J.D. Edwards' QUEST To End Its String Of Pyrrhic Victories Part 1: The News

J.D. Edwards' QUEST To End Its String Of Pyrrhic Victories

Part 1: The News
P.J. Jakovljevic - July 3, 2001

Event Summary 

During this year's FOCUS conference, which ran from June 11 -- 14, J.D. Edwards & Company (NASDAQ: JDEC), one of the leading providers of enterprise applications, demonstrated a somewhat more galvanized strategy than the one it initiated and less successfully executed during the last year (for more information, see J.D. Edwards Chooses Freedom to Choose EAI), with its renewed mid-enterprise focus and commitment to deliver customer-driven solutions. At FOCUS, J. D. Edwards gathered its QUEST User Group, over 8,500 customers from around the world and partners that include IBM, Sun, Andersen, Accenture, Compaq, Ariba and nearly 100 other technology and consulting companies. However, the event attracted much less attention and glitz compared to those organized at almost the same time by PeopleSoft and SAP, which might also serve as an indication of the current moods within the vendors' teams.

J.D. Edwards has been trying hard to reverse a continuing decline of license revenue against the backdrop of its direct competitors' upbeat postures.

About this Article: This note is a two-part note, the first part discusses the news from the J.D. Edwards conference. Part two discusses the Market Impact of this news and how it affects Users.

Conference Highlights 

J. D. Edwards pledged to refocus significant energy and resources on its traditional mid-enterprise marketplace. During his keynote address at FOCUS, J.D. Edwards' Chairman, President and CEO Ed McVaney, referenced the need for an integrated Customer Relationship Management (CRM) solution as a part of the mid-enterprise strategy, which should reinforce the value proposition J.D. Edwards presents to mid-enterprise customers seeking comprehensive integrated solutions. McVaney admitted that the company still has a lot of work to do to regain its stature in the industry. He pointed specifically to CRM applications, a crucial area in which the company has been undeniably remiss. McVaney did hint, however, that a major announcement concerning its CRM capabilities would be forthcoming very soon. Contrary to recent rumors in the media, J.D. Edwards will not dissolve the relationship with Siebel, but will rather jointly refine that relationship to more effectively serve the needs of their joint customers and the enterprise marketplace.

During the conference, the company highlighted three additional announcements related to the its renewed focus on serving mid-enterprise customers:

  1. J.D. Edwards will deliver its advanced planning solution (APS) to the mid-enterprise via four key modules:

    • Collaborative forecasting and demand management

    • Supply chain planning

    • Order promising

    • Production scheduling

  2. J.D. Edwards announced that it has partnered with Andersen to meet the rapid growth in the automotive industry. Together, they plan to deliver a highly tailored, industry-specific solution for mid-enterprise suppliers and OEMs in the automotive industry.

  3. J.D. Edwards continues to realize strong growth in its hosted applications business. In the month of May, the company booked 50 new customer wins with its Vertical-Focused ASP Program.

APS Integrated with OneWorld  

Possibly the most crucial was the announcement of the real-time integration of the company's real-time APS technology to its flagship OneWorld ERP system. Real-time connectivity between planning and execution has become essential with the advent of Internet for Supply Chain Event Management (SCEM) that allows customers to respond almost instantaneously to events anywhere in the supply chain. Previously, J.D. Edwards has offered only a batch integration of APS and OneWorld. Traditional batch-based solutions require 4-5 days to achieve the similar result - thus significantly limiting the ability of a company to respond to change in an extended supply chain.

The company also pledged full technical support for the collaborative planning, forecasting and replenishment (CPFR) standard and plans to deliver tailored collaborative applications to mid-market companies. The new OneWorld APS that debuted at the conference include collaborative forecasting and demand management, supply chain planning, order promising, and production scheduling. These solutions are available on a component basis. Each component will be priced at $147,000 and can supposedly be implemented and running in 16 weeks or less. The price tag of $147,000 is significantly less than the $400,000 charged for similar components designed for the upper end of the company's mid- and large-enterprise market. J.D. Edwards' collaborative supply chain solutions have recently been a driving force in the license revenue.

Compared to other offerings in the marketplace, J.D. Edwards claims that the real-time integration of APS and OneWorld provides:

  • Proven enterprise execution system with over 1,500 customers worldwide.

