J.D. Edwards - A Collaboration Thought Leader Or A Disguised ERP Follower?
Part 2: Evaluating J.D. Edwards
J.D. Edwards & Company is a leading global provider of enterprise business
software applications for distribution, finance, human resources, manufacturing,
customer service and supply chain management.
most of its peers, J.D. Edwards is hoping to rebound by focusing on Internet
collaboration and extended-ERP applications. The company has also differentiated
itself from competitors by embedding Enterprise Application Integration
(EAI) into its OneWorld product. While J.D. Edwards' move into the EAI
arena is indisputably risky, we commend its determination to bite the
bullet and include integration systems into the core product offering.
However, we also believe that managing this large application portfolio,
much of which involves partnering or extensive integration and customization,
will be cumbersome.
note presents in two parts a current evaluation of J.D. Edwards, examining
its history, products, and marketing strategy, with specific recommendations
for both J.D. Edwards and companies in the market for its products. Part
1 gave an overview of the history and strategy of the company.
2: Evaluating J.D. Edwards
- User Recommendations
and Product profiles are included with both parts.
Mid-Market Brand Recognition: By originally focusing on the AS/400
platform and delivering a functionally rich and mature WorldSoftware product,
J.D. Edwards has established a leading global position in the medium and
lower-end top-tier segments of the ERP market. That is manifested in a
large AS/400 customer base (over 4000 worldwide), a developed direct sales
force and indirect channel, and a reputation for good service and honest
treatment of customers. It resulted in a strong long-term track record
until 18 months ago, with a likelihood of sustained revenue owing to a
potential migration to the more advanced OneWorld product and to new product
offerings beyond the core ERP functionality.
Product Architecture and Migration Strategy: Contrary to many of its
AS/400 competitors that have expanded their products to other popular
OS platforms with limited success (some of them even alienating or leaving
their customers stranded), J.D. Edwards has delivered a migration strategy
for its customers to move as painlessly as possible to its advanced OneWorld
OneWorld product provides above-average horizontal ERP functionality for
the back office and is based on state-of-the-art technology. It features
Configurable Network Computing (CNC) architecture, with an ability to
dynamically change the physical applications architecture (heterogeneous
platform environment) while the system is in operation. Although the company
is still entrenched in the mid-market, it has notably improved the scalability
issues it had with its AS/400 WorldSoftware and, therefore, we also consider
J.D. Edwards an appropriate candidate for larger organizations.
Web-Collaboration Strategy: The company has also embedded Enterprise
Application Integration (EAI) into its OneWorld product and differentiated
itself from competitors by doing so. The idea - to spare customers from
investing in 3rd-party EAI products to link disparate best-of-breed systems
together - is certainly attractive.
company is supplying ready-made software connectors for transmitting Web
data directly in the back of other disparate applications. It will provide
a single point of interface to all of OneWorld's and supported third-party
applications. As a result, the offering includes application integration
sockets to enable users to plug their third-party packages into OneWorld,
and a new version of the company's Process Integration (XPI) engine, which
provides it with a messaging framework. XPI enables third-party applications
to communicate with OneWorld packages by integrating the different business
process workflows on which they are based. The packages can then swap
information using an eXtensible Markup Language (XML)-based data transport
believe 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 they need to further code.
J.D. Edwards' move into the EAI arena is indisputably risky, we commend
its determination to bite the bullet and include integration systems into
the core product offering. Some of its competitors, who are still convinced
that they can deliver most of the necessary functionality themselves,
may find themselves seriously lagging once they finally realize the need
for interconnectivity and EAI. E-commerce trends are by nature very dynamic,
and no single vendor can provide all required components. Even the market
leader, SAP, had to abandon its 'one-stop-shopping' product strategy.
Native integration is becoming less of an issue, particularly in the higher
end of the market. Acquiring the best products at an acceptable price
to meet an e-business strategy is the major issue.
J.D. Edwards has also solidified its presence in the supply chain planning
space with the completion of integrating Numetrix with its OneWorld ERP
suite and re-branding it as Advanced Planning. We believe it has a potential
of becoming a strong foundation for building upon the necessary components
of inter-enterprise collaboration, order fulfillment, and digital marketplaces.
