As reported on a number of IT News Web sites during mid August, PeopleSoft
Inc., a leading provider of business applications, has eliminated nearly
70% of outside consulting firms from its preferred-provider list in the
past year and is instituting a new certification program for nearly 12,000
individual consultants because of customers complaints about bad service
and improper handling of software installation and configuration. The
company officials said only 34 of 96 firms remain on the vendor's preferred-partner
list. PeopleSoft will require better training for individually certified
third-party consultants beginning in October.
addition, the vendor has bolstered its consulting division, PeopleSoft
Consulting, to focus on helping customers deploy e-business systems. PeopleSoft
Consulting's own 2,600 consultants currently handle only about 10% of
all new business, but the staff will more than double to increase its
share to 20% by year's end. In the past, PeopleSoft, Pleasanton, Calif.,
primarily relied on third-party consulting firms to implement and support
its products. Apparently, the new e-business focus is prompted by the
recent release of online PeopleSoft 8.
on July 20, PeopleSoft Inc. announced its financial results for the second
quarter ended June 30, 2000. Revenues, net income and net income per share
from recurring operations for the second quarter of 2000 were $420.2 million,
$15.9 million and $0.06, respectively. This compares with revenues, net
income and net income per share from recurring operations of $360.7 million,
$1.6 million and $0.01, respectively, for the second quarter of 1999 (See
from software license fees for the second quarter of 2000 increased to
$109.8 million, a 37% increase from the same quarter last year. PeopleSoft
experienced significant growth compared with the same quarter last year
in Human Resource Management and Financial applications - up 38%, and
Supply Chain Management applications - up 44%. Customer Relationship Management
(CRM) applications emerged as PeopleSoft's largest license revenue product
line in the quarter. License revenues increased in all major geographic
regions, with the United States growing 49% and International growing
31% assuming constant currency exchange rates.
were $404.0 million for the second quarter of 2000, compared with $365.7
million in the same quarter last year. The increases were primarily in
product development, cost of development services and sales and marketing.
Development costs increased due to the continuing costs associated with
completing the development of PeopleSoft 8, the company's pure-Internet
suite of eBusiness applications that was publicly launched at the beginning
of July 2000. Sales and marketing expenses increased as the company invested
in additional sales personnel and marketing campaigns to drive PeopleSoft
for PeopleSoft was strong across every product line and geography," said
PeopleSoft President and Chief Executive Officer Craig Conway. "It is
a major milestone that license revenue exceeded the $100 million mark
for the first time since 1998. This is especially significant coming in
the quarter prior to the launch of PeopleSoft 8. This quarter marks the
transformation of PeopleSoft to an eBusiness company. With the launch
of PeopleSoft 8 in the third quarter, PeopleSoft expects to be a dominant
competitor in the eBusiness applications market."
the last quarter we have dramatically increased our market position and
visibility," said Executive Vice President of Worldwide Marketing and
Strategy Baer Tierkel. "We are excited with the overwhelmingly positive
initial reviews of PeopleSoft 8, our new pure Internet suite of eBusiness
applications. In order to maximize the revenue opportunity presented by
PeopleSoft 8, we are rapidly adding field sales resources and have launched
the largest marketing campaign in PeopleSoft's history."
on July 11, in a speech full of criticism of its rivals, PeopleSoft's
CEO Craig Conway unveiled its latest product release, PeopleSoft 8, and
gave an upbeat outlook for, until recently, the struggling company. He
touted that PeopleSoft is well positioned with its new software to take
on market leaders SAP and Oracle. PeopleSoft has traditionally been renowned
for its congenial corporate culture as opposed to the swashbuckling ways
of Oracle or the uptight rigor of SAP. Therefore, one can only picture
the audience's astonishment when Conway took the stand and actually started
lambasting the opposition in an uncharacteristically strident tone.
has become a sociopathic company. It blatantly lies about things. Larry
Ellison is maniacal," Conway roared. "In 1990, Dun & Bradstreet Software
had 13,000 customers. Where is it now? By the way, SAP has about 13,000
customers too... We live in a tough neighborhood. Oracle spends 11% of
its revenue on marketing. In 1999 we only spent 3.5% of our revenue on
marketing. That will change. We have to be combative, confrontational,
and competitive in our marketing and advertising from now on."
PeopleSoft has turned the corner. While most of its competitors have been
faltering during the recent turbulent times, with the exception of Oracle
and possibly SAP, PeopleSoft has returned to strong profits and revenue.
The bleak days of 1999 and the possibility of being toppled by J.D. Edwards
are a matter of the remote past.
company has also improved its traditionally low international market penetration,
with the international license revenue growing 31% year over year. Furthermore,
these upbeat results coincide with the winding down of its ambitious R&D
endeavors. PeopleSoft invested an exorbitant 27% of total revenue in R&D.
