PeopleSoft Internationalizes Its Mid-Market Forays Part 2: Challenges & User Recommendations

PeopleSoft Internationalizes Its Mid-Market Forays

Part 2: Challenges & User Recommendations
P.J. Jakovljevic - September 27, 2002

Additional Market Impact

As well known and much publicized, the major factors of success in business applications for the small and mid market segment have traditionally been price, speed of implementation, vertical focus, product scalability and scope expandability, and a single point of contact. Therefore, PeopleSoft seems to have captured (or at least tackled) most of them, partly owing to finally breaking its product in more manageable components (which provides for faster phased implementations and system agility) and Internet-enabling it (which provides for easier deployability and user interface intuitiveness). Its solutions within ERP, CRM, SCM, portals and supplier relationship management (SRM) functionality provide a wide scope of features, and very few vendors can provide tightly integrated applications of this magnitude under one umbrella.

Furthermore, PeopleSoft has possibly the strongest product technology in terms of support for almost all industry relevant platforms and/or middleware standards, with Web service standards like eXtensible Markup Language (XML), Simple Object Access Protocol (SOAP) and Universal Description, Discovery, and Integration (UDDI) being already embedded within the 8.4 release. These facts, bundled with PeopleSoft's recently ascending corporate viability and mind share, have encouraged many small companies to opt for its offering, which has not been quite conceivable until very recently.

As a result, almost one quarter of PeopleSoft's customers now come from the mid-market, although almost all of those customers are in the US market. Furthermore, owing to a modest contract value for the segment, PeopleSoft's mid-market division is forced to generate a sizable revenue level by a larger number of new accounts. Therefore, the seemingly moderate expansion of its Accelerated program overseas, primarily into countries where the company has had a sizable success lately, seems like a prudent move. Thus, its own direct sales and delivery division combined with a handful of high-profile partners implementing the Accelerated Solutions may suffice for the time being, given that the localization features of some of the above new markets (e.g., support for value added tax (VAT)) would not be that intricate like a penetration of the Chinese or East-European markets. Look for that to nonetheless change in the not so distant future when PeopleSoft plans to start tackling more esoteric markets, for which incumbent SME application vendors have had to build extensive value-adding reseller (VAR) channels with expertise in local and/or vertical segments' business practices.

This is Part Two of a two-part analysis of recent PeopleSoft announcements. Part One discussed the announcements and began the Market Impact.

Challenges

Consequently, one should not expect PeopleSoft's (or any other Tier 1 vendor's) mid-market initiative to have a smooth ride yet. Although less notoriously negatively publicized than SAP, PeopleSoft remains a complex application, and the Internet architecture and new interface can mitigate that only so much. This perception of complexity remains ammunition that the smaller vendors will continue to exploit in order to hinder bigger brethren's attempt to penetrate their traditional stronghold. Furthermore, not all powerful PeopleSoft 8 functionality (e.g., SRM or product lifecycle management (PLM)) is available for Accelerated solutions, which may be a serious drawback when competing against the smaller vendors which have long offered their entire suites without any disparity between solutions for bigger and smaller customers.

The Accelerated Solutions while enabling PeopleSoft and its channel to offer a fixed price and fixed time implementation program in a modular way, may sometimes not necessarily offer a total extended-ERP functional scope (that would also include, e.g., supplier relationship management (SRM) or product lifecycle management (PLM) functionality yet to be available as part of Accelerated Solutions), but still only a part of extended-ERP. By the time the customer puts together modules to build a full collaborative enterprise system for a mid-market company, and then adds up the multiple implementation time and cost, all the touted benefits might have been annulled in some instances when incumbent mid-market vendors cover all the bases with their well-entrenched offering.

Therefore, it may still take some serious doing to produce a real magic bullet to attract vast majority of smaller enterprises, although the company has successfully addressed marketing and selling to both large and smaller enterprises lately (see PeopleSoft Supply Chain Is Music To Mid Market Ears). Still at this stage, many might fail to find a compelling rationale for an SME to go for PeopleSoft as opposed to, e.g., Lawson, Agresso, Systems Union or Infinium in service industries, or an army of channel-focused manufacturing-oriented smaller ERP vendors.

