Home
 > Research and Reports > TEC Blog > Yet Another ‘Big 5 ERP’ CEO Casualty

Yet Another ‘Big 5 ERP’ CEO Casualty

Written By: Predrag Jakovljevic
Published On: May 15 2000

Yet Another 'Big 5 ERP' CEO Casualty
P.J. Jakovljevic - May 15, 2000

Event Summary

On April 7, the Board of Directors of J.D. Edwards & Company announced that it had reappointed C. Edward McVaney to the position of President and Chief Executive Officer, replacing Doug Massingill who resigned from the position and from the Board effective immediately. McVaney had been CEO from the company's inception in 1977 until November 1998. He will remain as Chairman of the Board of Directors.

"I am honored to again be leading J.D. Edwards," McVaney said. "I am proud of our position as a leader in e-business software solutions and am excited to be spearheading our efforts in delivering agile, business-to-business solutions into the future. I am also looking forward to working closer with the rest of the management team on day-to-day operations."

Massingill will continue to advise J.D. Edwards on strategic projects for an undetermined time. He joined the company in 1990 and served as chief operating officer from March 1997 until he assumed the CEO post in October 1998. McVaney remained chairman during Massingill's CEO tenure. Dave Girard will remain as Executive Vice President and Chief Operating Officer. Rick Allen will remain as Chief Financial Officer.

"I'd emphasize that it was a mutual decision," Chief Financial Officer Rick Allen said of Massingill's resignation. "And Ed, at this time, is the most capable guy of injecting some change and leadership into our business and continuing to lead us forward. There are more challenges ahead, and we think we're well-positioned to meet those challenges."

Market Impact

Another shift in management, this time for J.D. Edwards, one of the largest enterprise vendors (~5% market share), coincides with a bad time for the ERP market in general. Like J.D. Edwards, many vendors are going through a painful period of trying to make the transition to business-to-business e-commerce.

While every CEO departure indicates some problems within a company, we do not believe this one will produce anywhere near the far-reaching consequences that Baan, its Dutch ERP rival, experienced in early January when Mary Coleman departed as CEO. As a matter of fact, we believe that McVaney never fully relinquished the reins of the company he founded, even during Massingill's CEO tenure. The sticky question - why McVaney departed his CEO position 18 months ago in the first place - still hovers unanswered.

Massingill led the company for 17 months, a span during which the enterprise software company suffered through an industry slump, even as he widened its focus by adding software from partner firms to its portfolio. However, the company's performance during Massingill's tenure did not meet the expectations of its board of directors. During its 1999 fiscal year, J.D. Edwards' revenue climbed only 1% to $944.2 million, and the company posted a net loss of $39.2 million. The year before, its revenue soared 44.2%.

While J.D. Edwards appeared to be on a comeback during the past few quarters, we repeatedly warned that 2000 would be a challenging year. The company has entered 2000 with a great deal of painstaking integration efforts remaining, both with its recently acquired products and with products of its partners, such as Siebel, Ariba, and Synquest. J.D. Edwards has been repositioning itself as an enterprise vendor to convince medium sized manufacturing enterprises that it is worthwhile extending their activities into e-business. However, managing a large application portfolio, much of which involves partnering or extensive integration and customization, will be cumbersome despite its alleged flexible product architecture.

Ten alliances have been highlighted in announcements since September 1999. Of these, at least seven deal with functional areas that are included as standard not only by larger rivals like Oracle and SAP, but also by its smaller competitors like Great Plains, Symix Systems, Intentia, Infinium, and IFS AB. J.D. Edwards' heavy reliance on other vendor's software flies in the face of its aggressive positioning around flexibility. Customers may find this disconcerting.

J.D. Edwards also has to be careful how it manages its alliances with "big stars" like Siebel and Ariba. In most of its key relationships the partner seems to be more influential and currently has a stronger brand. They are also aware of J.D. Edwards' dilemma whether to further pursue partnerships or venture into another acquisition. J.D. Edwards could therefore find it a challenge keeping control of its own destiny. The strategy gives the company less control of its own business. Its income can become so constrained as to be insufficient for any further broadening of a product offering through R&D or acquisition. We do not predict any radical departure from the current product strategy in the short-term.

User Recommendations

We reiterate our recommendations to include J.D. Edwards in an enterprise application selection long list for mid-market and low-end Tier 1 companies (with $100M-$2B in revenue). Organizations whose requirements fall within the scope of the standard ERP offering (manufacturing and supply chain) would do well to consider J.D. Edwards. However, any organization evaluating J.D. Edwards should only consider the existing functionality, and, in case of final selection, should negotiate the incorporation of new applications components now.

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 partnered offerings. If a complementary product (e.g., CRM, e-commerce, etc.) is of a critical importance, they should think carefully about the implications, and may benefit from considering its competitors' value propositions also. In any case, make sure that J.D. Edwards grants a single contract and help desk for all the disparate components of its product offerings.

 
comments powered by Disqus

Recent Searches
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Others

©2014 Technology Evaluation Centers Inc. All rights reserved.