Inc. is one of the top developers of enterprise business software, which helps
governments and large-to-medium sized industrial clients manage human resources,
financial, manufacturing, inventory planning and distribution data from a variety
of operating systems and hardware platforms. Founded in 1987 and with headquarters
in Pleasanton, CA, PeopleSoft is the third-ranked ERP vendor with $1.3 billion
in revenue in 1998 (approx. 8% of the global ERP market), behind SAP and Oracle.
The Company went public in 1992 and has grown from a $113 million HRMS vendor
in 1994 into a $1.3 billion software powerhouse in only five years (see PeopleSoft,
Inc. Annual Results Chart). In 1988 PeopleSoft delivered the market's first
network-based human resources management system (HRMS) software. The Company
has since broadened its software offering to include financials (in 1992), distribution
(in 1994) and discrete manufacturing (in 1996). PeopleSoft designs its products
for both the client/server and Internet models of computing. It is currently
developing the PeopleSoft Business Network (PSBN), which should incorporate
business transactions, knowledge and analytical tools within and beyond enterprise
boundaries, and which should make that content available to employees, customers,
and suppliers through a personalized Internet portal. The Company also develops
industry-specific products for healthcare, higher education, retail, insurance,
communications markets, etc., and generates more than half of its revenue from
services that include software maintenance and support, customer education and
training, and consulting (see enclosed charts). By the end of 1998 the Company
had licensed system installations to approx. 3000 customers worldwide. PeopleSoft
has offices in 18 countries and over 6,600 employees. The Company's revenue
primarily comes from US and Canadian markets (approx. 86%).
as one of the best and the most comprehensive HRMS applications available,
with a continued heavy investment in R&D (17% of total revenue, 19%
of total workforce); Very strong and complete vertical industry solutions
for financial, insurance, healthcare and higher education.
and loyal HRMS and financial modules customer base, providing significant
recurring revenue stream (approx. 70% of global HRMS market place).
and very efficient direct sales force, in terms of revenue growth and revenue
per sales employee (approx. 61% growth and $0.9 million revenue per sales
employee in 1998).
competitive and shrinking market. PeopleSoft's revenue growth in 1Q99 and
2Q99 has been driven primarily by maintenance, with dramatic deceleration
in license revenue (down 61%), in total revenue (down 3%), and in net profit
(down 91%) compared to the second quarter of the last year (see PeopleSoft,
Inc. Quarterly Results Chart).
of more aggressive action in strong markets like CRM/Front-Office (only
exhibited in partnering with Siebel and Vantive), and indecisive strategy
regarding PSBN (without clear differentiators and target markets).
not regarded as complete ERP solution provider, very far behind main competitors
(SAP, Baan, J.D. Edwards) in manufacturing functionality; acquisition of
"Red Pepper" supply chain product has been very poorly exploited
will be very challenging; We predict significantly reduced annual revenue
growth (max. 15%) with break-even or minimal profit margin (max. 10%) as
the most optimistic scenario (75% probability).
top-line revenue growth primarily through license revenue growth is of utmost
importance in order to preempt further layoffs, exodus of key high ranked
employees, share price volatility. PSBN and EPM initiatives have potential
for increasing revenues, however the coveted annual growth of 25%-35% is
not achievable (75% probability) without strong product offerings in CRM
and manufacturing area.
2000 and after - PeopleSoft will still be a major player, however, the pressure
of being overthrown by J.D. Edwards from No.3 position is mounting (70%
Small-to-Medium Enterprise (SME) market segment primarily with the PeopleSoft
Select, PeopleSoft Advantage and PeopleSoft vertical industry offerings,
bundled with the thin-client technology, and possibly through renting options
with Application Service Providers (ASP) partners, like USinternetworking
direct sales force to increase penetration into existing customer base,
mainly by offering new analytical Enterprise Performance Management (EPM)
applications and e-business supply chain (PSBN) components.
global presence (distribution, sales, services and support), primarily by
leveraging qualified local indirect channels. J.D Edwards and MAPICS would
be good examples of success in this regard.
without any further delay, product functionality, particularly in process
manufacturing and in CRM, either by acquiring one of the leading mid-market
ERP vendors (SSA, QAD, etc.) or CRM vendors (Vantive), or by developing
a product in-house/Momentum Business Applications, Inc.
worth considering in HRMS, financial and distribution business applications
- very attractive product portfolio, with dedicated ongoing service and
strong contender in enterprise application selection process within following
industries: utilities, service providers, financial institutions, public
sector, insurance, higher education.
list in any selection where HRMS system and financial modules are main pillars
of an enterprise application.
PeopleSoft is selected, future clients should negotiate incorporation of
new applications components by bundling them into contract now at negotiated
license fees, in expectation of PeopleSoft's increase in new product introductions.