PeopleSoft: Giving Fervent Hope To The Market And Jitters To The Competition. Part 2: The Implications

Part 2: The Implications
P.J. Jakovljevic - June 27, 2001

Event Summary 

PeopleSoft is seeking to make bigger strides in the CRM, SCM and B2B software markets with its recent spate of product releases. The rhetoric and hype aside, the fact is that PeopleSoft has become a fearsome enterprise applications provider. PeopleSoft has joined the elite group of vendors that can deliver a majority of the components of a complete e-business framework. If one considers all aspects of a CRM or SCM evaluation, PeopleSoft has earned the license to be evaluated along with market leaders. Possibly more encouraging is PeopleSoft's upbeat prediction for the rest of the year, optimism only a few of its competitors can currently exhibit.

While Wall Street praises the vendor's new product initiatives and its strong first quarter results and optimism for the future, its direct competitors are far from feeling easy.

About this Article: This is a two part note, Part One covered the news from PeopleSoft about new products and its first Quarter results. This part discusses the Market Impact of this news and how it affects Users.

Market Impact 

The rhetoric and hype ("pure Internet technology" that has "no code on the client" and allows "universal access from any Web device, anywhere in the world, at any time", also with "embedded analytics", etc.) aside, the fact is that PeopleSoft has become a fearsome enterprise applications provider. The new products and partnerships give the company an exciting look. Even with well-known caveats about product immaturity, PeopleSoft has officially joined the elite in the CRM, SCM and eBusiness battlefields. Additionally, its results present a ray of hope for the market in these otherwise dismal times that have seen many software vendors disappear, downgrade earnings, or otherwise struggle. Possibly more encouraging is PeopleSoft's upbeat prediction for the rest of the year, optimism only a few of its competitors can currently exhibit.

PeopleSoft has expanded much beyond its kernel Human Resource (HR) applications, with a broad product portfolio that might sell well in a number of geographic areas and/or industries. But PeopleSoft did not abandon its HR roots either. The purchase of SkillsVillage proves that PeopleSoft is still quite committed to the workforce management market. PeopleSoft has thereby upped the ante in the HR market, primarily for SAP, Oracle and J.D. Edwards, although the move has only slightly surpassed Lawson Software's e-Recruiting Services (formerly ijob) functionality.

The move might also promote PeopleSoft into the leadership position within the services procurement market, which was quite neglected in the past, as attention was traditionally focused on material goods procurement. This is not necessarily the case any more as companies look to apply similar principles of automation and savings to services procurement. But, the greatest value may likely be in integrating SkillsVillage with a slew of other PeopleSoft applications, like e-procurement, professional services automation (PSA), and e-payment.

The Positive Implications 

With its spate of new products, PeopleSoft joins the elite group of vendors that can deliver a majority of the components of a complete e-business framework. The PeopleSoft 8 suite includes CRM, SCM, professional service automation (PSA), data warehousing, e-procurement applications, business intelligence (analytics), on top of traditional ERP applications. Moreover, in some instances, PeopleSoft may be able to offer the best of both worlds (one-stop shop and best-of-breed). In addition to the leading HRMS product, the company's pervasive Business Intelligence (Analytics) components, with dedicated complex analysis and reporting around almost all crucial business areas including new CRM components, is quite impressive.

PeopleSoft was one of the first major enterprise application vendors to deliver an analytic product with its Enterprise Performance Management (EPM). However, PeopleSoft does not yet support predictive data mining, needed for behavior modeling and prediction or for targeting and segmentation to drive campaigns, and has only partially embedded the analytics into the major CRM business processes, which are part and parcel of leading CRM products.

PeopleSoft, however, is not breaking much new ground with these new products. PeopleSoft 8 CRM exhibits strong service and support (call center) functionality (a result of Vantive expertise), but only basic marketing and sales force automation (SFA) modules. There is also ample room for improvement of the following components: pervasive wireless connectivity, content management, partner relationship management (PRM), multi-channel service escalation, interactive selling system (ISS), and vertical solutions/templates. Most of these developments are slated for the end of the year according to the company's officials.