Partnerships: Besides congeniality towards customers, J.D. Edwards
has also gained a reputation for true partnership commitment. Its ActivEra
product suite is the result of industry leaders forming alliances to deliver
a full range of best-of-breed Internet based solutions. J.D. Edwards recognizes
these partnerships are essential. It has made a strong commitment to only
two EAI vendors, webMethods and Netfish. The company will be much more
in control of the arrangements by licensing source code, which is by far
more efficient and reliable than liaising with a slew of vendors that
provide similar integration systems. From hosting and infrastructure to
joint development initiatives, continued true strategic alliances will
contribute to the company's success.
Poor Financial Performance: The transition to client/server and
network-centric systems that the company began several years ago has been
more difficult than expected. Since November 1998, J.D. Edwards has posted
many quarterly losses totaling to approximately $64 million (See Figures
1 & 2). While the 56% increase in license revenue in Q3 2000 seems encouraging,
the rest of J.D. Edwards' situation remains lackluster. Its income could
become so constrained as to be insufficient for any further broadening
of its product offerings through R&D or acquisition. We believe the above-mentioned
restructuring moves have been aimed at adjusting the company's significantly
higher number of general & administrative employees (15 % of the total
number of employees) to the industry benchmark of 11%. The wariness to
tackle this sensitive issue was one of the major management flaws in 1999.
and Risky EAI Strategy: While we approve of J.D. Edwards' move to
position itself as an ERP vendor to persuade enterprises to extend their
activities into e-collaboration in a more flexible manner, we also believe
that managing this large application portfolio, much of which involves
partnering or extensive integration and customization, will be cumbersome
despite its highly marketed flexible EAI product strategy.
the best-of-breed approach can have its merits, we believe it consistently
leads to additional integration costs and complicates service & support
arrangements. Interfaces between components like ERP, CRM and/or e-business
usually require significant tailoring. This can be a barrier to future
changes as further revising already modified code is notoriously time
consuming, costly, and risky.
the EAI market is currently a nascent and fragmented one, burdened with
difficulties. The caveats also speak to the complex nature of EAI software
and the power struggles that are currently taking place in the market.
There are indications of the existence of more than several dozen dialects
of XML. Keeping track of these will be gut-wrenching work and J.D. Edwards
will need to ensure it can provide enough technical resources for the
addition to all apparent and hidden difficulties of integrating disparate
products, the cost of this strategy is growing. Although J.D. Edwards'
license sales notably increased over the year the cost of the myriad third-party
licenses that it has to purchase to provide end-to-end solution is eating
heavily into the bottom line. As mentioned earlier, ten alliances have
been announced 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 mid-market competitors like Great Plains,
Symix Systems, MAPICS, and IFS AB. J.D. Edwards' heavy reliance on other
vendor's software contradicts its aggressive positioning around flexibility.
Customers may find this somewhat disconcerting.
Immaturity and Integration Work-In-Progress: The ActivEra product
portfolio, achieved through a number of above-mentioned acquisitions and
alliances, is still a work-in-progress. There are also indications of
the products having different "look-and-feel" across the range. The number
of recent acquisitions and alliances has created the clutter of many different
applications that still require true integration, for which completion
is expected only during the first half of 2001.
the company's product migration strategy has been technologically successful,
this has not been the case regarding the product functionality. In the
last 18 months, J.D. Edwards spent a hefty amount of its R&D expenses
on resolving quality inconsistencies, missed functionality, poor performance,
and Web-enablement of its OneWorld flagship product. To further rub salt
in the wound, the company had to acknowledge the existence of notable
quality problems associated with these endeavors. WorldSoftware's and
OneWorld ERP's products functionalities have yet to converge, which has
prompted long-time users to either run both products in a co-existing
mode or to postpone the migration to OneWorld indefinitely. To that end,
webMethods has recently released a connector to Internet exchanges for
WorldSoftware users. J.D. Edwards will, therefore, have to prolong its
two-pronged product strategy, which will 1) require duplication of R&D,
sales and service resources, and 2) further defer revenue from its contemplated
user base migration to a new product.
known of the company's quality difficulties with earlier releases of OneWorld,
as well as having witnessed the recent staff attrition, the market may,
with good reason, have serious reservations regarding the company's capabilities
to successfully deliver and support its new, significantly more intricate
product set. Furthermore, its direct sales force, indirect channel and
parts of its operations in Europe, Latin America and Asia, where its service
& support has not been as good as in North America, will have to undergo
a serious education and training drill.
