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PeopleSoft 8 Launched - Anything to Write Home About?

Written By: Predrag Jakovljevic
Published On: September 7 2000

PeopleSoft 8 Launched - Anything to Write Home About?
P.J. Jakovljevic - September 7, 2000

Event Summary

According to a press release from July 11, PeopleSoft Inc., a leading business applications provider, launched PeopleSoft 8, a new generation of pure Internet e-business applications offering browser-based access and open integration across enterprise boundaries. PeopleSoft claims to have completely rewritten its applications for the Internet. The PeopleSoft 8 release includes PeopleSoft Customer Relationship Management (CRM), Supply Chain Management, Human Resource Management (HRMS), Financials, and Professional Services Automation (PSA), as well as other industry-specific solutions. In addition, PeopleSoft announced availability of 59 newly developed e-business applications that enable collaboration and commerce with customers, employees and suppliers.

PeopleSoft 8 is powered by the PeopleSoft Internet Architecture, which the company considers the industry's most open and scalable e-business platform based on HTML and XML. The server-centric architecture may significantly decrease cost by completely eliminating the need for software on the computing device other than a standard Internet browser. PeopleSoft 8 eBusiness applications are accessible via phone lines and wireless devices, have the look and ease-of-use of popular web sites, and integrate quickly and cost-effectively with third-party software. PeopleSoft claims its XML-based open integration capabilities will allow organizations to seamlessly combine PeopleSoft applications, such as CRM and Supply Chain Management, as well as third-party applications, to create a tightly integrated enterprise. Companies will be able to track orders from the point of contact with customers whether via phone, fax, e-mail, or the web through order management, procurement, and fulfillment to service execution.

"PeopleSoft is the first enterprise application vendor to deliver a pure Internet solution," said Craig Conway, president and CEO of PeopleSoft. "PeopleSoft 8 is an entirely new generation of eBusiness applications, and represents PeopleSoft's emergence as an Internet company."

PeopleSoft also hopes its support for Unicode, a global language standard, will allow customers to centrally manage implementations of PeopleSoft 8 in virtually every modern language in a single database. This will possibly enable multinational companies to better coordinate and streamline operations while significantly reducing cost. The company claims that PeopleSoft 8 is also the first enterprise application to embed multi-language search engine technology.

PeopleSoft has embedded analytic capabilities into all PeopleSoft 8 applications, empowering individuals to make quick, effective decisions and enabling organizations to better predict and respond to change. PeopleSoft's award-winning eBusiness analytic applications such as Customer Profitability, Workforce Analytics, Supply Chain Analytics, and Balanced Scorecard deliver the right information at the right time to customers, employees, and suppliers. PeopleSoft also plans to tailor specific eBusiness industry solutions for the Professional Services, Financial Services, Education, Government, Consumer Products, Communications, High Technology, Utilities, Distribution, and Health Care industries.

PeopleSoft 8 collaborative applications extend to PeopleSoft MarketPlace, a business-to-business trading exchange where customers, suppliers, and employees can collaborate and do business efficiently over the Internet. PeopleSoft MarketPlace is live today with eProcurement for office maintenance, repair, and operations (MRO) products and services. Future collaborative services are currently scheduled to include direct procurement, resource management, benefits, travel and expense, and recruiting. The solutions will enable strategic decision-making by integrating PeopleSoft Enterprise Performance Management, PeopleSoft's eBusiness analytics suite.

PeopleSoft 8 best-in-class applications can be hosted via PeopleSoft eCenter, PeopleSoft's applications hosting service, which provides the industry's broad set of integrated e-business applications, with single-vendor accountability and an enhanced customer experience. Customers can also turn to one of PeopleSoft's 12 certified Application Service Provider (ASP) partners to host PeopleSoft 8.

The PeopleSoft Internet Architecture was delivered in December 1999 along with PeopleSoft's Enterprise Performance Management suite of eBusiness analytic applications. PeopleSoft 8 is scheduled to ship in the third quarter of this year.

Market Impact

PeopleSoft Strengths

PeopleSoft seems to have turned the corner. While most of its competitors have been faltering during the recent turbulent times, with the exception of Oracle and possibly SAP, PeopleSoft has returned to strong profits and revenue. The bleak days of 1999 and the possibility of being toppled by J.D. Edwards are a matter of the remote past.

The company has also improved its traditionally low international market penetration, with the international license revenue growing 31% year over year. Furthermore, these upbeat results coincide with the winding down of its ambitious R&D endeavors. PeopleSoft invested an exorbitant 27% of total revenue in R&D. That investment is paying off with new product releases that indicate the company is in sync with market trends.

Indeed, PeopleSoft's latest product release, with an even more remarkable new browser looking user interface, a completely redesigned Internet architecture, and notable additional functionality, places the company as one of the frontrunners in the next generation of e-business applications. Furthermore, it stands a chance to currently be the only vendor, other than Oracle, that can deliver a majority of the components of a complete e-business solution with its PeopleSoft 8 suite.

