PeopleSoft - Catching Its Second Wind From The Internet
Part 3: Predictions and Recommendations
P.J. Jakovljevic - June 7, 2001
PeopleSoft, Inc. is one of the leading developers of enterprise business applications, which helps governments, higher education institutions and large-to-medium sized corporations manage human resources (HR), financials, supply chain management (SCM), customer relationship management (CRM), e-Business and business intelligence data from a wide range of operating systems and hardware platforms.
From its founding in 1987 PeopleSoft grew at a breakneck pace with a number of consecutive years of doubled sales until 1998, when its sales all but stalled due to increased competition and a saturated market. 1999 and 2000 were years of changes and adjustment culminating in a company with a pure Internet platform, a new set of products, and a new assertive attitude.
Indisputably, the most prominent event and the turning point for the company was the delivery of PeopleSoft 8 in September 2000. The product is an Internet-based collection of 160 applications, with 59 new applications in the 8 release, that span well beyond PeopleSoft's HR stronghold into e-business collaborative applications, CRM, SCM, professional service automation (PSA), and analytics to name but a few.
TEC predicts that within the next 12 months, PeopleSoft will have to officially announce alliances with or acquisitions of vendors whose products would provide it deeper B2B e-business infrastructure and vertical marketplaces capabilities.
This part of the note contains predictions about PeopleSoft and makes recommendations to both PeopleSoft and Users.
About This Note
This is a three-part note:
We envision a healthy annual PeopleSoft growth (25%-40%) in 2001, much higher than the market average, particularly owing to its strong customer base within service industries and to its CRM offering (65% probability). However, toppling Oracle's ERP market share remains a very tall order (20% probability within 5 years time).
Within the next 3 years, more than 35% of PeopleSoft's revenues will come from outside of the North American market (65% probability), with the license revenue contributing more than 35% of its total revenue within the same period of time (60% probability). CRM and EPM products will be significant contributors to PeopleSoft's sales revenue (up to 45% within the next 3 years). While overthrowing Siebel's leadership in CRM arena may be achievable only within 4 years time (30% probability), taking the No.2 position in the CRM market is more likely within the same time period (60% probability). We believe PeopleSoft SCM applications will match the functionality of best-of-breed SCM vendors within the next 3 years (70% probability). We also predict that PeopleSoft's hosting has a potential of reaching 15%-25% of total sales revenue within next 5 years (60% probability).
We expect more aggressive PeopleSoft's moves both on the acquisition and joint ventures fronts in order to provide a strong solution for complex and/or process manufacturing. It is quite likely (65% probability) the company will pursue within the next 18 months acquiring a struggling ERP vendor with a market capitalization value less than $100 million and with a product offering and strong client base that would bolster PeopleSoft's competitive position. The very likely acquisition candidate could be QAD, Epicor or Ross Systems.
We believe that, within the next 12 months, the company will have to officially announce alliances with (30% probability) or acquisitions (70% probability) of vendors whose products would provide it deeper B2B e-business infrastructure and vertical marketplaces capabilities. It is very difficult to identify potential candidates amongst the spate of resource-depleted start-up companies with attractive product offerings.
PeopleSoft should expand its global presence (distribution, sales, services and support), primarily by leveraging qualified local indirect channels. PeopleSoft must continue its effort to penetrate the Small-to-Medium Enterprises (SME) market segment with the entire product portfolio of component applications, mainly through indirect channels and vertically focused ASP/outsourcing arrangements. For the next year, PeopleSoft needs to continue sales momentum to ensure its channel partners remain or become fiscally sound and deliver on promises. It should also strike agreements to re-use code developed by its partners.
Furthermore, it should use its channel to expand business in its existing customer base, by offering enterprise applications beyond traditional ERP solutions (CRM, EPM, SCM, E-Commerce, PSA) and Vertical Industry-Specific products. Better effort should be conducted to sell these individual applications to non-PeopleSoft users on a stand-alone basis.
PeopleSoft should better publicize its analytic applications and Enterprise Warehouse in light of its ability to provide a complete solution that spans both operational and analytic aspects of business. It should also rethink the nomenclature of some products, namely, the word "workbench" may not intuitively denote an analytic application.
The company should remain committed to timely new product introductions, and to the reduction of product complexity and implementation price by maintaining the R&D budget for next year to be at least 16% of sales revenue. 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.
PeopleSoft should broaden product functionality in process and/or complex manufacturing and in SCE either by acquiring one of the above-mentioned leading mid-market ERP vendors or by developing a product in-house.
PeopleSoft should more clearly define the PeopleSoft 8 product upgrade requirements from its earlier releases. With many components to choose from it may be difficult to understand what the necessary requirements are to run the new applications. It should also further facilitate connectivity to external Internet exchanges and/or 3rd-party products. The company also needs to produce a roadmap of its applications, functional details, and expected availability timelines. It should also publicize customer references for its fledgling new product components, and particularly in the above-mentioned markets where it still has a low visibility.
PeopleSoft is generally worth considering in HRMS, financial, and supply chain enterprise applications realms - it offers an attractive product portfolio, with dedicated ongoing service and support. 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.
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, high-tech electronics, wholesale distribution, and consumer packaged goods (CPG). 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, current and potential users are advised to inform themselves about these, particularly in the above-mentioned industries of focus. Companies outside of the above-mentioned industries of focus, and companies that are in need of deep supply chain optimization, transportation planning and SCE, may benefit from evaluating other products at this stage.
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. PeopleSoft will have to prove the speed and ease of integrating suppliers and providing complex sourcing in an environment that incorporates a multitude of business partners running on diverse platforms.
Existing users of PeopleSoft client/server-based products may want to inquire about PeopleSoft's future product support and/or migration strategy. Beware of the 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. Non-PeopleSoft Vantive CRM product customers should promptly clarify their support status and PeopleSoft's CRM product development strategy.
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. Non North American users and users from non-English speaking countries should inquire about the availability of global payroll, multi-lingual and multi-currency capabilities from PeopleSoft. It is very likely that it will take several release cycles before the local support (for example, payroll) will catch up with the support for PeopleSoft HR global markets.
Conclusion of Part 3
This concludes Part 3 of a three - part note on PeopleSoft.
Part 1 contains a summary of the history of PeopleSoft, it current trajectory and strategy, and major developments during the past two years.
Part 2 contains an analysis of PeopleSoft's Strengths and Challenges.
Part 3 contains the bottom line information with predictions, and recommendations for both PeopleSoft and users.