JD
Edwards' Alliances: Is It Too Much of a Good Thing?
P.J.
Jakovljevic - April 11th,
2000
Event
Summary
Enterprise application vendor JD Edwards has forged a number of alliances
since September 1999 as the company looks to expand the availability of
its OneWorld product suite.
In
a two-pronged attack, the company has secured an agreement with Andersen
Consulting and extended its existing deal with IBM Global Services. It
will concentrate on the consumer packaged goods market, and a co-development
deal with Andersen will provide collaborative brand management and promotions
applications.
The
JD Edwards storefront for e-business will be powered using IBM's Websphere
Commerce suite and will be available in the spring. Doug Massingill, chief
executive of JD Edwards, said: "We have to give customers a solid, integrated
platform that scales, and for us, that means reselling Websphere. We're
going for the one-to-few rather than one-to-many sector with Andersen
and IBM, providing customization services."
JD Edwards has also reviewed its reselling agreement with Siebel to include
Siebel's entire suite of front office applications. Alongside these agreements,
JD Edwards will focus on its demand planning, scheduling and product configuration
products that include applications from last year's Numetrix acquisition
and the partnership with Synquest. JDE has also decided to enter the arena
of B2B electronic exchanges with Active Marketplace. The TRADEX Commerce
Center platform is the basis for this and as with other exchanges, the
idea is to link trading communities in an on-line marketplace. Yet another
partnership is with Extensity, a vendor that delivers automated travel
and expense reporting software.
Mike
Schmitt, senior vice president of product strategy at JD Edwards, said:
"Mid-market enterprises need to respond to competition from customer-driven
digital exchanges. These applications add value to their businesses."
Schmitt conceded that JD Edwards' own development needs to move forward
so that customers get access through a full HTML client, which will be
available in June. This will allow ASPs to host on a one-to-many basis,
which is not possible under client/server architectures.
JD
Edwards is repositioning itself as an enterprise vendor to convince medium
sized manufacturing enterprises that it is worthwhile extending their
activities into e-business. But managing a large application portfolio,
much of which involves partnering or extensive integration and customization,
is difficult. "We have to show offerings in all these markets, but today
it's hard to know where the demand will concentrate itself. It will be
tough for the foot soldiers out there selling," added Schmitt. Asked whether
the company is comfortable with having many critical components outside
its immediate control, Schmitt said: "We think the OneWorld architecture
insulates us from incremental application change issues."
Market
Impact
J.D. Edwards has entered 2000 with a bitter taste of a dismal 1999 and
a great deal of painstaking integration efforts remaining, both with its
recently acquired products and with products of its partners, such as
Siebel, Ariba, Extensity, and Synquest. We condone J.D. Edwards' move
to reposition itself as an enterprise vendor to convince medium sized
manufacturing enterprises that it is worthwhile extending their activities
into e-business. Consequently, it has launched ActivEra Solutions, with
the idea to present it as an integrated set of front office and back office
functions.
The
first component of the solution is Active Supply Chain, which combines
supply chain planning and execution. This includes advanced planning capability
along with traditional functions like warehousing and transportation.
It also allows full collaboration with business partners who are given
a window into the system through a self-service Internet front end.
The
next component is Active Customer Relationship Management, which is mere
a repackaging of Siebel's CRM solution along with an electronic storefront
solution from IBM.
There
is then Active Enterprise (another inventive way to avoid using the infamous
word ERP) and finally, Active Procurement (Ariba) to round off the core
system components. The whole suite is complimented by Active Knowledge
Management, which provides business intelligence and document management
capability.
However,
we believe that managing this large application portfolio (a kind of a
software Frankenstein), much of which involves partnering or extensive
integration and customization, will be cumbersome despite its highly marketed
flexible product architecture. One should never neglect the inevitable
intricacies of managing softer, people issues.
Complementary
product alliances can often be a good thing. Nevertheless, it is puzzling
why J.D. Edwards needs them more than most of its competitors. 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 SAP, Oracle, PeopleSoft, and Baan, but
also by its smaller competitors like Great Plains, Epicor Software, Symix
Systems, and IFS AB.
While
the best-of-breed approach can have its merits, we believe it invariably
leads to additional integration costs and complicates service & support
arrangements. Interfaces between significant components like ERP and CRM
usually need some tailoring. This can be a barrier to future changes as
further modifying already modified code is notoriously time consuming,
costly, and risky.
J.D. Edwards' heavy reliance on other vendor's software flies in the face
of its aggressive positioning around flexibility, which customers may
find very disconcerting. To further rub salt in the wound, the vast majority
of its customers are still running both its mature World and new, less
mature OneWorld products simultaneously on a single, shared database.
This coexistence, bundled with additional future integrations could be
a perfect definition of an IT manager's nightmare.
Furthermore,
J.D. Edwards 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. J.D.
Edwards could therefore find it a challenge keeping control of its own
destiny.
Both
Ariba and Siebel have partnerships with its fierce competitors too. Great
Plains, for example, points out that its integration with Siebel is well
ahead of J.D. Edwards'. It is in its second phase, meaning the integration
on a database level has been completed; the blending of user interfaces
is the focus now. Moreover, Great Plains cites that it will not have a
conflict of interest with Siebel's sales force in its SME market segment
(companies with less than $250 million in revenue). This is not necessarily
so in case of J.D. Edwards, which tends to target much larger companies
as well.
The
strategy also gives J.D. Edwards less control of its own business. ERP
has taken a back seat in the market and hot areas like CRM and e-Commerce
are driving much more activity. Oracle and SAP are increasingly starting
to report wins of new accounts. They also see a broader product portfolio
as the means to further mine their large existing customer bases.
J.D.
Edwards is not well positioned to compete and develop its business in
this way. Its income seems to be much constrained. As a result it will
find it increasingly difficult to close the functionality gaps. The market
is demanding more and more from vendors and broadening a product offering
through R&D or acquisition is very expensive. We wonder whether J.D. Edwards
having 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; is therefore reticent to undertake any internal development
or acquisition of CRM and e-commerce functionality. While this may be
a more prudent approach than the risk of following the steps Baan took,
the 64,000 dollar question is whether J.D. Edwards' core competency is
now going to be system integration.
User
Recommendations
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 offering, where manufacturing, logistics and
financial modules are main pillars of an enterprise application, would
do well to consider J.D. Edwards. We do not hereby intend to overlook
the company's proven fair treatment of customers as well as its expertise
within some industries like automotive, consumer packaged goods, electronics,
manufacturing & distribution.
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.
Improved
technological integration is seldom guaranteed by joint marketing arrangements,
and only comes after the arrangement yields considerable implementation
experience. Furthermore, 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 where the installation of its partnership-enhanced product has gone
without major glitches would additionally alleviate existing anxieties
within users' community.
Nonetheless,
if a complementary product beyond core ERP (e.g., CRM, e-Commerce, etc.)
is of a critical importance, users should think carefully about the possible
implications and may benefit from considering J.D. Edwards competitors'
value propositions too.