PeopleSoft Plays Hardball
On January 30, PeopleSoft Inc. (NASDAQ: PSFT), one of the largest
business applications providers, announced record financial results for
the quarter ended December 31, 2000. Total revenue of $498 million was
the highest reported in company history, and was up 34% over $372 million
in the same quarter of 1999 (See Figure 1). The company touted strong
market demand for PeopleSoft 8, its Internet-based application
suite, for the stellar showing, citing 1,000 new orders in four months
since the product launch. Fourth quarter license revenue grew up 73% to
$165 million, up from $95 million in the same quarter of 1999. Including
non-recurring items, fourth quarter net income rose to $44 million, compared
with a loss of $5.6 million, in the same quarter of 1999. For the year,
PeopleSoft revenue peaked $1.7 billion, up 22% from the $1.4 billion in
revenue for 1999. License revenue increased 46% to $496 million from $340
million in 1999, while service revenue rose 5% in 2000 to $1.18 billion
from $1.06 billion in 1999 (See Figure 2).
2001 enterprises are widely adopting internet technology to improve business
operations," said President and CEO Craig Conway. "PeopleSoft 8 is the
only pure internet eBusiness suite on the market. With more than 1,000
orders for PeopleSoft 8 in less than four months, market acceptance has
been very strong. Our Q4 financial results not only show the strong market
demand for our eBusiness applications, they also demonstrate PeopleSoft's
focus on growth and profit for our shareholders."
cited significant wins against its competitors in the fourth quarter in
all product lines and across all geographies. The company alleged that
31 of its 50 largest deals in the quarter were direct wins against SAP
or Oracle. During the fourth quarter, PeopleSoft further solidified
its position as an e-business applications leader. The following are the
major highlights that were announced or occurred since PeopleSoft's last
announced PeopleSoft 8 CRM, an Internet-based suite of CRM applications
that is currently scheduled for release in mid-2001.
selected PeopleSoft Human Resource Management Systems
(HRMS) as its preferred worldwide solution.
launched PeopleSoft 8 Accelerated Enterprise, a turnkey
solution including eBusiness applications, services, training and financing
for mid-size enterprises (for more information, see PeopleSoft
Joins The Hunt For SMEs).
Consulting delivered the PeopleSoft Upgrade Roadmap
- a suite of packaged services designed to accelerate the adoption of
war of words aside, the fact remains that PeopleSoft has regained the
status of a formidable applications competitor. The 22% growth was more
than twice the estimated overall ERP market growth in 2000. Add returning
to strong profits and improved international market penetration and brand
recognition, and one should conclude that 2000 was a year of PeopleSoft's
content. These impressive results coincide with the final phase of integrating
acquired Vantive CRM product within its flagship PeopleSoft 8 product
suite and with the winding down of its ambitious and over two years long
R&D endeavors. Look for possibly even a stronger bottom-line in the future
if the company continues to succeed in attracting new deals.
to put things in the right perspective, one should bear in mind that PeopleSoft's
license revenue in 2000 was still 25% less than the corresponding revenue
in 1998 (See Figure 2), back when the company was only a mere ERP player.
Therefore, one should not be too overly impressed with the magnitude of
quarterly comparative improvements. Nevertheless, the figures show the
company is gaining turnaround momentum and is going in the right direction.
PeopleSoft will be a fierce contender in a number of industries. While
this may not be the case in complex manufacturing, the company certainly
can compete in traditional service industries with its HR, financial,
and recently added CRM and e-business modules, like Healthcare, Utilities,
Higher Education, and Financial Services.
PeopleSoft has attempted a new tack of addressing manufacturers' needs
by focusing its manufacturing solutions on the following five industries:
Consumer Packaged Goods (CPG), High-Tech, Wholesale-Distribution, Utilities,
and Communications, its competitive position is not going to improve dramatically
very soon. To that end, expect more aggressive PeopleSoft's moves both
on the acquisition and joint ventures fronts in order to provide a strong
solution for manufacturing. It is quite likely the company will pursue
acquiring an 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 (for more information, see QAD's
Costly eTransition Continues).
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. Moreover, PeopleSoft's decision to offer only an
Internet browser look-and-feel interface has, in some instances, initially
met the power-user resistance. While the HTML-like interfaces are perfect
for casual and task-specific users with minimum training requirements,
power-users may still prefer the functionality and drill-around capability
of Windows-like user interfaces (drop-down menus, etc.). Some power-users
cite the awkwardness of conducting more complex transactions only via
hyperlinks, jumping to and fro among a number of screens, which defeats
the purpose of simplicity. In that regard, the Web-enabled user interfaces
of its competitors (e.g., Oracle, SAP, J.D. Edwards, Lawson
Software, etc.) that either still contain many Windows features
or offer different interfaces for casual and power users, may be the better
approach at this stage.
company's biggest challenge, however, lies in further increasing the marketing
awareness, promoting its new image, products, and the Internet architecture
as well as in crisp sales execution. The success of the PeopleSoft 8 release
may be difficult for the company to manage in the near future. Peoplesoft
needs to keep the ball rolling by providing efficient and knowledgeable
sales and services teams that can articulate the vision and provide the
expected value to customers. Therefore, while PeopleSoft should continue
to focus on delivering its products on time, it should also ensure stringent
training of its sales and customer support forces, and should preemptively
address any potential dissatisfaction on the part of early adopters.
Only time will tell how the market will take the new PeopleSoft message.
More important will be how well Peoplesoft's sales and service force can
demonstrate the benefits of pure Internet architecture-based products
to the prospect or customer. Due diligence should always be paid to satisfying
your unique requirements as derived from your unique e-business strategy.
While selecting a strategic software partner is a challenging and risky
undertaking, the positive news is there are more companies competing for
your dollars. Nonetheless, the depth, breadth and innovativeness of PeopleSoft's
offerings for the above-mentioned industries are attractive at first sight
and deserve due attention.
comprehensive recommendations for both current and potential PeopleSoft
users can be found in PeopleSoft
8 Launched - Anything to Write Home About?