While fixed time and cost solutions delivered packaged from pristine laboratories do have their appeal, SMEs are becoming increasingly savvy to ask for more than just these implementations perceived as cookie-cutter approach. And there are a number of obliging smaller vendors with immaculate vertical focus and knowledgeable channel, some of them like Scala offering a very flexible modern product, very well attuned for local regulatory requirements of several dozen countries and supporting well over 20 languages. Indeed, with its strong focus now at the SME level, PeopleSoft faces a phalanx of competitors spearheaded by Microsoft Business Solutions' (former Great Plains and Navision) offerings (see Microsoft 'The Great' Poised To Conquer Mid-Market, Once and Again), Epicor, Exact Software and Best Software to name only few. Recent SAP's vacillations to deliver more than accelerated watered down' mySAP solutions (see SAP Tries Another, Bifurcated Tack At A Small Guy) and its quandary to recruit channel partners and overcome the barrier to entry will not pass PeopleSoft either.

Oracle and Siebel have also long been grappling with their like breakthrough SME offering. Therefore, PeopleSoft has to repeatedly point out it has not taken a cookie cutter approach, as each of its solutions is preconfigured to reduce cost and complexity, but also allows for available extensions based on each customer's need. This combination might make a differentiating trait, and since the company has also developed industry templates for each solution, these could keep cost, complexity and risk down

More Competition

While, for the mid-market, PeopleSoft seems to have outdone its Tier 1 rivals to a degree, the bigger hurdle of outdoing the mid-market incumbent vendors still remains. Indeed, many elements of the offering can still be recognized in moves SAP, Oracle, or J.D. Edwards have recently struck with some of the usual suspect' among consultancy and technology partners (e.g., KPMG, Compaq, HP, IBM, Microsoft and Sun) in the mid market. As mid-market businesses in the US do not have the same needs/values as their larger national counterparts, the situation is even more exacerbated with their overseas peers, and PeopleSoft, still a relative newcomer in these mid-markets (although it is not the case within larger markets in these geographies given PeopleSoft now generates over 40% of revenues from international markets, and its product is now on the 6th international release rendering it as one of only a handful of vendors that has true international functionality multi-lingual, multi-currency, multi-country regulatory capabilities built in), will have to address these cultural disparities. As the above new mid-markets' cultures may value honesty and community spirit more than commercial success, snazzy marketing collaterals and brand recognition, some may be unimpressed (if not deterred) by having to deal with haughty PeopleSoft, IBM or other Big 5 consultancy staffers. To that end, local darlings like Adonix in France, Exact and Scala in the Netherlands, or PRONTO Software in Australia might represent preferable alternatives.

Additionally, PeopleSoft has long endured criticism from competitors and analysts at what they have portrayed it as a lightweight SCM product unable to compete effectively with applications from pure-play SCM vendors like i2 Technologies and Manugistics, and ERP rivals like J.D. Edwards, Oracle, Baan and SAP. A tall order therefore might still remain for PeopleSoft to convince the market that its domain expertise in manufacturing-oriented environments should be taken seriously, despite its recent successful forays and success beyond its proverbial strength in financials and Human Resources (HR) realms, by acquiring more than 110 SCM customers lately in an extremely competitive environment, and at its critical opponents' expense.

