Yet Another 'Big 5 ERP' CEO Casualty
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.
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."
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."
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
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.
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%.
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.
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.
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
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.