Marketing Effort in the Past and Low Mind Share in the High End of the
Market: J.D. Edwards has not traditionally been a proponent of aggressive
and slick marketing, which has recently allowed Oracle and SAP to make
inroads into its historically strong mid-market turf. On the other hand,
owing to its late expansion into the UNIX and Windows NT worlds, and since
its product portfolio is still questionably scalable for mega-user environments
(2000 users and more), the company is still struggling for recognition
beyond its own customer base and is often overlooked in discussions of
top-tier enterprise applications vendors. Ironically, its 'freedom to
choose' message would most likely strike chords with some more aggressive
CIOs of larger global companies, who would be unwilling to get locked
into the inflexible, proprietary technology that for example Oracle's
value proposition seems to inherently offer.
2000 and 2001 will be challenging. We predict moderate annual revenue
growth (15-30%), on par with its peers. While overthrowing PeopleSoft
from third position in the enterprise applications market is not a likely
scenario within the next three years (30% probability), J.D. Edwards will
retain its position as the number four applications vendor during the
same period of time (70% probability).
major acquisitions are expected in the foreseeable future (80% probability).
Instead, the focus will be on integrating the recently acquired and partnered
applications, as well as on expanding its own product functionality and
offering new vertical industry solutions (see Vendor Recommendations).
Another focus will be on strategic alliances with renowned VAR and ASP
companies in order to penetrate the Small-to-Medium Enterprises (SME)
market via outsourcing offerings. However, within the next 18 months,
the company might acquire (60% probability) some of its smaller integrating
partners in order to beef up its own recently dwindled consulting resources.
the next four years, more than 40% of J.D Edwards' revenues will come
from outside of the US market (70% probability), with the license revenue
contributing more than 35% of its total revenue within the same period
of time (60% probability). AS/400 products will constitute 50% of the
user base within the next five years (60% probability). At the same time
30% of total software revenue will be generated through indirect channel
distribution (60% probability).
J.D. Edwards should use its direct sales force to expand business in its
existing customer base by upgrading older versions of software and by
offering enterprise applications such as Front-Office, Business Intelligence,
Supply Chain, and E-Commerce beyond its core ERP solutions. It should
also develop new Vertical Industry-Specific products. To clear the deck,
the company should promptly attend to the resolution of any remaining
system instability and missing functionality issues that early users of
OneWorld software have experienced.
company should also expand further into the SME market, particularly into
the lower-end that is still out of reach of Tier 1 ERP vendors, by offering
the Genesis Channel program (for enterprises with less than $100 million
in revenue, available only on AS/400), either by leveraging its strong
indirect channel network or through its JDe.sourcing option.
company should remain committed to timely new product introductions (e.g.,
supply chain execution and project module) and to new industry solution
offerings (e.g., communications, paper and wood, etc.), as well as to
enhancing e-Commerce offerings (e.g., on-line auctions functionality).
These endeavors are very ambitious and the current R&D workforce percentage
of 18% of total workforce (See Figure 3) should be increased to at least
the industry average level of 25%.
