J.D. Edwards' QUEST To End Its String Of Pyrrhic Victories
Part
2: The Implications
P.J.
Jakovljevic
- July
5, 2001
Event
Summary
During this year's FOCUS conference, which ran from June 11 - 14, J.D.
Edwards & Company (NASDAQ: JDEC), one of the leading providers of
enterprise applications, demonstrated a somewhat more galvanized strategy
than the one it initiated and less successfully executed during the last
year (for more information, see J.D.
Edwards Chooses Freedom to Choose EAI), with its renewed mid-enterprise
focus and commitment to deliver customer-driven solutions. At FOCUS, J.
D. Edwards gathered its QUEST User Group, over 8,500 customers from around
the world and partners that include IBM, Sun, Andersen,
Accenture, Compaq, Ariba and nearly 100 other technology
and consulting companies. However, the event attracted much less attention
and glitz compared to those organized at almost the same time by PeopleSoft
and SAP, which might also serve as an indication of the current
moods within the vendors' teams.
A
small enterprise does not care much for trendy IT buzzwords - it simply
wants to manufacture and deliver a product in a most efficient way and
by utilizing minimal necessary resources. J.D. Edwards has resolved many
pieces of the puzzle by delivering the real-time integration of APS and
OneWorld with an event-driven product architecture.
The
partnership with IBM should be mutually beneficial and should simplify
the life for resellers and buyers.
As
a summary, the new initiatives and the profitability are steps in the
right direction, but the market will have a close eye on new license sales.
Not many will feel comfortable to strike a long-term partnership with
a vendor that has a new product set but declining sales growth. The time
allowance may be running out for J.D. Edwards to turn around its business
given the competition flying from all directions.
About
this Article: This note is a two-part note, the first
part discussed the news from the J.D. Edwards conference. This part
discusses the Market Impact of this news and how it affects Users.
Market
Impact
If one is to judge by profits without taking into consideration the nature
thereof, J.D. Edwards situation might not look that dim. Nonetheless,
while a return to profitability is desirable and a step in the right direction,
it takes much more to convince the market that the vendor is on a full
recovery trail. Cost cutting and frequently recurring restructuring, as
means to regain profitability, can only be a temporary solution, and will
likely be perceived by the market as desperate moves. Given its main competitors'
license revenues have mostly grown in the recent past, J.D. Edwards' decline
indicates that it must have done something wrong in that regard. Other
vendors' upbeat results indicate that enterprises are still funding projects
and continuing with e-business strategies despite the uncertain times,
although in a more discerning manner.
To
that end, J.D. Edwards has focused on Internet collaboration and provision
of extended-ERP applications, but much of them coming from third parties.
The company has made an attempt to alleviate the inherent integration
intricacy by embedding Enterprise Application Integration (EAI) into its
OneWorld Xe product through its XPI integration layer though. The idea
- to spare customers from investing in third-party EAI products to link
disparate best-of-breed systems together - is attractive, but mostly to
more agile and risk-taking companies, which number has recently been rapidly
dwindling.
This
is a more sophisticated approach than the traditional EAI one given that
most other vendors only enable users to integrate third-party packages
by providing them with application programming interfaces (APIs) that
then require further coding. However, betting its fate on XPI, which "any-to-any"
integration capability could enable companies to collaborate with multiple
business partners by linking their disparate systems and applications,
has yet to generate a sizable traction. The complexity still hovers over
potential customers' minds and may likely deter them to venture into it
during the current slow economical times.
Even
McVaney frankly admits that the concept is ahead of the time and the promise
of a quick (two-hour) set-up for collaborative commerce with "any business,
anywhere" is not yet guaranteed in any contract its company has closed.
It will, however, serve as the guiding principle behind J.D. Edwards'
continued development in this area, which will be the long haul. Although
the increased focus on the mid-market seems justifiable, the company will
have to make every effort not to overwhelm the prospects with complex,
obscure terminology and/or technology (e.g., Xe, XPI or XBPs).
Further,
while J.D. Edwards' move into the EAI and the product openness arenas
is getting the endorsement even by SAP's recently announced interconnectivity
strategy, the company must also continue to widen the breadth of its natively
provided applications. The crucial driver of its license revenue revival,
will be J.D. Edwards' client base's adoption of its strong native extended-ERP
functionality such as supply chain planning, collaboration and execution,
and warehouse management, which have recently often been the order winners.
A small enterprise does not care much for trendy IT buzzwords - it simply
wants to manufacture and deliver a product in a most efficient way and
by utilizing minimal necessary resources. J.D. Edwards has resolved many
pieces of the puzzle by delivering the real-time integration of APS and
OneWorld with an event-driven product architecture.
