PeopleSoft Building Muscles To Overcome The Rough Patch Part 1




PeopleSoft Building Muscles To Overcome The Rough Patch
P.J. Jakovljevic - June 19. 2002

Event Summary

At the beginning of 2001, PeopleSoft Inc. (NASDAQ: PSFT), one of the largest enterprise applications providers, ebulliently indicated its continued interest in rounding out its product portfolio through favorably priced acquisitions. Instead, the company recently unveiled a number of new products developed either internally or via alliances. It is likely its recently tamed new revenue generation has played a part in the company backpedaling its bullish attitude on acquisitions.

Recent announcements include:

New Products

  • PeopleSoft eSettlements Part of PeopleSoft's Finanacial Management Solution

  • General availability of PeopleSoft Enterprise Service Automation (ESA) 8.4

  • Expansion of Human Capital Management (HCM) solutions

  • Supply Chain Management Solutions Strategic Sourcing and Trading Partner Management (TPM)

  • Next generation Enterprise Portal

  • CRM solutions for Government, Insurance, Energy, and High Technology

Alliances

  • Vigilance Supply Chain Event Management

  • Agile Software Company Comprehensive Product Life Cycle Management

Financial Results

This is Part One of a four-part report on recent PeopleSoft announcements. Parts Two and Three will discuss the Market Impact of these announcements and Part Four will make User Recommendations.

New Products

Recently, on May 28, PeopleSoft announced the general availability of PeopleSoft eSettlements, an integrated, comprehensive solution for electronic invoice presentation and payment (EIPP) for global enterprises. As a part of PeopleSoft's Financial Management Solutions, the application was devised to optimize the source-to-settle' process by providing a common platform for buyers and sellers to exchange and match transactions, such as purchase orders, receipts, and invoices.

For many companies, the settlements process is still primarily manual and paper driven and essentially one-way, resulting in expensive, inefficient, and error prone business processes. With PeopleSoft's eSettlements, companies would receive invoices electronically, send alerts and notifications, and resolve disputes online. In addition, buyers are able to extend their procurement and payment rules, such as matching and payment selection criteria, whereas sellers can improve customer relationships and reduce days of sales outstanding (DSO) through on-line tracking and resolution of payment issues. The result should consequently be lower costs, shorter cycle times, fewer errors, and higher productivity.

On May 14, PeopleSoft announced the general availability of PeopleSoft Enterprise Service Automation (ESA) 8.4. The product reportedly continues to gain strong market acceptance, with more than 180 customers licensing the product since its introduction in Q3 2001. PeopleSoft ESA was devised to provide real-time visibility and control to manage spending on services as well as internal projects to reduce costs associated with securing contractors and managing resources, and streamlining the execution of projects across the enterprise. The release of PeopleSoft ESA 8.4 includes new functionality especially designed to meet the unique requirements of global customers and customers in the public sector. To that end, the key functionality to meet the specific needs of the Education and Government sector includes commitment control, fund accounting and services procurement.

As for Global Customers, PeopleSoft ESA 8.4 introduces European country-specific functionality. The solution now supports Value Added Tax (VAT) in Contracts and European Expenses, including Per Diem, Mileage Reimbursement, and VAT configuration by expense type and country. This new functionality should increase efficiencies for global organizations that operate and manage projects across multiple countries.

In addition, PeopleSoft ESA 8.4 delivers expanded integration with Microsoft Project 2002 to provide enhanced project control functionality that includes project level budgeting, work breakdown structure (WBS) support and activity level integration. PeopleSoft ESA includes the following applications: Services Procurement; Resource Management; Contracts; Projects; Expenses; Mobile Time and Expense; Mobile Time and Expense - Palm and Travel.

Further, at the PeopleSoft Leadership Summit 2002 at the end of April, PeopleSoft unveiled a number of new applications that should extend its already broad applications portfolio. First of all, building on 14 years of leadership in the human resources management systems (HRMS) industry, the company announced touted breakthrough Human Capital Management (HCM) solutions that should align and leverage workforce contribution with corporate objectives. PeopleSoft announced three new modules with a view towards extending its proverbial lead in the HRMS industry providing solutions from managing traditional HR and payroll, to connecting employees and managers through self-service. PeopleSoft's new HCM solutions include:

  • PeopleSoft Sales Incentive Management (SIM) should enable organizations to design and implement incentive plans that align sales force behavior with enterprise objectives in real time. The solution should also reduce the complexity and repetitive, error-prone nature of today's incentive compensation systems, as the entire sales incentive process from planning through payment will be provided online.