The functionality of the PeopleSoft 8 CRM product suite has not yet matched the breadth and depth of CRM pure players (e.g., Siebel, Onyx, etc.), PeopleSoft's (as well as SAP's and Oracle's for that matter) huge potential advantage is the integration of its CRM, SCM and eBusiness products to its back-office ERP systems that handle the vital internal processes so important to customers. The new system should potentially allow manufacturers to get a 360-degree view of all their customer relationships. This kind of knowledge only comes from integrating CRM software with back-office systems. Additional advantages of the PeopleSoft 8 CRM product are its alleged interconnectivity to other third-party ERP systems as well as improved scalability (the company claims to be the first vendor to support 30,000 CRM users).

Also, supplier-facing applications have long been a strength of PeopleSoft, with a sizable customer base. PeopleSoft 8 SRM is designed to help organizations effectively evaluate the strategic value of their suppliers and leverage their relationships accordingly. It is envisioned to integrate the design, sourcing, procurement, manufacturing and replenishment processes within a company. Since the solution offers an array of both direct and indirect materials procurement processes, it might provide PeopleSoft with the opportunity to sell its SCM products into some non-manufacturing industries such as healthcare, telecommunications and utilities, where it already has a large user base.

Furthermore, integration of SCM and CRM products should result in a convergence of these traditionally disconnected business processes (e.g., campaign-to-order, order-to-cash, service-to-profit, design-to-acceptance, plan-to-service, request-to-resolve, agreement-to-profit, etc.) through information at every channel across the expanded enterprise. To enable effective collaborative commerce, PeopleSoft has delivered role-based portals that encompass business applications, transactional data, workflow and analytics to make employees more productive.

The Downside of Product Expansion 

The downside of this product expansion is the resulting attention and retaliatory actions of a wider number of formidable competitors. While PeopleSoft now has strong management with an invigorated stance, and is running a profitable business with a good control of its financial, sales, and marketing activities, it may be short-lived without sustaining license revenue.

Although a broader product range should provide more revenue, one should bear in mind that PeopleSoft's license revenue in 2000 was still 25% less than the corresponding revenue in 1998, back when the company was only a mere ERP provider. PeopleSoft still has lower license revenue (expressed both as a percentage of total revenue and in raw dollar amounts), market share, global presence, and resources compared to SAP, Oracle and, in part, Siebel Systems and i2 Technologies. Also, the great part of its revenue comes from its existing customer base (almost 50% of PeopleSoft's existing customers have reportedly upgraded to the new product), while the rest may be reluctant to jump on a heavily involved product upgrade both because of current economic conditions and because of their contentment with the current product release in use. On the other hand, potential users that might be attracted to the new release, may postpone the software acquisition until the economic conditions improve.

One is also to expect the likes of Siebel to counterattack by going after users of Vantive products, particularly those that do not run on PeopleSoft back office given that switching to PeopleSoft's next generation product would require spending more money and tinkering with the systems anyway. In case that PeopleSoft CRM 8 does not offer significant new functionality, current Vantive users may opt to switch to a deeper and broader leading CRM product (or only a component thereof).

While the methodology, toolset and packaged services to assist customers in migrations from Vantive to the new PeopleSoft 8 CRM platform, which are scheduled for the release in July, are a step in the right direction, they do not address integrations Vantive customers might have made to other systems, such as other ERP systems or Computer Telephony Integration (CTI) and Interactive Voice Response (IVR) functionality. The tools are designed to examine an existing Vantive implementation, determining where customization has occurred and mapping existing business rules and data to the new system. Also, current Vantive users may not appreciate the need to convert to PeopleSoft's value-based pricing model that charges based on the number of modules and the size of the company, which is a departure from the user-based pricing Vantive had originally used.

PeopleSoft will use Internet-based product architecture, analytics, and integration with its own back-office and/or the openness to other products/platforms to snatch a bigger market share in the CRM market. While its product might currently be more Internet-based than those of other leading enterprise application vendors, it holds some caveats too. Some competitors cite that PeopleSoft is trying to present virtue out of necessity (in other words, to go for only HTML interface as the easiest way out of outdated fat-client two-tier architecture it had belatedly abandoned). In fact, PeopleSoft's decision to offer only an Internet browser look-and-feel interface has even, in some instances, initially met the power-user resistance or a displeasure for not being able to choose between many options.

Customers also prefer more gradual and, therefore, less painful, transition from their current client/server based systems, and may consider PeopleSoft's new product release as a steep technology leap. While the HTML-like interfaces are perfect for casual and task-specific users with a minimum training requirements, power-users may still prefer the functionality and drill-around capability of Windows-like user interfaces (drop-down menus, right-click feature, etc.).

