Event Summary
On January 11, PeopleSoft (NASDAQ: PSFT), one of the leading e-business applications providers, announced that it had entered into a definitive agreement to purchase, for an undisclosed amount, the intellectual property and certain assets of Mountain View, CA-based privately held Annuncio Software Inc. With this purchase, PeopleSoft strives to continue to raise the bar in delivering industry-leading CRM functionality. The acquisition is subject to customary closing conditions, including the approval of Annuncio's stockholders, whose majority has allegedly agreed to vote in favor of the acquisition. The acquisition is scheduled to close during the first quarter of 2002.
Annuncio's marketing automation solution for email and web customer interaction, combined with PeopleSoft 8 CRM solution, will supposedly enable companies to automate and personalize online customer business interactions within a single integrated CRM solution. This functionality is envisioned to give PeopleSoft customers the ability to execute marketing campaigns utilizing online dialog and web site marketing to maintain real-time personalized conversations with customers.
The acquired dialog marketing capability reportedly automatically coordinates personalized interactions with customers through email, web links, banner ads and direct mail. Personalized landing pages and surveys on web sites, as well as targeted follow up offers, can supposedly be used to drive customer loyalty and maximize each customer interaction. These web site marketing features should enable companies to personalize products, services and content presented on their websites. Fitting seamlessly into existing web sites, web site marketing might allow companies to tailor the content and offers presented to each visitor. Products and services can reportedly also be merchandised utilizing a customer's or prospect's personal profile to help drive incremental revenue.
Moreover, the marketing savvy owners of Annuncio claim that companies can realize dramatic increases in customer response rates when they combine personalized online communication channels including email and web links, with traditional marketing channels such as direct mail and telemarketing. Increased response rates presumably drive top line revenue and build customer loyalty. Online channel communications also enable companies to personalize an ongoing dialog with their customers, significantly reducing the cost of customer interactions. This real-time dialog potentially results in lucrative cross sell opportunities and incremental revenue.
Market Impact
Having all but convinced the market that its 'pure Internet' product architecture might be the best innovation on earth since sliced bread, PeopleSoft has also silently realized that it might also be overdue to fill multiple functionality gaps, before its competitors come up with their 'zero-client footprint' solutions. When the company first released PeopleSoft 8 CRM product, marketing, personalization and customer analytics/data mining were pointed out as possibly the biggest competitive inadequacy. The focus of CRM products has long moved beyond sales force automation (SFA) and service/call centers to include marketing automation as well.
This acquisition, along with partnerships with Unica for its predictive modeling and campaign management capabilities and ANGOSS for data mining capabilities, should enhance PeopleSoft's offering in the prospective and growing, but highly contested marketing campaign management space. The moves position PeopleSoft to compete with Siebel and E.Piphany, the current leaders in the market segment, as well as with SAP and Oracle in the long run.
Likewise in J.D. Edwards' recent acquisition of YOUCentric (see J.D. Edwards Fires Siebel, Hires YOU), the two companies in case should also fit well together. Annuncio should bolster PeopleSoft's functionality in managing online campaigns, deploying rules-based personalization and profiling, and tracking the results of campaigns across multiple on- and off-line channels, while both products are built on a scalable Web-based architecture. The software covers a diverse assortment of marketing activities, from advertising and direct mail to telemarketing and ad banners. As PeopleSoft has a number of customers that require such a wide range of activities, this acquisition should present a strong opportunity for new software sales. However, a lack of common customers as of today will mean some time for delivering referenceable case studies to prove products integration.
Furthermore, PeopleSoft has to carefully observe that it does not overstretch itself and lose focus going forward. While it has yet to execute the assimilation of a slew of software products, which it recently acquired in order to fill the gaps in its CRM and e-business infrastructure offering such as Cohera, a catalog and content management and integration company, and Calico, a product configurator provider, it also remains under pressure to fill other outstanding product functionality shortcomings such as mobile/remote SFA and private trade exchanges (PTX). If one is to judge by the general industry benchmarks, it will take at least until late 2002, for the products to be fully integrated. Once it is the case, the concoction of PeopleSoft's and Unica's customer behavior modeling products and recently acquired product configurator from Calico and should make for an interesting customer experience scenario. However, in the short run, it is very likely that the above disparate products will be connected via XML messaging only.
Moreover, having to soon buy back Momentum, which it decided to spin-off a separate software development business in 1998, for an estimated amount of over $90 million might reduce PeopleSoft's ability to lavishly acquire and integrate new products. The spin off move, which has meanwhile become illegal in the US, was devised as an accounting ploy to achieve better control over PeopleSoft's investment in new product developments, and to push a part of R&D expenses off of its own books.
Furthermore, as Momentum solely contracted its workforce from PeopleSoft, these employees were seen as a source of PeopleSoft's top line revenue. In other words, PeopleSoft has since enjoyed reduced R&D costs, it has been able to generate additional (although artificial) revenues by contracting out its own developers, and it has spread the payments on its software over 10 years. To be fair, however, the company had to bear the burden of R&D employee costs, which is the biggest part of most R&D costs, and it will have to swallow the liability Momentum generated since its inception. While it appears that the transaction will not affect PeopleSoft's current stellar financial and cash situation, time will still only tell whether all the above mentioned and foreseen acquisition initiatives might become too unwieldy down the track.
User Recommendations
PeopleSoft's current users should react positively to this news, in principle, as the product combination should allow them to address many of the marketing campaign needs. Existing and prospective customers should evaluate the add-ons emanating from the acquisition as a way to add value to their existing applications whether with an interim integration solution now or by waiting for PeopleSoft to supply a generally available seamlessly integrated solution. Therefore, question PeopleSoft's officials to obtain the firm delivery schedule of intended offering.
Current Annuncio and Calico customers should continue to use the products, but they and any potential customers should realize that PeopleSoft will want to, at the very least, incline the software towards its platform, and most likely fully integrate the solutions with PeopleSoft 8 CRM, which might very well leave current non-PeopleSoft shops feeling cold, and wondering whether the new combination will work for them better than alternative solutions.
More comprehensive recommendations for both current and potential PeopleSoft users can be found in PeopleSoft - Catching Its Second Wind From The Internet; Part 3: Predictions and Recommendations and "Collaborative Commerce": ERP, CRM, e-Proc, and SCM Unite! A Series Study: PeopleSoft.