That investment is paying off with new product releases that indicate
the company is in sync with market trends.
believe that PeopleSoft may also be in a good position to be a strong
contender in a number of industries. While this may not be the case in
complex manufacturing until the market witnesses the proven capabilities
of its forthcoming PeopleSoft 8 release, it certainly can compete in traditional
service industries with its human resources, financial, and recently added
CRM and e-business modules. It may also compete in distribution industries
like Consumer Packaged Goods (CPG) with its supply chain and logistics
functionality resulting from the 1996 Red Pepper acquisition.
PeopleSoft has so far poorly exploited its purchase of Red Pepper, its
new tack of addressing manufacturers' needs may result in far greater
success. Namely, PeopleSoft has focused its manufacturing solutions on
only consumer packaged goods, high tech/electronics, and wholesale distribution
industries. It already has a strong customer base within these industries,
primarily with its financial and human resource management systems, but
also to a degree with its manufacturing and supply chain modules.
PeopleSoft faces a number of notable challenges. Despite an impressive
growth of license revenue in the last quarter, things do not appear to
be quite rosy after a more prodding look. Namely, Vantive products have
been the major license revenue contributor (~26%), which means that PeopleSoft
traditional breadwinners' (HR and financial systems) revenues have grown
much below the ERP market average growth rate, year over year. Moreover,
the overwhelming impression is that Vantive has not been utilized to its
full potential either despite the fact that the CRM market has been experiencing
stellar annual growth. While PeopleSoft now has strong management with
an invigorated stance and is running a profitable business, it may be
short-lived without sustaining license revenue. The company has a reputation
of squandering very promising acquisitions away - the Red Pepper being
one. A similar slip-up with Vantive could be disastrous, particularly
since CRM, a main driver of the new economy, gives PeopleSoft a golden
company's biggest challenge, without doubt, lies in creating marketing
awareness, promoting its new image, products, and the Web architecture
as well as in crisp sales execution. While PeopleSoft has more than tripled
its marketing budgets and is on the quest to beef up and focus its sales
organization, a poor market acceptance of PeopleSoft 8 could be very detrimental
to the company's future. We are afraid that betting mainly on enterprise
performance management (EPM) analytics and new product architecture, on
top of its embellished traditional product offering, will not suffice
in the long run. While the number of additionally released applications
is impressive, the product portfolio still shows serious functional holes,
particularly in its proverbial bogey areas like manufacturing and supply
chain management, where its competitive position is not going to improve
dramatically very soon.
for its new image, some might concur that when Larry Ellison ordered private
detectives to forage in his competitors' dustbins, PeopleSoft had no choice
but to play it tough to survive. While the new stance may initially impress
some, how attractive and plausible would be a movie story where Tom Hanks
or Michael J. Fox would portray a tough guy winning over bullying characters
like Nicolas Cage or Bruce Willis? Nevertheless, all of them may still
be eligible for Oscar nomination playing the roles that completely suit
PeopleSoft should rather focus on delivering PeopleSoft 8 on time, adhering
to stringent training of its sales and customer support forces, and on
preempting any dissatisfaction of early adopters and subsequent bad publicity.
To that end, we approve the company's move to radically improve its customer
service & support. The ERP market has traditionally been plagued by a
number of dodgy consulting practices or third-party system integrators.
Sifting through its partner program and enforcing much tighter control
over awarding certifications is definitely a right move, although somewhat
belated in PeopleSoft's case.
Existing PeopleSoft customers should certainly consider the new offering,
but avoid selecting it without looking at what the other vendors have
to offer. We recommend identifying your clear e-business strategy and
conducting a thorough comparison-shopping, at least for the negotiation
leverage sake. Contact a PeopleSoft sales representative for more information
on PeopleSoft 8 and request a list of recent customers and ask them about
the product. Existing users of PeopleSoft client/server-based products
may want to inquire about PeopleSoft's future product support and/or migration
strategy. Beware of the potentially hidden costs of a migration, particularly
for heavily customized installations.
for potential customers, PeopleSoft remains a very strong contender in
enterprise application selection processes within the following industries:
utilities, healthcare, service providers, financial institutions, public
sector, insurance, higher education and consumer packaged goods. It should
be on a short list in any selection where HRMS system, financial modules,
and e-business/self-service are the main pillars of an enterprise application.
However, since the company has been touting the significant manufacturing
and supply chain product enhancements within its new release, which is
due later this year, current and potential users are advised to inform
themselves about these, particularly in the above-mentioned industries.
companies in other industries may benefit from evaluating PeopleSoft's
product components on a stand-alone basis for their e-business needs and
leverage that information against other vendors in the selection. Organizations
considering extended ERP applications (both web based and network dependent)
should consider all options, although PeopleSoft's activities are promising.
The notion of a full Internet based solution could save time and money
on the integration. An additional consideration might be the complete
outsourcing of the ERP application with an Application Service Provider
(ASP). Future clients are also advised to request the company's written
commitment to promised functionality, length of implementation, and seamless
future upgrades, particularly for recently announced offerings.