J.D. Edwards Fires Siebel, Hires YOU

Event Summary 

J.D. Edwards announced plans to acquire CRM vendor YOUcentric, Inc. for approximately $86 million to "help companies capitalize on customer and market demand for integrated CRM applications." At the same time, they have severed their 18 month relationship with Siebel and ended integration plans between J.D. Edwards core functionalities and Siebel's eFrontOffice capabilities. Abrupt? Yes. Unexpected? Possibly. In the best interests of J.D. Edwards and their customers? Wholeheartedly yes.

J.D. Edwards and Siebel Joined at the Hip 

Until this announcement, it appeared that J.D. Edwards and Siebel were joined at the hip and moving forward together.

In a statement released by J.D. Edwards in June of this year, Chairman, President, and CEO of the company Ed McVaney referenced the need for an integrated Customer Relationship Management (CRM) solution as a part of a mid-enterprise strategy. This would fortify the value proposition J. D. Edwards presents to mid-enterprise customers seeking comprehensive integrated solutions.

He goes on record as stating that, "contrary to recent reports in the media, J. D. Edwards is not dissolving the relationship with Siebel, but is jointly refining that relationship to more effectively serve the needs of their joint customers and the enterprise marketplace."

"J. D. Edwards will continue with its plans to deliver its second integration of J. D. Edwards software with Siebel software in June, 2001 and will deliver an enhanced version of this integration in December, 2001. It's important that as we move forward, we continue to support our joint customers, and one of the best ways to do this is to continue building out the integrations we are scheduled to release," said Hank Bonde, Chief Operating Officer of J. D. Edwards.

Successful Midnight Surgery on the Siamese Twins 

On August 15, J.D. Edwards announced its intentions to acquire YOUcentric, Inc. of Charlotte, N.C. YOUcentric is a privately held provider of Customer Relationship Management (CRM) software, including applications for Sales Force Automation (SFA), Campaign Management, Contact Center Management, and Partner Relationship Management.

By adding YOUcentric's capabilities, J.D. Edwards plans to deliver a "comprehensive set of integrated collaborative commerce applications that enable companies to electronically manage their business relationships from supply chain planning all the way to customer services." A mouthful, but it boils down to collaborative commerce.

J.D. Edwards' collaborative commerce product set brings together Enterprise Resource Planning (ERP), Advanced Planning and Scheduling (APS), and Supplier Relationship Management (SRM; otherwise known as Supply Chain Management), with traditional CRM functions.

J.D. Edwards also announced its intention to sever its relationship with Siebel, though it vows to maintain support for those customers that purchased the Siebel solution from them (numbering approximately 50 companies). It's expected that J.D. Edwards will quickly provide an incentive for those customers to move to its new, integrated solution as soon as it is ready.

Who In the World is YOUcentric? 

Actually, we've known about YOUcentric for quite some time now. Their basic offering, called YOUrelate, has four major components: Marketing, Selling, Servicing, and Partnering. They have gained considerable acclaim by being named to several "Best" lists:

• Top 100 Emerging Companies to Watch in 2000 (ComputerWorld, November 1999)
  
  
• Top 15 CRM Software Packages for 2001 (ISM, February 2001)
  
  
• Hot 100 Private Companies (Upside, May 2001)

Mass Customization  

YOUcentric didn't invent the term or the concept; they only applied it in the CRM application space. "Mass Customization" is a phrase that was coined by Stan Davis in his book Future Perfect in 1987. The idea, as opposed to mass production, where the same thing is produced in large quantities, is to create pre-defined, flexible components, which later can be modularly fit together, and further refined, based on specifications from the customer. This is exactly YOUcentric's approach to software design. They have over 110 components in the CRM space; everything from Account Management, to Contact Management, to Customer Service Call Handling, to CTI support, to Support for wireless data access (WAP-enabled cell phones, Palm platform, pagers).

Eschewing, even disdaining, the traditional "best-of-breed", or "best practice" approach, YOUcentric describes their approach toward software development as akin to Dell's make-to-order approach to computer manufacturing. They start with the customer's strategic business processes (which are hopefully well-aligned with the company's strategic goals and vision), pick among their 110 components, customize where they need to, even create new components if necessary, and thread them all together for a perfect fit.

YOUcentric is quite negative on the one-size-fits-all approach being promulgated by the likes of Larry "Thou Shalt Not Touch My Code" Ellison at Oracle and even Tom "I'm Gonna Beat Larry At His Own Game" Siebel of Siebel Systems. With a best-practice approach, if an automated software process has worked well for a group of companies or an industry, then logic should hold that it would work well for any company similarly aligned.

The problem is, claims YOUcentric, this approach forces you to follow the pack rather than capitalize on what processes make your company unique. If the top companies in an industry all have the same "best practice" software and inherent processes, then none of them has a service solution that gives them a competitive differentiation or advantage. That may be OK, if a company believes strongly that business processes don't matter given their products' overwhelming superiority in the marketplace. But many products are starting to look awfully alike in terms of features and pricing, and in our opinion, companies better well worry about business process reengineering, mapping appropriate technology to their very own best processes, and finding competitive wins for their customers through superior services.

