J.D. Edwards Finds Its Inner-Self Within Its 5th Incarnation Part 3: Market Impact

Market Impact

This is yet another example of what difference a year can make, and of a vendor taking advantage of a given second chance. A year ago, J.D. Edwards was in a rather self-loathing mood amid sagging sales, massive layoffs and restructuring, and with rumors of a possible buyout abounding as well, all making existing customers quite concerned and potential ones extremely leery (see J.D. Edwards' QUEST To End Its String Of Pyrrhic Victories). Worse than that, there was a lingering general feeling that the company had long been unable to articulate a product strategy that was well-attuned with the market needs/trends. The appointment of the new Chairman and CEO Bob Dutkowsky, from the hindsight, after less than a year at the helm (J.D. Edwards' CEO Retires Again; This Time For Good?), appears to be just what the doctor had ordered, resembling to a degree a feat of the current PeopleSoft's CEO, Craig Conway. Bringing an outsider (even if he/she comes with a pedigree of the closest partner, IBM) at a helm of a company which had forever jealously guarded that position only for its dynasty ranks will have helped bring a new prospective on how to further satisfy the customers, and will have allayed sluggishness and a not invented here' mentality that typically comes along with ruling too familiar a territory for far too long.

Let's face it, J.D. Edwards is not stampeding like a raging bull amid the bad economy, but the new management team has at least attained many positive changes (including instilling a winning attitude) by leveraging a proven product and its congenial, albeit often ineffective and anemic organization in last few years, and by fathoming how to deliver pragmatic value to a born-again-loyal installed base and to the prospective fertile "midrange to mid-cap" target market, which consists of enterprises that are loath to any radical changes to their business practices, but are rather inclined to improving their businesses incrementally by adding additional functions around their core ERP investment.

This is Part Three of a four-part note on J.D. Edwards. Parts One and Two covered recent announcements. This part discusses the Market Impact. Part Four will outline the Challenges J.D. Edwards faces and make User Recommendations.

Improved Financial Performance

First of all, Dutkowsky's natural initial focus on the company's improved financial performance, sales execution and continuation of products portfolio integration will have addressed the following two important issues: 1) the common perception of the troubled company, and 2) the difficulty of regaining confidence. To that end, important operational areas, like pipeline management, cash flow increase, collections/days of sales outstanding (DSO) reduction, margin improvements, etc., have all been improving, while increasing sales to the installed base, expanding the services business, and enhancing the company's market visibility has been happening as well.

While the new CEO has indisputably produced quick results and has boosted the company's posture (albeit he still has remaining 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 co-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 contemporary AS/400-only ERP competitors, with some like SSA and JBA being fatally wounded in the process. McVaney, often disparaged by his counterparts and Wall Street pundits for his unsophisticated but effective managerial style, never managed to create a real software powerhouse though, other than a legacy of honest rather than glitzy competitiveness.

That is exactly what the new management team has finally managed to crack the company seems to have found its soul, as it has finally pinpointed the right offering for its target market (both geography, customer size, and vertical segments wise), and it also seems to be exuding an air of confidence without arrogance, which had rarely, if ever, been seen in the past. Listening to customers, deploying new emerging technologies, delivering more software in the next two years than it has ever happened in any two-year period since the company's inception, putting the latest version of its products portfolio under the unified umbrella brand (that is also marrying the company's name to the product for the first time, further enhancing the brand recognition), delivering industry-based functionality, renewed commitment to professional services, technology innovations via partnerships, a new modular product delivery approach to make the purchasing and upgrading of its portfolio of applications easier and more efficient for the customer to rationalize and digest — should all be the harmony of the music for the customers' ears.

In a nutshell, J.D. Edwards seems poised to deliver applications within its traditional verticals that are wide-ranging, integrated, and modular (loosely decoupled) at the same time, which is apparently a clearer message and a better business model for the company.

Achieving Balance

Still, McVaney should feel additionally vindicated by the fact that with him at the helm J.D. Edwards had started to put its house in order. The fact remains that the company had achieved a fair balance between the product functionality scope expansion and the product architecture flexibility still during his tenure (see J.D. Edwards On The Mend; This Time Might Be For Real). One is to expect that Mr. Dutkowsky will continue to emphasize the recently breadwinning products like OneWorld (recently renamed ERP 8) and supply chain planning & execution suite (coming mostly from former Numetrix) and a prospective breadwinner, CRM product from YOUcentric (see J.D. Edwards Fires Siebel, Hires YOU). The focus on industry solutions such as for high-tech/electronics, industrial fabrication & assembly (IFA), automotive, life sciences, and architectural & construction, should continue as well. The J.D. Edward 5 product family featuring solutions for CRM, SCM, supplier management, business intelligence (BI), and Web-based collaboration, as well as an architecture that is evolving to embrace Web services were likely hatched under McVaney's wing as well.

Using a deliberate approach of not jumping injudiciously on every latest technology bandwagon, the company has by and large successfully taken its customers from mainframe-based systems to the Web, without resorting to a rip-and-replace' strategy (in an evolutionary rather than revolutionary manner), while also delivering an increasingly broad set of solutions.