  • PeopleSoft Performance Management should enable a company to overlay and enforce corporate objectives all the way from the boardroom to the storeroom, as every employee can be aligned with the management by objectives (MBO's) of the company, and any employee not aligned can be easily identified to ensure that valuable resources are not wasted.

  • PeopleSoft Enterprise Learning Management should enable organizations to dynamically deliver training where it is needed, both inside and outside the enterprise, with learning systems being integrated with both performance and incentive management applications.

Following up on this strategy, on June 11, PeopleSoft announced Enterprise Incentive Management (EIM), a product suite to be included in the above-introduced HCM solutions. PeopleSoft's EIM suite will also provide organizations with the capability to model, manage, communicate, and measure incentive compensation in alignment with specific business objectives across departmental boundaries. PeopleSoft Sales Incentive Management (SIM) is the first product to be introduced in the EIM suite.

Also during the same event, PeopleSoft announced that organizations around the world are rapidly adopting its Supply Chain Management (SCM) solution, which includes Supplier Relationship Management (SRM), Manufacturing, Supply Chain Planning (SCP), Customer Fulfillment Management and PeopleSoft Supply Chain Analytics solutions, and provides more than 450 embedded performance indicators for the management of real-time business processes. During the first quarter of 2002, more than 50 organizations reportedly went live on PeopleSoft SCM. The company also announced the general availability of two new supply chain solutions, Strategic Sourcing and Trading Partner Management (TPM).

With the announcement of PeopleSoft Strategic Sourcing, PeopleSoft claims to offer the only solution that manages the entire source-to-settle process for all goods and services, as companies can directly generate contracts and purchase orders from bid evaluation screens, and thereby significantly reduce processing time. In addition, with PeopleSoft Strategic Sourcing, companies should identify and measure suppliers on numerous criteria driving more profitable supplier relationships. PeopleSoft Trading Partner Management (TPM) provides a unified interface to manage any type of electronic trading relationship. Companies can choose from multiple communication methods, including FAX, EDI, XML, Portal or Web Services, which should enable them to remove barriers associated with supplier enablement.

Additionally, PeopleSoft announced the general availability of its next generation Enterprise Portal. PeopleSoft believes it has raised the bar for enterprise portal solutions with functionality such as Intelligent Context Manager and Web Services integration. Intelligent Context Manager proactively prompts users with relevant information when they initiate transactions within the portal. Information is automatically displayed enabling users to navigate through the business process in an informed manner.

For example, using a traditional portal approach, an accounts payable clerk would see that a customer is overdue on a payment. The clerk would typically send the account to a collections department or agency -- never knowing there is a large sales opportunity in the pipeline from the same delinquent payer. With Intelligent Context Manager, the clerk is directly notified of the sales opportunity at the same time he or she is accessing the receivables information.

PeopleSoft also touts to be the only enterprise portal vendor to utilize Web Services standards as its primary integration method, as the Enterprise Portal enables customers to directly syndicate Web Services content into the portal, with a prospect of reducing costly programming and maintenance, and lowering the total cost of ownership (TCO).

New CRM Products Coming

Last but not least, PeopleSoft announced new industry solutions for Customer Relationship Management (CRM), expected to be available later this year. In addition to existing solutions for Financial Services and Communications, PeopleSoft announced CRM solutions for Government, Insurance, Energy and High Technology.

  • PeopleSoft CRM for Government should give government organizations the ability to provide fast, effective service through multiple channels. For example, state and local governments will have the capability now to be able to: manage non-emergency "311" communication between government organizations and their constituents; automatically assign constituent inquiries to the right department; graphically display the location of reported problems and work crews; and reduce administration costs by providing self-service access to online support services.