Although PeopleSoft has already achieved a strong presence in the supply chain space, owing to its ongoing commitment to this sector and due to focusing its solutions on only a handful industries such as: CPG, High-Tech, and Wholesale-Distribution, it still possibly occupies the Top 5 place (at best) in the supply chain marketplace as a whole. To that end, as the company is apparently keen to change the competitive landscape, and having a huge pile of cash, it still has to do a much better job at disseminating the message and making the market aware and serious about its manufacturing expertise. The fact that only 29% of its mid-market customers are manufacturing enterprises indicates a vast room for improvement. There are still a number of smaller vendors with impressive broad functionality and an easy-deploying product owing to their original focus only on manufacturing, IFS, Made2Manage, SoftBrands, MAPICS and QAD being only some. These vendors do not burden a small manufacturer with any unneeded functionality or with a complex, spaghetti-like code base, as a non-manufacturing ERP vendor would likely have had to produce after deciding to expand into manufacturing. A mitigating factor though for PeopleSoft (and even its differentiating trait compared to its Tier 1 peers) in that regard would be that its latest product release has been re-written mainly from scratch, granting for both refined code base and modular product architecture.

Also, while short implementation benchmarks will remain important decision factor, quick implementation will likely evolve into an order qualifier rather than an order winner, as vendors have been converging in delivering more streamlined methodologies to meet customers' business needs and tight budgets. Differentiation will become a tight vertical focus, with solutions targeted even down to the individual six figures SIC code. This granularity of vertical focus has been delivered by Navision, and has been apparently adopted by SAP (for more information, see SAP Claims Big Gains In The Low-End Battleground), although the delivery side of the equation has been happening at a much slower pace. It appears that PeopleSoft will likely follow suit and one should look for its vertical solutions' general availability announcements only far in the future.

Despite the challenges, PeopleSoft has raised the bar in providing solutions for smaller enterprises, and Tier 2 and Tier 3 vendors should be in for a tough battle to defend their turf, especially as they are concurrently trying to expand and modernize their products with ever diminishing resources and wary prospects. PeopleSoft is undeniably a tenacious and persistent fighter able to endure the long hauls.

User Recommendations

Interested customers in particular industries should certainly consider PeopleSoft's mid-market offering and carefully determine their needs and implementation time framework, bearing in mind problems typical with new product releases. Organizations seeking a Web-based solution and out-of-box functionality with little or no customization may benefit from evaluating the hosted offering.

We strongly recommend identifying your clear e-business strategy and conducting thorough comparison-shopping, at least for the sake of information leverage. Consider all options. Most importantly identify what needs are "must have" requirements and a timeline for additional components. Once identified, comparison-shop and use the related information to negotiate the best price for the solution. Among the more alluring selling points of Accelerated Solutions is the guarantee of "on-time and under budget" delivery, something that PeopleSoft implies can be accomplished in as little as 12 weeks. We are generally skeptical about bold promises of speedy, trouble-free implementations and recommend that users dig deeper and conduct detailed interviews with PeopleSoft and ask for sample timelines and references from past clients who have achieved quick ROI. Conversely, question other vendors in the contest to match some elements of PeopleSoft's value proposition (e.g., guaranteed no extra cost for legacy data conversion).

Most vendors offer their own version of SME solutions with programs for rapid, lower-cost implementations. While vendors' endeavors in that regard are highly commendable, the "caveat emptor" approach is still applicable. Although some smaller companies would be well off with scaled-down versions of rapidly implemented, Tier 1 software applications, for many companies this may not necessarily be the best solution. Although PeopleSoft's preconfigured solutions may provide the best of both worlds as templates lower cost and complexity and give mid-market companies a strong foundation to built upon, but there is still support for extensions based on each customer's need, still, make sure that you do not sacrifice functionality and/or customizability for the sake of a quick implementation, since that may cost you more in the long run.

For mid-market companies today's dynamic business environment means the survival of the most agile and flexible. When evaluating a software application, companies often fall for a snazzy user interface or raw number-crunching power. However, a flexible system should also offer features like tools and templates, cross-reference checks, and many other parameterization utilities that provide significant system changes without changing source code. Make sure that what you select now will keep abreast of the technology changes in the future. It may sometimes be more beneficial to implement the right solution slowly than to rush the wrong one into place.

As more food for your thoughts in this regard, see Fast-path Implementations - Are They Good or Bad? and Should You Modify an Application Product?.