Edwards should also consider having notably different marketing approaches
for the higher end of the market and for its smaller and mid-market fragments,
given the different requirements and mindset of decision makers in these
respective niches. As noted earlier, the 'freedom to choose' message will
most likely strike chords with some more aggressive CIOs of larger global
companies, who would be unwilling to get locked into the inflexible, proprietary
technology of one particular vendor. The increase in new licenses within
the higher-end of the market seems to speak in that regard.
the other hand, the company will have to provide more out-of-box integration
for the small-to-medium enterprises (SME) market. These CIOs are very
likely to get disconcerted by the prospect of having to deal with a dozen
disparate interfaced applications and may rather consider a solution that
requires only a couple of critical bolt-on applications. Therefore, it
will be very important that J.D. Edwards urgently completes seamless integration
of Siebel and Ariba components with the OneWorld suite. Both approaches
should, nevertheless, be backed up with much more vigorous marketing and
market awareness creation than has been done so far. It is also needless
to say that the execution will have to be flawless because the leeway
for making mistakes has rapidly been shrinking; this may possibly be the
last 'make-or-break' opportunity for J.D. Edwards.
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 and a
number of other partnerships with renowned vendors (some being J.D. Edwards'
competitors). 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.
Existing J.D. Edwards' customers should certainly consider the entire
ActivEra offering (including OneWorld ERP product), but avoid selecting
it without looking at what the other vendors have to offer. We recommend
identifying your clear e-business strategy and conducting thorough comparison-shopping,
at least for the sake of developing negotiation leverage. Contact a J.D.
Edwards sales representative for more information on OneWorld Xe release
to request a list of recent customers, and ask them about the product.
Understand what functionality you're interested in and investigate what
the company can offer. Identify the requirements and related costs to
upgrade your systems to support the added functionality. Be wary of pre-selling
efforts and focus on the current release version. Existing users of WorldSoftware
product may want to inquire about J.D. Edwards' future product support
and/or migration strategy. Beware of the potentially hidden cost of a
for potential customers, we generally recommend including 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 and SCM offering, where manufacturing,
logistics and financial modules are main pillars of an enterprise application,
would benefit from considering J.D. Edwards. One should bear in mind the
company's proven fair treatment of customers as well as its expertise
within some industries like automotive, consumer packaged goods, electronics,
manufacturing & distribution. Nonetheless, if a complementary product
beyond core ERP and SCM (e.g., CRM, e-Commerce, BI, etc.) is of a critical
importance, users should think carefully about the possible EAI implications
and may benefit from considering competitors' value propositions too.
hosted Internet solutions may offer cost effective applications to small
or mid-sized organizations. Small to medium enterprises with less than
$100 million in revenues, which are AS/400 shops, which are assemble-to-order
(ATO), make-to-stock (MTS) and less complex manufacturers will benefit
from evaluating Genesis program. Consider all options. Most importantly
identify what needs are "must have" requirements and a timeline for additional
components. Once identified, comparison-shop and use the related information
to negotiate the best price for the solution.
interested in the company's assistance in connecting them to digital market
places (Internet exchanges) should have answers to the following questions,
at least: What methodology does (or will) the company use? Will J.D. Edwards
map customers' schemas (typically pertinent to a certain industry) to
those of the marketplace?
with all new releases, users should employ a critical approach in their
evaluation of OneWorld and require all potential vendors to demonstrate
specific business processes. Though demonstrations do not guarantee a
trouble-free implementation, they can go a long way toward helping users
understand how the software might behave in their environments. 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.
following are only some of the issues associated with EAI that users should
be aware of: different security systems and keys, package interfaces that
do not provide the information in a preferred format, systems may operate
in different time zones and be geographically dispersed, scalability,
performance, disaster recovery and contingence planning. Users for whose
solutions J.D. Edwards partnered with other EAI vendors may benefit from
informing themselves what the company plans for future service & support
are and what would be the ramifications of switching or not to its above-mentioned
strategic EAI partners.
technological integration is seldom guaranteed by joint marketing arrangements,
and only comes after the arrangement yields considerable implementation
experience. Therefore, users are advised to ensure that J.D. Edwards is
the main contractor that will assume overall accountability for the project.
Failing to do so may result with customers being caught in a middle of
contractors' recriminations and finger pointing when things start to go
awry. The company's readiness to provide a number of reference sites within
the industry of interest, where the installation of its partnership-enhanced
product has gone without major glitches, would additionally alleviate
existing anxieties among users.
This concludes a two-part technology note evaluating J.D Edwards. For
an overview of the history and strategy of J.D. Edwards see Part 1.