Particularly impressive are its pervasive Business Intelligence (Analytics) components, with dedicated complex analysis and reporting around many crucial business areas including several new CRM components. Although the marketing, so far, of its CRM acquisition has not matched the efforts of rivals such as Oracle, Siebel and Nortel/Clarify, PeopleSoft's huge potential advantage is the integration of its Vantive product to the back-office ERP system that handles the vital internal processes so important to customers. For example, sales and/or customer support representatives should know at any time whether the supplies needed to make a product are in stock, so they can accurately inform customers about a product's available-to-promise (ATP) date.

The new system allows manufacturers to get a 360-degree view of all their customer relationships. It provides tracking and management of marketing campaigns, the entire sell cycle, the fulfillment cycle, and customer service. This kind of knowledge only comes from integrating CRM software with back-office systems. Additional advantages of the Vantive product are its ability to easily integrate with other 3rd-party ERP systems as well as improved scalability (the company claims to be the first vendor to support 20,000 users).

While we have strong reservations towards about company's utilizing high sounding words like "technology leap", there is a point in PeopleSoft's suggestion that its competitors' (read Oracle and SAP) products were only Web-friendly, rather than an Internet-only application. Early Web enabled releases from both Oracle and SAP were a mere porting of client/server architecture to the Internet (in other words, basically rejuvenated versions of the existing Windows-like screens and forms).

Therefore, PeopleSoft's announcement of 100% Internet connectivity with the elimination of required client side software represents a new twist. Not only will it speed application deployment time (browsers are free and often pre-installed), it will allow access to anyone with a cell phone, hand held or browser equipped machine, which is an attractive prospect for remote offices, sales teams, and business partners. Also, PeopleSoft's architecture will challenge competitors' offerings with advanced XML messaging and application programming interfaces (APIs) options that promise to ease integration. Other indisputable advantages of a browser are the ease of training and use, as well as a broad-scale deployability.

We believe that PeopleSoft is also in a good position to be a strong contender in a number of industries. While this may not be the case in complex manufacturing until the market witnesses the proven capabilities of its forthcoming PeopleSoft 8 release, it certainly can compete in traditional service industries with its human resources, financial, and now CRM and e-business modules. It may also compete in distribution industries like Consumer Packaged Goods (CPG) with its supply chain and logistics functionality resulting from the Red Pepper purchase.

While PeopleSoft has so far failed to exploit its purchase of Red Pepper several years ago, its new tack of addressing manufacturers' needs may result in far greater success. Namely, PeopleSoft has focused its manufacturing solutions on only consumer packaged goods, high tech/electronics, and wholesale distribution industries. It already has a strong customer base within these industries, primarily with its financial and human resource management systems, but also to a degree with its manufacturing and supply chain modules.

What may also help PeopleSoft in this particular endeavor is the change in both the business applications climate and users' mindset. The times when features and functions (bells and whistles) were the order winners are over. The new selections fights are fought on the peripheries of ERP, in the CRM, the supply chain management (SCM) and e-collaboration arenas, with very sharp vertical focus. Assuming the forthcoming new manufacturing functionality will not be significantly inferior, bundled with CRM capabilities from its recent purchase of Vantive and with traditionally strong analytic applications developed in house, PeopleSoft may turn out to be an adequate contender in future manufacturing and material management software selections.

PeopleSoft Challenges

Nevertheless, PeopleSoft faces a number of notable challenges. Despite a significant growth of PeopleSoft's license revenue in the last quarter (37% compared to year ago), a more detailed look reveals things to not appear quite so rosy. Namely, Vantive products have been the major license revenue contributor (~26%), which means that PeopleSoft traditional breadwinners' (HR and financial systems) revenues have shown below the market average growth year over year. Moreover, the overwhelming impression is that Vantive has not been utilized to its full potential either despite the fact that the CRM market has been experiencing stellar annual growth.

While PeopleSoft now has a strong management with an invigorated stance, and is running a profitable business, it may be short-lived without sustaining license revenue. The company has a reputation of squandering very promising acquisitions away - the Red Pepper purchase from a few years ago being one. A similar mistake with Vantive would be disastrous, particularly since CRM is a part-and-parcel of the new economy giving PeopleSoft a golden opportunity.

The company's biggest challenge, without doubt, lies in creating marketing awareness, promoting its new image, products, and the Web architecture as well as in crisp sales execution. While PeopleSoft has more than tripled its marketing budgets and is on the quest to beef up and focus its sales organization, a poor market acceptance of PeopleSoft 8 or any early adopter dissatisfaction could be very detrimental to the company's future. We are concerned that betting mainly on enterprise performance management (EPM) analytics and new product architecture, on top of its embellished traditional product offering, will not suffice in the long run.

While the number of additionally released applications (59) is impressive, the product portfolio still shows serious functional holes, particularly in its proverbial 'bogey' areas like manufacturing and supply chain management, where its competitive position is not going to improve dramatically very soon. To that end, the company has also implemented a Baan Voyage program to encourage companies to trade in Baan's products in place for PeopleSoft products.

