At the beginning of February, PeopleSoft, Inc. (NASDAQ: PSFT), one of the largest enterprise applications providers indicated its continued interest in rounding out its product portfolio through favorably priced acquisitions. According to the Financial Times, Craig Conway, PeopleSoft's CEO, somewhat enigmatically said there were a number of well priced firms out in the market today that he and his associates continue to 'eyeball'.
The news follows a number of other recent announcements including:
- the January 24 announcement of upbeat fourth quarter and full year 2001 financial results
- the January 25 announcement that the company would exercise its option to purchase 100% of the outstanding Class A Common Stock of Momentum Business Applications, Inc. (NASDAQ: MMTM)
- the January 28 announcement that its North American Consulting Labs have all received ISO 9001:2000 certification
- the January 29 announcement of the global expansion of PeopleSoft eCenter
For details on these announcements see Part One.
This is Part Two of a two-part event note discussing recent announcements by PeopleSoft and their impact on the market and users.
However, to put things in the right perspective, one should bear in mind that PeopleSoft's license revenue in 2001 was still 3% less than the corresponding revenue in 1998 (see Figures 1 & 2 below), back when the company was only a mere HR/ERP player. PeopleSoft's big recent success areas are still less in conventional manufacturing management and more in e-procurement and supply chain management, as it has so far captured well over 1,200 e-commerce customers.
It is too bad that PeopleSoft does not break down revenue by product line, rather than to arbitrarily claim that sales of the CRM products outside of its installed base have been increasing, and that it now occupies the No. 2 position in the CRM market (which has also been claimed by SAP, a company that breaks its figures into product lines). PeopleSoft is indeed the number one for HR products, and possibly the number two for financial management products. However, the fact remains that SAP and Oracle feature much broader functionality footprint, which, with their impending endeavors to complete re-architecting their products, may position them better than PeopleSoft in the future.
To be fair, PeopleSoft has already achieved a strong presence in the supply chain space, owing to its ongoing commitment to this sector. Although it has attempted a new tack of addressing manufacturers' needs by focusing its solutions on only a handful industries such as: Consumer Packaged Goods (CPG), High-Tech, Wholesale-Distribution, Utilities, and Communications, it still possibly occupies the Top 5 place (at best) in the supply chain marketplace as a whole.
It still lacks depth in manufacturing, with the exception of lean/flow manufacturing, and its algorithm-based supply chain planning (SCP) software inherited with the erstwhile Red Pepper acquisition. To that end, as the company is apparently keen to change the competitive landscape, and having a huge pile of cash, expect more aggressive PeopleSoft's moves both on the acquisition and joint ventures fronts in order to provide a strong solution for manufacturing.
The devil lies in the fact that there are many areas within the realm of the supply chain management process that PeopleSoft might be looking to buttress. The obvious candidates that may cross anyone's mind, such as Manugistics and i2 Technologies, while tempting, are not very likely preys due to the magnitude of the acquisition. Having just completed the integration of Vantive, and having had a somewhat daunting experience with Red Pepper should keep PeopleSoft away from a high-profile purchase. It is much more likely that the company will pursue its recent strategy of acquiring possibly a few more vendors with a much lower market capitalization value (i.e., less than $100 million), which would leave it with a hefty amount of cash remaining (see PeopleSoft Annuncio-es Continuation Of Its Shopping Spree).
Given that the market has an abundance of devalued companies with narrowly specialized product functionality, many of them little known even to avid analysts, the candidate list becomes almost endless. For example, should PeopleSoft wish to shore up its transportation management offering, it may look at Logistics.com or TanData. Should it want to bolster its manufacturing software, QAD, Ross Systems, or even the likes of CIMPAL may come to mind. Pipechain and SupplyPoint may be attractive to fill the supply chain execution (SCE) and supply chain event management (SCEM) gap.
Whoever the winner(s) turn out to be, PeopleSoft has to be careful that it does not overstretch itself and lose focus going forward. While it has yet to execute the assimilation of a slew of software products, which it recently acquired in order to fill the gaps in its CRM and e-business infrastructure offering, it also remains under pressure to fill other outstanding product functionality shortcomings such as mobile/remote SFA, Web analytics, and/or private trade exchanges (PTX). Some of the earlier acquisitions represented only improvement rather than complete solution filler.
If one is to judge by the general industry benchmarks, it will take at least until late 2002, for these products to be fully integrated. However, in the short run, it is very likely that a plethora of disparate products will be connected via XML messaging only, and a huge pile of cash can speed things up only in a very limited way.
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, ESA, and e-business modules, like Healthcare, Utilities, Higher Education, Financial Services, CPG/Retail, High-Tech, and Industrial Automotive. 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.
PeopleSoft's current users should react positively to the company's recent acquisitions and to future prospects, in principle, as the product expansion should allow them to address many of their outstanding needs. Existing and prospective customers should evaluate the add-ons emanating from the acquisitions as a way to add value to their existing applications whether with an interim integration solution now or by waiting for PeopleSoft to supply a generally available seamlessly integrated solution. Therefore, question PeopleSoft's officials to obtain the firm delivery schedule of intended offering.
Current customers of acquired products should continue to use these, but they and any potential customers should realize that PeopleSoft will want to, at the very least, incline the software towards its platform, and most likely fully integrate the solutions with PeopleSoft 8, which might very well leave current non-PeopleSoft shops feeling cold, and wondering whether the new combination will work for them better than alternative solutions. Demand a meeting with PeopleSoft's executives to address your product support concerns and to possibly obtain some firm commitment.
More comprehensive recommendations for both current and potential PeopleSoft users can be found in PeopleSoft - Catching Its Second Wind From The Internet; Part 3: Predictions and Recommendations and "Collaborative Commerce": ERP, CRM, e-Proc, and SCM Unite! A Series Study: PeopleSoft.