The following final touches of the new management are apparently what made the long awaited quantum leap possible:

  • A new product development philosophy for J.D. Edwards 5, allowing the product to be enhanced incrementally without necessarily requiring customers to update all modules and products at once, and including a stringent software Quality Assessment (QA) process that brings requirements analysis and QA planning much sooner in the development cycle. J.D. Edwards 5 covers the entire suite of products that the company has developed or acquired so far, and going forward, each product grouping will be independently enhanced to meet the demands of customers, while also breaking the applications down into smaller modules should allow customers to purchase what they need when they need them, which is in tune with the current buying market. Despite a depressed economy, enterprises still need to upgrade and enhance those applications required to support collaborative processes for internal users and external trading partners, yet they must be able to prove a speedy return on the investment (ROI). This has proven to be crucial in selling additional functionality into the installed base, but it also gives J.D. Edwards' sales reps "multiple entry points" into new accounts.

  • Combined with the above comes the unified brand name and totally refurbished marketing, including a common look and feel to previously disparate literature for an unwieldy myriad of different product names, and more effective communications to the market and press/analysts, all that have greatly lacked in the past.

  • Focus on its traditional vertical markets while foraying into new markets that build on the company's known strengths in financials/manufacturing/distribution, such as Real Estate and Construction/Development, and staying away from markets that are the strongholds of some fierce competitors (e.g., SAP, PeopleSoft, or Lawson) and would only dilute efforts, like Federal Government, Healthcare, and Retail.

  • A number of fast-tracked integrated releases of J.D. Edwards' CRM product in less than a year, initially focused on Sales Force Automation (SFA) and support for the IBM iSeries platform, which is used by a larger part of its installed base.

Competitive Analysis

Although J.D Edwards remains at the No. 4 in the global enterprise applications vendors' league (with a support for 21 languages, and several dozens localized country issues), and PeopleSoft is now at a safe distance at the No. 3, behind SAP and Oracle, J.D. Edwards' recent performance is more impressive than those of its bigger counterparts, given the company's traditional focus on midrange manufacturing and distribution enterprises, a market segment with a great potential, but the one whose buying power has been severely affected by the current economy. The crucial driver of its license revenue revival has been the client base's adoption of its strong native extended-ERP functionality such as supply chain planning, collaboration and execution.

Moreover, with its product openness and flexibility, J.D. Edwards has broadened its hunting grounds and it has lately been successfully competing against SAP and Oracle at some segments of the higher-end of the manufacturing market. It has also enhanced its products for the service industries where it can now compete against PeopleSoft, SAP, Oracle, Geac, Lawson and Infinium. Owing to its own CRM product, it has even won against former ally Siebel Systems in the Financial Services market.

Therefore, J.D. Edwards' functional scope is now undeniably large, as it offers almost about everything from traditional ERP to full web-based collaborative modules for CRM, SCM and optimization at both strategic and tactical level. The company's applications are 100% web-enabled using Java 2 Enterprise Edition (J2EE) and HTML, and all applications also work on Windows CE at the lowest user interface (UI) level. Meanwhile, eXtensible Markup Language (XML) is native to the product, and mobile technologies are fully supported, particularly in applications like its CRM, rendering it a technology agnostic suite supporting all of the leading industry-accepted platforms.

Particularly encouraging, indeed, is the fact that the company has recently been creating buzz much more about the product functionality scope expansion than the product technology superiority'. In its attempt to shed the image of mere a traditional ERP vendor a few years ago, J.D. Edwards had initially focused on e-collaboration and extended-ERP applications, albeit with much of the functionality coming from numerous third parties. The company had instead tried to differentiate itself from competitors by embedding EAI into its OneWorld Xe product through its XPI integration layer — an XML-based interoperability engine and architecture that handles data, process, and workflow integration between enterprises.

Although J.D. Edwards' move into the EAI and the product openness arenas has been lately vindicated by other monolithic giants' endorsements of product openness (see SAP Opens The 'Miss Congeniality' Contest , Siebel Rallies Its Integration Alliance Troops and Oracle Makes A U-Turn At The "All Things To All People" Exit), and although the XPIs/XBPs seem to have proven their concept, the company has until very recently struggled without widening the breadth of its natively provided applications. Now, with J.D. Edwards 5 and its ample natively provided functionality, the "Idea to Action" and "Freedom to Choose" mantras could sound as a plausible humility of a vendor that offers flexibility to its customers, rather than an action out of desperation due to the lack of its own offering. These ideas have meanwhile been rendered valid by the emerging awareness of Web Services' promise for which J.D. Edwards has built good foundations with its loosely-coupled infrastructure and service-based product architecture blueprint.

Having further fine-tuned its ears to the mid-market wishes, J.D. Edwards has seemingly been staying away from being an infrastructure developer, somewhat contrasting its bigger counterparts' ambitions, as it remains a pure enterprise applications developer open to partnerships to deliver applications, services, and products that are outside its core competencies.