Given PeopleSoft's weak complex discrete manufacturing functionality (which is Baan's strength on the other hand) we do not regard the company's offer to discount only $100,000 off the implementation costs (which would only be a negligible fraction of the total cost of ownership, never mind the pain of switching to another system per se) as very compelling. In a case where its functionality could come close to Baan's (e.g., in flow manufacturing), the company should offer its software for a significantly discounted license price in order to boost the number of its manufacturing reference sites, which is currently only a measly couple of hundred.

Another impediment to PeopleSoft's immediate success may be the market's generally low awareness of the Internet-only architecture advantages. At this stage, users mainly require the look and feel of the Internet and, therefore, other Web-enabled products may not be seriously disadvantaged while competing against PeopleSoft 8.

Besides, Oracle and SAP have already significantly improved their latest product releases and there is every reason to believe that they may eliminate the PeopleSoft architectural advantages very soon. And this is aside from Lawson Software that has long been acclaimed for its advanced product architecture and superior user interface. Furthermore, the client/server architecture is still far from being dead. There is a great likelihood that client/server and Internet architectures will coexist for the long time to come until interruptions and Internet instability are tremendously curbed.

If one wants to be nit picking he/she may notice that even PoepleSoft's entire product suite does not exhibit an identical look and feel across the board. Namely, its Vantive CRM suite still requires Java virtual machine and will hopefully be rearchitected for the Internet and fully integrated within the suite at some point in the future. This flies in the face of the company's recent lambasting of competitive products. Moreover, it may also prove to be a serious drawback, given that CRM is often the driving force behind e-business projects.

Like SAP and Oracle, PeopleSoft should also carefully reevaluate its product migration strategy from current product instances (7.5 and earlier), in order not to alienate and disillusion its loyal customer base. PeopleSoft 8 has allegedly disconcerted some users because its licensing model requires that existing customers re-license its older software, rather than pay a lower upgrade charge as with previous updates. Some customers may see this as only another hefty investment with little added value other than improving user interface. The competitors are only begging for a surge of similar news.

In addition, SAP's recent $250 million joint development alliance with Commerce One Inc. may derail PeopleSoft's own technology alliance with the same marketplace vendor. PeopleSoft Marketplace is its e-procurement suite for which Commerce One's MarketSite technology is used to power content management, auctioning, and searching, with the initial target markets to be professional services, educational, and financial services. Future collaborative services are said to include direct procurement, travel, benefits, resource management and recruiting. PeopleSoft may now be forced to develop its own marketplace technology as a result of the SAP deal. PeopleSoft's small customer base within discrete manufacturers can further aggravate its marketplace initiative dubiousness given that these are the prevalent users of Internet collaboration.

User Recommendations

Existing PeopleSoft customers should certainly consider the new offering, but avoid selecting it without looking at what the other vendors have to offer. We recommend identifying your clear e-business strategy and conducting a thorough comparison-shopping, at least for the negotiation leverage sake. Contact PeopleSoft sales representative for more information on PeopleSoft 8 and request a list of recent customers and ask them about the product.

Existing users of PeopleSoft client/server-based products may want to inquire about PeopleSoft's future product support and/or migration strategy. Beware of a potentially hidden cost of a migration. In order to preserve the existing customers' business rules, a certain amount of application logic must be "mapped" into XML. For customized applications this could represent a significant amount of coding and require a complex understanding of the business rules. Find out what resources are required to preserve the business rules and most importantly, who pays for it. Additionally, by shifting much more processing power to the application server side, PeopleSoft 8 may require much more hardware processing power of the application server compared to its preceding releases.

As for potential customers, PeopleSoft remains a very strong contender in enterprise application selection processes within the following industries: utilities, healthcare, service providers, financial institutions, public sector, insurance, higher education and consumer packaged goods. It should be on a short list in any selection where HRMS system, financial modules, and e-business/self-service are the main pillars of an enterprise application. However, since the company has been touting the significant manufacturing and supply chain product enhancements within its new release, which is due later this year, current and potential users are advised to inform themselves about these, particularly in the above-mentioned industries of focus. Furthermore, companies outside of above-mentioned industries may benefit from evaluating PeopleSoft's product components on a stand-alone basis for their e-business needs and leverage that information against other vendors in the selection.

Organizations considering extended ERP applications (both web based and network dependent) should consider all options, although PeopleSoft's activities are promising. The notion of a full Internet based solution could save time and money on the integration. An additional consideration might be the complete outsourcing of the ERP application with an Application Service Provider (ASP). Consideration should also be given to the products availability and endorsement of "web standards." Should a different XML standard be adopted (industry wide) after installation, identify who will be responsible for accommodating the change and what measures have been engineered into the application to support evolving standards.

As with all new releases, users should employ a critical approach in their evaluation of PeopleSoft 8 and require all potential vendors to demonstrate specific business processes. Though demonstrations do not guarantee a trouble-free implementation, they can go a long way toward helping users understand how the software might behave in their environments. 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 offerings.

 
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