In addition, it's pretty darn difficult to work with a pre-defined data model when every company has its own, unique legacy data in different places, as well as organizational silos and heterogeneous technologies. Which brings us to the next point:

Data Model Independence and Inheritance 

YOUcentric does have its own data model, but it doesn't force it on any customer. If a customer already has core pieces of their data laid out in an ERP data model, (for example, the J.D. Edwards suite), YOUcentric can sit right on top of that data model - something called Data Model Inheritance. They conduct data mapping to the foreign data model, extend the data model if need be, and their application is none the worse for leveraging work already done. This could dramatically facilitate integration between YOUcentric modules and the core application modules by sharing data in the same data model.

Full J2EE Compliance

All of YOUcentric's code is written in Java and is fully compliant with J2EE (Java 2 Enterprise Edition). This means it's natively Internet friendly, and generally platform and database independent.

Siebel Gets Punched in the Eye

Less Wyatt, Chief Marketing Officer of J.D. Edwards, pulled no punches when discussing the disintegration of the relationship between his company and Siebel Systems. As he explained during the corporate web conference call on the YOUcentric purchase: "We entered that [the Siebel] relationship 18 months ago with high expectations. Unfortunately, when they delivered the solution, we found it was not a great fit; the product is complex, difficult to implement, and our business relationship was not win-win. We were not meeting the requirements for the market nor supporting our business model to be successful. Siebel does not mean long-term success for us. In fact, we have announced that we are terminating our relationship though continuing to support our customer base." A mere 50 J.D. Edwards/Siebel customers later, they pulled no punches, and pulled the plug.

YOUcentric Treated with Kid Gloves 

In the same web conference, corporate executives at J.D. Edwards couldn't stop saying good things about YOUcentric. They cited three major wins in the YOUcentric acquisition:

1. Together, J.D. Edwards and YOUcentric would present an "unmatched comprehensive collaborative commerce solution".
   
   
2. YOUcentric's J2EE technology means tremendous flexibility and fits in nicely with J.D. Edwards' OneWorld Xe's workflow integration toolkit called XPI.
   
   
3. Increased speed of implementation and faster Time To Market

Ed McVaney, the Chairman, CEO, President, and Co-Founder of J.D. Edwards sees YOUcentric as helping them craft a much more vigorous CRM strategy, which is very important to their manufacturing and distribution customer base (the company sited a study in which a full 1/3 of their current customer base of 6,000 were interested in CRM solutions over the next two years). He claimed that customers want a broader, deeper version and vision of CRM than that which is propagated today (and which he called "CRM Lite.") Stating that Sales Force Automation, and Marketing Campaign Management, and Contact Center and Customer Self-Service functionality, and Product Configuration, and Business Intelligence and those sorts of things satisfied only "part of the need for manufacturing and distribution customers," he's looking forward to providing customers exposure into the complete supply chain with such functionality as order Status, Self-Quoting, ATP (Available To Promise), shipping and delivery status, Joint Planning, graphical configuration of products, customer "dossiers," and even a customer view into Accounts Receivable. He called it "Total CRM Relationships," which, he says is much broader than the traditional view of CRM.

With YOUcentric in their pocket, J.D. Edwards plans to aggressively peddle both its collaborative commerce and standalone CRM solutions. They quoted from an AMR research note which stated that the CRM market alone is expected to grow at a compound annual growth rate of 29% over the next five years.

Integration Plans 

J.D. Edwards has publicly stated very aggressive integration plans between the two companies' technologies. They expect that by the end of the year, they will have integrated YOUcentric's SFA components with J.D. Edwards' order processing - "from a business process perspective." In 2002, they expect to fully integrate all other pieces.

Observations

TEC saw the handwriting on the wall for a breakdown in the J.D. Edwards - Siebel relationship (see J.D. Edwards' QUEST To End Its String Of Pyrrhic Victories, Part 2). There was too much difficulty in integrating the two companies' technologies, cultures, and even sales strategies.

We need to take a moment and considerably disagree with Mr. McVaney's definition of traditional CRM. Take one look at Siebel's offerings, for example, and you'll find virtually all the additional pieces he's talking about, maybe save for the A/R view. Could he be trying to put distance between J.D. Edwards and other major ERP vendors who are also pushing themselves as the leaders in Collaborative Commerce? If so, this argument falls thin.

We could certainly argue that someone like SAP has an equally or even more impressive story to tell in the collaborative commerce space than J.D. Edwards, and we could quibble about how YOUcentric integration and Time To Market improvements with J.D. Edwards software are yet to be seen.

But, through the marketing hyperactivity and excitement that is often involved in high profile M&A activity such as this one, there seems to be promise: J.D. Edwards now has a truly flexible CRM solution that they OWN and which, though not complete in its scope, should be quickly adapted into J.D. Edwards OneWorld environment, as well as quickly expanded with additional resources.

User Recommendations 

J.D. Edwards is a major, Tier 1 ERP vendor that is making a leap at the Collaborative Commerce brass ring. Now that it has brought the second of three key components in house (Internet-enabled Supply Chain Management comes from Numetrix), they have a better shot at providing a compelling, well-integrated solution to both their existing customer base, additional collaborative-commerce-thinking customers, as well as customers interested in standalone CRM. The key for J.D. Edwards, and in turn the key factor for users and potential users to watch, is integration. J.D. Edwards still has a mix of third-party vendors providing bits and pieces of the overall solution (for example, Knowledge and Information Management from Open Text and FileNet; Business Intelligence from Microstrategy, as well as the aforementioned Numetrix SCM). Their ability to integrate the solutions smoothly and ultimately provide quick implementation programs will prove their true worth in the marketplace.