PeopleSoft Recuperating Slowly, Hoping to Sink 1999 into Oblivion Quickly

PeopleSoft Recuperating Slowly, Hoping to Sink 1999 into Oblivion Quickly
P.J. Jakovljevic - February 23rd, 2000

Event Summary

In 1999, PeopleSoft posted flat revenues of $1.43B compared to revenues of $1.47B in 1998. Profits declined 87% to $21M for 1999 compared to $164.1M in 1998, excluding nonrecurring costs. When including nonrecurring costs, PeopleSoft lost $177.8M in 1999. For the fourth quarter of 1999, revenue topped $372M and profits hit $11M, a 9.5% revenue drop from the $411.3M posted in Q498, and a 73% drop from the $42.3M in profits in Q498. When including nonrecurring costs, PeopleSoft lost $5.6M in the fourth quarter.

The nonrecurring charges came mostly from PeopleSoft's purchase of The Vantive Corporation, a leading maker of Customer Relationship Management (CRM) products. Revenue from license fees for the fourth quarter, including Vantive's income, was 45% higher than the previous quarter. Also in the fourth quarter license revenue for enterprise software grew 37% and CRM revenue grew 68% from the previous quarter.

PeopleSoft also unveiled the first product release from its acquisition of The Vantive Corporation. PeopleSoft rolled out Vantive eBusiness applications for CRM. Currently available, Vantive eSales allows users to access the Vantive Enterprise CRM system through a Web browser. Also released was an Internet-based self-service application to let users initiate, track, and try to resolve product issues over a browser interface. A field-service system and help-desk system are also available immediately.

Market Impact

Fiscal 1999 has indeed been a difficult year for PeopleSoft. The growth of the ERP child prodigy, which exceeded well over 70% only a few years ago, came to an abrupt halt in the last year. However, PeopleSoft's fourth-quarter numbers, particularly license revenue, indicate a return to growth.

The company faces tough challenges in assimilating the Vantive CRM product line, and delivering its truly Internet-based product. By acquiring a complete and one of the best CRM product suites available, PeopleSoft leapfrogged most of its competitors. They are still struggling to deliver a patchwork of internally developed or acquired CRM modules. Nonetheless, we expect the usual painstaking effort associated with merging two large companies. The mitigating factor however, is the fact that PeopleSoft and Vantive had a marketing and development partnership.

The technical problems are likely to arise with the future integration of the two products into a common interface and code base. This we believe PeopleSoft will have to undertake in order to continue to compete with the other top ERP vendors in the combined ERP and CRM space. The recent product announcement is more of a marketing message to reassure current and potential PeopleSoft and Vantive customers that innovation will continue and Vantive products will continue to be upgraded.

PeopleSoft, however, has still been figuring out how to fit Vantive into its overall strategy, which, we believe will take a serious effort. On the other hand, the silver lining in 1999 was PeopleSoft's successful expansion into markets outside of North America, which presented a serious challenge in previous years.

User Recommendations

In summary of our recommendations in TEC's note on PeopleSoft, PeopleSoft is a very strong contender in enterprise application selection processes within the following industries: utilities, service providers, financial institutions, public sector, insurance, and higher education.

It should be on a short list in any selection where HRMS system and financial modules are the main pillars of an enterprise application. Furthermore, organizations that are in an early stage of evaluating PeopleSoft should negotiate incorporation of new CRM applications components by bundling them into the contract now at negotiated license fees, and be wary of expected application integration problems.


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