from YOUcentric. The focus on industry solutions such as for high-tech/electronics, industrial fabrication & assembly (IFA), and architectural & construction, should continue as well.

However, time will only tell how Dutkowsky will handle the company's recent decision to pare down a number of system integrating partners (almost 40%), given his proven emphasis on channel and worldwide expansion in the mid-market, and given that the decision was made prior to his appointment. It is likely that leveraging some high-profile consulting companies (e.g., Accenture, Arthur Andersen, Cap Gemini Ernst & Young) to co-develop the strategic industry solutions should remain unimpeded in any case.

Another move to watch will be its approach towards enhancing J.D. Edwards' outdated iSeries-based World software that still has a large loyal user base. While the iSeries server co-branding agreement with IBM could breathe a fresh air in this product line, major intrinsic product enhancements are not very likely.

User Recommendations

Potential and current J.D. Edwards' customers should certainly welcome the improved vendor's posture and it is very likely that the new energetic CEO will not depart fundamentally from his predecessor's recently paved route. Consider the new product offering bearing in mind the immaturity of recently released products, and the magnitude of still outstanding product delivery. Question the company's ability to deliver promised both horizontal functional modules and vertical enhancements both in short and medium-to-long term.

Existing users of the World software should be aware that future enhancements that are not of regulatory nature such as the CRM and collaborative SCM modules will likely merely be interfaced to their product through the eXternal Process Integration (XPI) technology, and should inquire about a more detailed product integration strategy. Stand-alone users of former Numetrix and YOUcentric products within non-J.D. Edwards' environment might benefit from questioning the company's intentions to provide integration connectors between these applications and other third-party applications in place.

More comprehensive recommendations for both current and potential J.D. Edwards' users can be found in J.D. Edwards - A Collaboration Thought Leader Or A Disguised ERP Follower? Part 2: Evaluating J.D. Edwards and 'Collaborative Commerce': ERP, CRM, e-Proc, and SCM Unite! A Series Study: J.D. Edwards.

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