Building Muscles To Overcome The Rough Patch
Part 2: Market Impact
- June 20, 2002
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.
eSettlements Part of PeopleSoft's Finanacial Management Solution
availability of PeopleSoft Enterprise Service Automation (ESA) 8.4
of Human Capital Management (HCM) solutions
Chain Management Solutions Strategic Sourcing and Trading
Partner Management (TPM)
generation Enterprise Portal
- CRM solutions
for Government, Insurance, Energy, and High Technology
Supply Chain Event Management
Software Company Comprehensive Product Life Cycle Management
is Part Two of a four-part report on recent PeopleSoft announcements.
One detailed the announcements. This part and Part Three will discuss
the Market Impact of these announcements and Part Four will make User
might have become the victim of its own success, since the year 2001 was
an exceptional year of its financial performance, including record total
revenue, record profit, and more than $500 million of generated cash.
The 19% growth was far and away better than the estimated dismal applications
market growth (if not a steep decline) in 2001.
2001, PeopleSoft was perceived to have the purest Internet-based product
architecture. With improved international market penetration and brand
recognition (nearly 40% of revenues coming from outside the US), one could
conclude that 2001 was a year during which PeopleSoft has promoted itself
into a formidable applications competitor. It was a picture of growth
matched only by SAP, Siebel Systems, Oracle, and
i2 Technologies during their happiest years in the big league.
It certainly bucked the trend across most of the enterprise IT sector.
would be a tall order for the company to repeat the feat in 2002, given
its current position and size. PeopleSoft, while number one in the HR
applications market (with ~60% of the market share) is ranked number three
behind SAP and Oracle for enterprise applications generally. For financials
applications with its customers representing more than 60% of Fortune
1000 companies, it has been in a neck-to-neck contest with Oracle for
a No. 2 position behind SAP. In the CRM market, while in a dispute with
SAP for the second position behind Siebel, PeopleSoft is possibly the
only one amongst several dozens of ERP vendors able to sell seriously
beyond its base with stand-alone CRM applications.
that PeopleSoft had been able to weather the storm for so long, where
did the abrupt slump in Q1 2002 revenues came from and why was its stock
was so punitively thrashed afterwards? The overall continued slowdown
in IT spending did not happen overnight, but it certainly contributed.
It comes as no surprise the fact that users have for some significant
time been penny-pinching their IT budgets to implement and/or upgrade
software they already own (from those happy days when they were buying
even what they did not need at the time
addition to promoting its collaboration-centric architecture, PeopleSoft
has also been successful in up-selling new modules to its customer base,
which bought on average three additional modules when upgrading to PeopleSoft
8 (many customers would use the upgrade also as an opportunity to add
new ERP modules and new extended-ERP applications, most frequently portals,
e-procurement, CRM, and employee self-service (ESS)). Therefore, it is
quite possible that PeopleSoft has exhausted all the early adopters in
its customer base, or that there is really a temporary lull in upgrades
due to the overall spending anxiety.
reportedly, only a third of PeopleSoft customers have licensed
PeopleSoft 8 so far, leaving a large group of customers that will probably
license version 8 before support for version 7.5 ends in 2003. Although
that seems a promising revenues booster, one would rather want customers
to jump on an upgrade due to their infatuation with new functionality
and clear return on investment (ROI) opportunities, rather than for feeling
blackmailed and held over a barrel with an impending product support discontinuation.
as PeopleSoft's Q1 2002 revenue miss of over $30 million represents the
loss of many sales, based on its average sales price/contract size of
over $0.7 million in 2001, there may be some concerns that sales execution
has also entered the picture on top of the soft market. Time only will
tell whether this was a short-term bump, soon be rectified (although the
company expects flat results in Q2 2002 as well), or the start of a protracted
period of declining revenues resembling Oracle's current predicament (see
Oracle Fumbling For A Jump-Start Kit). Yet, given the large population
of customers still willing to upgrade, and given a number of enticing
new applications and the install base's tendency to purchase additional
modules, and given PeopleSoft's cash position and strong, tight-fisted
management, it should be able to weather another quarter of flat earnings
and to be well-prepared for the supposedly more promising second half
of the year.