  • PeopleSoft CRM for Insurance should deliver functionality to manage all lines of insurance including property and casualty, life and health. The solution will model insurance policy relationships, providing a comprehensive view of a customer's insurance portfolio — from claim to billing to payment, while self-service capabilities will give customers online access to product information, policy quick quotes and the ability to file claims in real time.

  • PeopleSoft CRM for Energy should provide a comprehensive solution designed specifically for energy retailers and distributors. The functionality will include: premise management support to administer service points and assets; service management support for move and transfer of service transactions; tracking and resolution of power outages, gas leaks and other emergency and non-emergency services; comprehensive account billing and management functionality; and loyalty and retention analysis for up-selling and cross-selling products and services.

  • PeopleSoft CRM for High Technology should provide functionality for manufacturers and distributors of hardware, software and other technology products. The solution will include: self-service product registration; contract and entitlement management; real-time tracking of availability for materials and spare parts across multiple locations; and up-sell and cross-sell of products and services, such as extended warranties and professional services.

Alliances

On May 28, PeopleSoft also announced an alliance with Vigilance, Inc. to provide a supply chain event management (SCEM) solution that should give customers extended visibility and expanded control over the supply chain. The integration of PeopleSoft's Supply Chain Management (SCM) applications with Vigilance's Supply Chain Event Management Suite (SCEM) should enable companies to immediately alert employees and suppliers to unexpected events and take corrective action throughout the supply chain.

The new solution combines cross-enterprise event detection, closed-loop analytics, role-based portals, and collaborative business rules to enable companies to identify and prioritize emerging issues, alert escalation paths, and facilitate immediate corrective action. For example, procurement managers can be alerted immediately to an unexpected production stoppage with a key supplier, and apply real-time analytics and alternative business rules to rapidly deploy a new sourcing strategy. As a result, companies should minimize costs and short-term disruption.

In its attempt to compensate for a functionality long offered by its more manufacturing-oriented nemeses like SAP and Baan, on May 9 PeopleSoft and Agile Software Corporation (Nasdaq: AGIL) announced that they have formed an alliance to provide a comprehensive solution for product life cycle management (PLM). PeopleSoft's Supply Chain Management (SCM) and Customer Relationship Management (CRM) solutions will be integrated with Agile's comprehensive suite of Product Chain Management (PCM) applications. The solution should enable companies to manage the complete product life cycle from development to end-of-life including sourcing, production, sales, service and distribution.

Integrated PeopleSoft and Agile applications should drive rapid product development, change management and partner collaboration. Critical business processes like New Product Introduction (NPI), Product Change Management and Total Product Cost Management will be addressed by the combined solution that should enable suppliers, customers, employees and partners to share key information such as design adjustments, product changes and customer requirements for new products.

Financials

The above announcements came on the heels of the April 25 announcement of less than upbeat first quarter 2002 results, which ended a string of record results during previous six quarters. For the first quarter ended March 31, 2002, software license revenue declined 13% to $133 million, from $153 million in Q1 2001 (See Figure 1). Likewise, total Q1 2002 revenue was $483 million, a decline of 6% from $514 million a year ago, justified by the management with all-too-familiar slowdown in IT spending.

Figure 1.

However, income from recurring operations, however, increased by 28% to $46 million, up from $36 million in the same quarter of 2001, while net income for the first quarter of 2002 was $45 million. Other positives were the Company's cash and investment balances at March 31, 2002 at $1.82 billion, an increase of $149 million during the first quarter. Days Sales Outstanding (DSO) at March 31, 2002 declined to 58 days, an improvement from 63 days at December 31, 2001 and possibly the record low level in the industry.

PeopleSoft again cited significant deals against its competitors in the fourth quarter in all product lines and across all geographies. Nevertheless, many important indicators were down compared to previous quarter, including average sales price, net new customers, and number of contracts with more than $1 million value. While license revenue from existing customers was flat, possibly the most major negative effect was that new customers represented only 25% of revenue, down from an average of 39% and from 42% in the previous quarter. A bright spot was the education and government market, which continued to show some strength throughout the quarter.

This concludes Part One of a four-part report on recent PeopleSoft announcements. Parts Two and Three will discuss the Market Impact of these announcements and Part Four will make User Recommendations.

 
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