  • Sophisticated real-time event management system capable of high-performance monitoring, simulation and decision support to users both internal and external to a company supporting over 60 alert types.

  • Powerful optimization capability that can automatically determine the best course of action while considering finite capacity, costs and profits.

  • Out-of-the box integration between planning and execution at the transaction level, allowing any transaction created by OneWorld (from purchase orders to advanced shipping notices to back-order notifications) to be processed by the APS system immediately.

  • Comprehensive external integration capability (XPI and XBPs) that delivers pre-packaged connectivity and collaboration to customers, trading partners and exchanges.

  • Extensive business intelligence capability with pre-packaged Key Performance Indicators (KPIs) to measure the results of real-time, integrated supply chain processes.

General Availability of XBPs 

Following up on its interconnectivity mantra, the company also announced the general availability of eXtended Business Processes (XBPs). Building on J.D. Edwards' XPI (Extended Process Integration) middleware product, XBPs are predefined, fully executable business processes that tie disparate applications and enterprises together. Released in January, XPI laid the groundwork for XBPs that would ideally allow multiple applications, including CRM, e-procurement, supply chain, financial management and fulfillment, to share and integrate data in real time across the enterprise and beyond to trading partners.

In the near future, J.D. Edwards plans to make its pre-determined XBPs available for business software applications from a wide variety of vendors enabling customers to choose the best-of-breed individual software products. XBPs are also slated to be made available for self-service and supply-chain applications to deliver collaborative solutions tailored for vertical industries. For instance, J.D. Edwards will be able to deliver this multi-faceted product package to the high-tech electronics industry pre-integrated for the RosettaNet standard used widely in that space.

Pre-set XBP's designed to integrate J.D. Edwards OneWorld software with e-procurement, CRM and storefront applications are available now. In addition, J.D. Edwards plans to offer consulting, maintenance and upgrade services for companies looking to build new XBPs that would tie existing systems into the common XPI fold irregardless whether these are legacy-based or not in order to help customers leverage investments already made with existing systems.

Key Alliances and Partnerships 

In addition, J.D. Edwards has formed key alliances and partnerships to increase the exposure and adoption of OneWorld products. Possibly the most prominent of these is the recently expanded partnership with IBM into a prospective powerhouse alliance. Under the agreement, the two companies will jointly market and sell a specialized IBM eServer designed to run J.D. Edwards' collaborative commerce software for small to medium businesses. J.D. Edwards hopes the IBM alliance alone will boost its annual revenue by 10%.

Optimized for J.D. Edwards' OneWorld applications, the IBM eServer for J.D. Edwards is apparently the first server co-branded with an independent software vendor. The solution is tailor-made for small- and mid-sized businesses looking for ways to reduce the complexity of their e-business infrastructures. The IBM eServer for J.D. Edwards will be pre-configured to run HTML, Java or Linux. In addition, as an IBM eServer this specialized offering shares the same technology that helped establish a world record of Java performance on a single IBM eServer iSeries system. Also, the IBM eServer iSeries established a new industry record of 6,000 concurrent users in a recent benchmark running J.D. Edwards' OneWorld Xe applications. General availability is expected sometime during the third quarter 2001.

Q2 Financial Results 

However, the announcements came only a month after the company laid off 8% of its workforce as a revitalization effort pursuant to the string of losses and management changes (see J.D. Edwards Saved By SCM, Narrowly, And Only For Now).

On May 23, J.D. Edwards reported financial results for the second quarter ended April 30, 2001. Revenue for Q2 2001 was $216.7 million, a 6% decline compared to revenue of $231.0 million in Q2 2000. The optimism was definitely tempered by a dismal license fee revenue of $62.3 million, a 24% drop compared to $81.7 million in the same period last year (see Figure 1). At least, services revenue grew 3% to $154.3 million, from $149.3 million in the second quarter of fiscal 2000. Net income from normalized operations improved significantly over last year though, to $2.9 million, compared to a net loss from normalized operations of $9.6 million in the second quarter of fiscal 2000. Amounts from normalized operations exclude amortization of acquisition-related intangible assets, restructuring and other related costs, and gains on sales of equity investments and product line.

Figure 1.

This concludes part one of two- part note. Part two discusses the Market Impact of this news and how it affects Users.

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