Some early PeopleSoft 8 power-users cited the awkwardness of conducting more complex transactions only via hyperlinks and through jumping to and fro a number of screens, which defeats the purpose of simplicity. In that regard, the competitors' Web-enabled user interfaces that either still contain many Windows features or offer different interfaces for casual and power users, may be the better approach at this stage. As a remedy, PeopleSoft had to turn to proprietary technology called PowerHTML that enables the use of hot keys in a browser to reduce navigation time. Also, the zero footprint client does not lend itself to disconnected mobile computing. PeopleSoft will have to provide a solution to enable mobile users (salespeople) to use the system without the mandatory need for Web connections, which is a key issue for sales force automation (SFA).

The Challenge 

PeopleSoft's major challenge remains in further increasing the marketing awareness, promoting its new image, products, and the Internet architecture as well as in crisp sales execution. The success of the PeopleSoft 8 product portfolio may be difficult for the company to manage in the near future. PeopleSoft needs to keep the ball rolling by providing efficient and knowledgeable sales and services teams that can articulate the vision and provide the expected value to customers. Therefore, while PeopleSoft should continue to focus on enhancing its products on time, it should also ensure stringent training of its sales and customer support forces, and partners as the spotlight is only going to intensify.

Like SAP, Oracle and Baan, PeopleSoft will preach the power of integration with the back-office to downplay their current inferiority in feature-function battle against the CRM or SCM specialist vendors. Except for Oracle that remains adamant on its unitary one-stop-shop mantra, the other vendors can also tout strength to support integration with other vendors or legacy systems on a wide range of platforms. The fact that most of leading ERP vendors have delivered CRM and SCM modules integrated with their back-office systems (although not the cutting edge functionality), and a tamed growth of the CRM market recently, might force the likes of Siebel or i2 to finally get out of their complacent mindset and to start considering acquisition of an ERP vendor or at least the provision of an interconnectivity of their modules.

In addition to ERP giants battles against best-of-breed vendors, look for particularly fierce intra-market duels between SAP, Oracle and PeopleSoft owing to the closeness of the companies' product offering. The technological advantage that PeopleSoft currently has in terms of the pure Internet architecture may not last for long. On the other hand, SAP's and/or Oracle's advantage due to larger market recognition and resources, broader product foothold and better international presence may be diminished by PeopleSoft's new product release. Every selection war will be won by mere nuances. The use of a statistically valid decision-making tool and careful discernment of importance (weight) factors for all selection criteria will be of paramount importance (see Knowledge Based Selections). When more than one vendor ranks well within a given set of areas (as is very likely in the case of the above vendors), the decision hierarchy provides the supporting material required to justify the rationale of the final decision.

User Recommendations 

It remains to be seen how the market will take the new PeopleSoft's product offering. It also remains to be seen whether the competitors will emulate the pure Internet architecture before PeopleSoft delivers the all-encompassing deeper CRM and SCM functionality. If one considers all aspects of a CRM or SCM evaluation, PeopleSoft has earned the license to be evaluated along with market leaders, particularly given that many vendors, including Siebel, are currently undergoing a product technical transition. Also important will be how well PeopleSoft's sales and service force can demonstrate the benefits of pure Internet architecture-based products to the prospect or customer.

Due diligence should always be paid to satisfying your unique requirements as derived from your unique e-business strategy. While selecting a strategic software partner is a challenging and risky undertaking, the positive news is there are more companies competing for your dollars. Nonetheless, the depth, breadth and innovativeness of PeopleSoft's offerings for the above-mentioned industries are attractive at first sight and deserve due attention bearing in mind the risks associated with the first release of the product.

In general, enterprises in need of a CRM or SCM solution and departments with a need for a solid customer service product should evaluate PeopleSoft 8. However, enterprises that need mobile computing or personalization/data mining right away instead of as a future need only should evaluate other vendors at this stage. PeopleSoft 8 CRM's value proposition comes for enterprises that are XML-compliant and/or have data scattered over several different systems/platforms, and the need to integrate those into a single solution.

Existing Vantive users have a more complex decision process that involves pricing, new implementation, new skills, and new technology. PeopleSoft is still defining specific services packages for Vantive customers, which will be supported on the Vantive product for the next 30 months. It is likely that most of the upgrade tools will be covered under normal maintenance fees, and customers will receive credit for existing investments in the software. However, users must recognize that there is much more at stake than a standard upgrade and that they will have to invest in services, technology, and training.

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.