The
Challenge of Partnerships
The other pieces have yet to be resolved though, while its competitors
have worked diligently over the past few years to develop strong products
in ERP-adjacent areas like CRM, business intelligence and e-procurement,
J.D. Edwards relied on partnerships to deliver these. To add salt in the
wound, the alliances with Ariba and Siebel Systems have
been less of a success so far, which is intriguing given successful partnerships
Siebel has shown in case of Microsoft Great Plains, Lawson Software
and Navision. While well-defined partnership agreements may work
well once established and although J.D. Edwards is recognized for its
congenial approach towards customers and partners, managing the large
application portfolio, much of which involves massive integration and
customization, is intricate and a challenge in itself. To that end, many
prospective clients, especially in the small-to-mid-market, have apparently
been deterred from the complexities of multiple-vendors solution in favor
of vendors that can offer close to a turnkey solution.
The
success of Siebel's partnership with other mid-market vendors probably
lies in the fact that these vendors have opted for a direct integration
of products as opposed to a middleware option that scares the smaller
customers. In addition to that, these smaller vendors sell almost only
through an indirect channel of partners certified by Siebel, whereas there
has been a likely competition between Siebel's and J.D. Edwards' direct
sales forces, on top of the scarcity of consulting and support staff that
is well versed in both products and the EAI technology.
Still,
J.D. Edwards has no choice but to remain focused on pursuing the premier
partnerships, since it is quite late in a day for developing its own CRM
or e-commerce functionality. These alliances will nonetheless have to
be revised, the most likely along the above-speculated guidelines. Thus,
the challenge will be to establish an indirect channel and to maintain
the roster of available direct service and support staff that will be
proficient in the applications in question and in XPI/XPB integration.
Therefore, J. D. Edwards, more than its direct competitors, will have
to prove that it has the means to support its customers in the future.
The execution, particularly the service and support will have to be immaculate.
In that regard, it is a positive sign that J.D. Edwards has created an
apparently more efficient services organization, which is now significantly
more centralized and consolidated.
A
Key Partnership
But the possible home run for J.D. Edwards in addressing the mid-market
needs could be its expanded partnership with IBM. J.D. Edwards' predicament
has long been the almost complete attention on release quality of its
flagship OneWorld application suite, while not having the fresh idea for
its large World customer base, particularly those not willing to abandon
the IBM iServer (formerly AS/400) platform.
The
new implementations and/or migrations from its older World software release
has been a daunting experience for many users, especially for early adopters
from 1999. J.D. Edwards patched and upgraded its way through the process,
which took considerable time and human resources and most likely prevented
the company from delivering its native functionality beyond ERP.
The
partnership with IBM should be mutually beneficial and should simplify
the life for resellers and buyers. IBM is interested in reviving its iServer
product line, which has suffered significant territory losses due to Windows
NT expansion despite its merits (performance and total cost of ownership
(TCO)); whereas J.D. Edwards gets IBM's endorsement and the affirmation
in relation to its fierce AS/400 counterparts (MAPICS, Intentia,
SSA GT, Infinium, American Software,
etc.).
As
a summary, the new initiatives and the profitability are steps in the
right direction, but the market will have a close eye on new license sales.
Not many will feel comfortable to strike a long-term partnership with
a vendor that has a new product set but declining sales growth. The time
allowance may be running out for J.D. Edwards to turn around its business
given the competition flying from all directions.
User
Recommendations
Potential and current J.D. Edwards' users should not overly dwell on its
viability and the future. The company remains a major applications vendor
and will continue to deliver exciting products. More important will be
how well its global sales, service and support forces can demonstrate
the touted collaboration benefits to the prospect or customer.
Existing
J.D. Edwards' customers should certainly consider the new offering bearing
in mind the immaturity of recently released products, and the fact that
the company's strategy is still a moving target. One would be hard pressed
to justify not including J.D. Edwards on at least an initial long list
of vendors in a global manufacturing and distribution enterprise applications
selection.
Evaluate
J.D. Edwards if you are a mid-market or a low-end Tier 1 enterprise (with
$100M-$2B in revenue) and if your requirements fall within the scope of
the traditional ERP and SCM offering, with manufacturing, logistics and
financial modules as main pillars of an enterprise application. One should
also bear in mind the company's expertise within some industries like
automotive, consumer packaged goods (CPG), electronics, manufacturing
& distribution.
Nonetheless,
if CRM or e-Procurement are of a critical importance and immediate need,
question the company's currently available offering and consider competitors'
value propositions too. J.D. Edwards' value proposition also comes for
rapid change environments that value system flexibility and openness and/or
have data scattered over several different systems/platforms, and the
need to integrate those into a single solution. Also, the company may
have a value proposition for mid-size enterprises that wish to leverage
their ERP investments into B2B collaboration and participation in both
private and public vertical Internet Exchanges (Marketplaces).
More
comprehensive recommendations for both current and potential J.D. Edwards'
users can be found in J.D.
Edwards - A Collaboration Thought Leader Or A Disguised ERP Follower?
Part 2: Evaluating J.D. Edwards.