Internet Architecture Software
a differentiation in mind, PeopleSoft has been since 2000 a pure Internet
architecture software evangelist, which is an achievement that took over
$500 million and 2,000 developers per year resources. The result is a
wide-ranging collaborative enterprise system with no client software to
maintain and very good visibility of real-time information and data for
anyone anywhere, with the ability to maintain multiple data models and
a large investment in architecture made early, PeopleSoft has so far resisted
the downturn in the market and has gained ground by making its core applications
a compelling choice. However, the company has somewhat tempted the fate
with touting that its product architecture would make it bulletproof to
the weak economy, making the market reward it at that stage for being
the poster child of a success in the tough environment. One should not
be surprised with the market's harsh knee-jerk reprisal once the pure-Internet
magic was dented with the latest tamed results.
illustrate the point that the pure-Internet' architecture might no longer
be the selling panacea, here is an anecdotal recent event. While attending
an annual user conference of a prominent manufacturing ERP vendor (not
PeopleSoft, for interest sake), a vendor that is also a big proponent
of harnessing Internet and collaboration, I shared a cab with that vendor's
power user, a material management executive within her user firm. During
the trip from the airport, she proudly mentioned that this product has
been the umpteenth ERP product she has used in her impressively long career
of over 20 years. On my question which one of them she liked/enjoyed the
most, she said, to my slight dismay and disbelief, the product that the
pundits would regard as a dinosaur of the ERP. Why? Because the ancient
green-screen application would provide her with a wealth of information
on the same screen with only one key combination (ctrl/alt + xyz'), whereas
the new cool & sexy application requires dozens of frustrating to-and-fro
hyper-linked screen navigations only for the fragments of same information.
anybody out there like to volunteer to debate with her about the pure-Internet
return on investment (ROI) rationale and users' buy-in? It all comes to
back-to-basics logic of doing the job effectively and of business processes'
improvement; the IP-based technology might be a solution enabler to accelerate
customer's productivity (as well as the vendor's product development productivity),
but not the goal in itself.
that end, PeopleSoft's move from transactional to process-centric orientation,
to balancing technology with customers' business imperatives, and to making
attempts to prove its ROI supremacy as the order winner might be just
what the doctor ordered. However, collaborative business is awfully complex
and what business scenarios are well supported will depend on the application
area intimate expertise of the vendor, where PeopleSoft might have some
catching up to do compared to SAP and Oracle. Even without any potential
functional inferiorities, progressing software transactional to business-process
management (BPM) within heterogeneous intra-enterprise environments is
quite intricate and a time-consuming exercise for any vendor.
be fair, with a snazzy user interface (UI) keeping with PeopleSoft's long
tradition of having one of the most compelling UIs, a completely redesigned
Internet product architecture, and expanded functionality footprint, PeopleSoft
has taken a leading position in the next generation of enterprise systems.
PeopleSoft 8.4 is a suite of more than 160 applications and with
many of them featuring 'best of breed' traits.
scope, the product portfolio covers:
- e-business (PeopleSoft Portal, eProcurement, eStore,
and Marketplace) CRM (following now the proverbial Vantive
acquisition of over two years ago, and with new CRM Mobile Sales
and CRM Mobile Field Service applications featuring compelling
synchronization features in release 8.4) enterprise service automation
(ESA) (for resource automation with traditional services procurement,
from sourcing to settlements, and for project automation addressing
visibility, administrative, and workflow issues around projects such
as time & attendance, expenses, staffing, pay/bill management, workforce
and financial analytic information, etc.)
- supply chain management (SCM)
- HRMS evolving into above-mentioned HCM (with a view towards true
employee empowerment by integrating services such as knowledge management
(KM), business intelligence (BI), and e-learning that are outside the
scope of traditional HR such as benefits, personnel administration or
- financial management (financial and project management, treasury
management, MarketPay, etc.)
- enterprise performance management (EPM) and analytics (for supplier
relationship management (SRM) with links to quality management, customer
profitability, workforce analytics, supply chain analytics, and balanced
scorecard) to name some.
of the above modules can be licensed separately and/or together, as lots
of painstaking work and developers' effort have essentially transformed
PeopleSoft's core modules and technologies, as well as those of its recent
acquisitions to come up with this flexible and powerful array of applications.
are now also 26 individual applications within SCM and manufacturing,
and the supply chain product modules can be combined in several ways for
different sectors and their requirements. The more prominent would be:
- Accelerated SCM (with front- and back-office applications
demand planning being linked straight with materials requirements
- eProcurement Solutions (featuring auctions, reverse auctions,
supplier analysis, purchase order management, purchase requests, requests
for quote (RFQs), etc)
- Manufacturing (with configurable product and process design)
- Sales and Logistics; Supplier Relationship Management (SRM)
(from design collaboration to strategic sourcing)
- Supply Chain Planning (SCP) (from planning and design to
proactive forecast development tools and execution, although still
far from the level of strategic network design provided by i2 and
Manugistics it is rather at the level of operational supply
chain demand and inventory planning and enterprise production).
concludes Part Two of a four-part report on recent PeopleSoft announcements.
One discussed the announcements. Part Three continues the discussion
of the Market Impact of these announcements and Part Four will make User