A prime example would be the renewed and enhanced partnerships with IBM and webMethods. Having long realized that its plethora of disparate applications have to co-exist both within and outside the J.D. Edwards' umbrella, the two companies struck a partnership a few years ago, and as a result, webMethods has supplied the embedded XPI platform for integrating J. D. Edwards' applications as well as third-party applications in a manner of an integration hub for both data and processes. Going forward, however, webMethods will seemingly become the preferred integration provider instead of J.D. Edwards abridging applications using webMethods' tools and further dissipating its resources, as it has been the case so far.

Future Strategy

J.D. Edwards' future focus will supposedly be on developing deeper applications that focus on business processes rather than on merely functions. To that end, the vendor will be providing customers with distinct business process management (BPM) services to address their specific needs, and these "services" will be prepackaged solutions that may extend across several different enterprise application areas (i.e., SCM, ERP, CRM, SRM, etc.) to address a specific business process.

As an example, since small-to-medium enterprises want to manufacture and deliver a product/service in a most efficient way and by utilizing minimal necessary resources, these companies consider planning and execution as one process. J.D. Edwards has to that end resolved many pieces of the puzzle by delivering or planning to deliver soon the real-time XPI-based integration of all the components of its Advanced Planning suite (e.g., planning, fulfillment, logistics, e-procurement, and product data management (PDM)) and ERP 8 with event-driven product architecture.

By providing the above noteworthy spate of functionality pieces such as advanced planning adapter and agent technologies, demand collaboration and planning, order promising, production and distribution planning and scheduling (in both discrete and process manufacturing flavors), web planning, demand consensus forecasting for engineer-to-order (ETO) industries (where the pure statistical forecasting based on historical data does not suffice), multi-site pegging, and supply chain event management (SCEM), J.D. Edwards joins the elite of SCM leaders. Supply chain execution (SCE), on its hand, involves the portal system, advanced pricing module, advanced stock valuation, agreement management, bulk stock management, forecasting management, inventory management, management accounting and product costing.

By going well beyond core ERP, the product also covers aspects of quality management, requirements planning, sales order management, shop-floor and work order management, and transportation management and warehouse management. J.D Edwards has also made significant forays with its EAM solution, which has been re-architected as a stand-alone product in addition to a native integration with its ERP system and solid functionality including predictive maintenance analysis based on the application of analytics to historical maintenance records, criticality analysis, and warranty management, with service agreement management slated for a future release.

Another promising revenue driver (at least based on existing install base's low penetration and increasing interest in) should be the company's acquired CRM product, as the move puts quite a substance in J.D. Edwards' long belated and wandering CRM strategy. Although painfully obviously remiss until last November, when the company acquired a CRM vendor YOUcentric to beef up its CRM solutions, it has since been aggressively busy integrating it with its other components (much of the solution has been integrated with the ERP 8 system, and to some extent with the SCM solutions) with a view to span the entire "lead-to-cash" cycle.

By the end of 2002, the company plans to deliver a complete CRM solution with full customer's visibility all the way through the back end into inventory, contract services, and other pertinent data. J.D. Edwards CRM product, now largely integrated (and meaning the end of the Siebel relationship, which proved to be too unwieldy for many of J.D. Edwards' mid-market customers to swallow and to difficult to integrate with OneWorld), provides modules for customer self-service, basic marketing and campaign automation, partner relationship management (PRM), sales force automation (SFA) and service and warranty management.

Moreover, J.D. Edwards' envisioned Collaborative Commerce CRM product set should bring together ERP, SCM, and SRM functions such as delivery, billing, order promising and collaboration with traditional CRM functions, which should enable a customer-oriented, collaborative business-to-business (B2B) solution for optimizing a company's planning, marketing, sales, order fulfillment, delivery, and service operations.

Therefore, as the whole is always better than the sum of the parts, J.D. Edwards Advanced Planning product's functionality should be bolstered by the integration of CRM, as it will also be able to also include prospective orders into planning (in addition to the actual ones), or it should likewise be able to optimize spare parts inventories for field service. Furthermore, SFA has reportedly been a hot item in the mid-market, as J.D. Edwards' own survey shows that its customers are keen on purchasing an SFA solution, as opposed to marketing management modules. To that end, former YOUCentric's YOUrelate product has indeed one of the best SFA modules for the market segment, while Aprimo's partnership should do for less urgent marketing management functionality.

Possibly the key advantage to J.D. Edwards CRM is its data inheritance capability that lets customers access their most important customer data without having to replicate or copy data into another data model. The offering is based on the J2EE standard, so that it absorbs the database of the existing legacy systems or it attaches itself to the database, and is able to sit on top of any collection of ERP systems across an enterprise without serious integration costs and/or a tremendous infrastructure buildup.

This concludes Part Three of a four-part note on J.D. Edwards. Parts One and Two covered recent announcements. Part Four will cover the Challenges J.D. Edwards faces and make User Recommendations.

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