PeopleSoft Revamps World for Its Mid-Market "Express" Conquest Part Two: Market Impact

Market Impact

Recently "inaugurated" as the No. 2 leading business applications provider after digesting the former J.D. Edwards & Company, PeopleSoft, Inc. (NASDAQ: PSFT), has been making decisive moves to deliver a number of new, and refurbished solutions, in a great part by leveraging its recently acquired product portfolio. Although the vendor has acted swiftly on assimilating its former competitor (see PeopleSoft Gathers Manufacturing and SCM Wherewithal), these recent initiatives might show us that the vendor has moved even farther from the digestion stage and into a full-blown execution and productivity phase.

Recent announcements that reflect this are

• PeopleSoft World Express, one of the industry's most comprehensive solutions for smaller businesses with annual revenues between $20 million and $100 million (USD), on May 3, at COMMON 2004, the IBM iSeries user conference.
  
  
• A new release of PeopleSoft World that included more than 280 new features and enhancements that span the product family's human capital management (HCM), supply chain management (SCM), and financial management (FM) applications, and a new web-based user interface (UI),on March 18 at CeBIT 2004.
  
  
• Further extensions of the longstanding partnership with IBM (NYSE: IBM) announced during PeopleSoft 2004 Leadership Summit which expands their global alliance by enabling IBM's expanding SMB reseller channel (see IBM Express-es Its Candid Desire for SMEs) to offer PeopleSoft applications. PeopleSoft on May 18.

For details, see Part One.

The importance of the above announcements is multifaceted. First, against the background of SAP having to recently tackle the lower-end of the mid-market by acquiring and then further sprucing up a more suitable and genuine product for the segment, PeopleSoft stands a good chance in the market segment by leveraging a revamped release of a tried-and-true vantage product. (See SAP Tries Another, Bifurcated Tack at a Small Guy and SoftBrands to Institute Fourth Shift for SAP Business One Manufacturing Work-Plan for information on SAP.) To refresh our memory, the original J.D. Edwards WorldSoftware product was launched in 1984, and it has always run only on the IBM eServer iSeries platform (formerly AS/400). It has also since become one of the most stable and widely used ERP applications on the platform, with 3,400 almost religiously loyal customers worldwide, and it was available in 21 supported languages.

However, while the product was both a blessing and a curse for its original owner, the new owner, PeopleSoft seems to have learned from these experiences to its advantage. Namely, throughout the 1990s, the former J.D. Edwards has kept its focus on what was then the breadwinner, the RPG code-based World product. It maintained strong services until its next-generation OneWorld product (currently called PeopleSoft EntepriseOne) was released in the late 1990s. The vendor had thus established itself at that stage through a combination of its reliable product and a strong services organization, which was able to help a tide of enterprises overcome the Y2K compliance issues.

This is Part Two of a four-part note.

Part One detailed recent announcements.

Parts Three will continue the market impact.

Part Four discuss challenges and make user recommendations.

J.D. Edwards' Experience

In addition, a former J.D. Edwards' US-focused, mid-market program called Genesis, which aimed at ensuring stability and low support must-haves for the market segment, through a competitively-priced older (and thus market-proven) release of J.D. Edwards' World, had been sold to enterprises with less than $100 million (USD) in annual revenue by distributors that provided local support. However, the program had not fully fulfilled its indisputable promise because of J.D. Edwards' lack of willingness to take a more aggressive stance in building up its distribution channel. PeopleSoft will have to watch carefully in order not to repeat the mistake.

Although J.D. Edwards had avoided the financial turmoil that its traditional AS/400-based competitors experienced in the mid-1990s, when some, like former SSA (now SSA Global) and JBA International (now part of Geac Computers) were fatally wounded, it has still had an Odyssey-like transition from solely IBM iSeries and DB2 platforms to UNIX, Oracle, and Microsoft Windows NT/2000 while keeping most customers committed and arguably content.

Namely, although erstwhile J.D. Edwards had successfully targeted conservative AS/400-oriented enterprises with its mature World product and a well thought-out migration to the next-generation, cross-platform, ERP application OneWorld (i.e., owing to a well-conceived data model consistency, virtual functional parity, and the ability to have the older and next-generation applications coexist), it has nonetheless not been an easy and completely successful feat for many reasons. For one, it has taken several years for former OneWorld to entirely reach the functional parity with its older and more mature sibling, WorldSoftware. Also, because of J.D. Edwards' heritage and market presence, iSeries had initially, and for a long time, been the dominant platform even within the OneWorld constituency. While the Microsoft Windows NT/2000 platform, in particular, has long been capturing an increasing share of the overall OneWorld deals and prospects, still, J.D. Edwards' belated entry to the non-iSeries ERP market hampered its success, since it had not initially been a known force for UNIX, Oracle, and Windows customers.

Then again, most new functional enhancements have since been added to the more technologically promising (in terms of support for multiple platforms and scalability) OneWorld product, which had meanwhile gained a functional edge over World in most areas, especially outside the core ERP scope. However, it still would fall behind in others, including certain financial and accounting modules. Also, J.D. Edwards' growing implementation partner program at the time had targeted the more attractive non-iSeries platforms, whereby the WorldSoftware's user enterprises and partners have thus long been wary of J.D. Edwards' (and, eventually, PeopleSoft's) intentions to indefinitely support the ageing product, given the company's development effort immediately prior to the acquisition had mostly been on extending the OneWorld's footprint (meanwhile once again renamed into J.D. Edwards 5, shortly prior to being acquired by PeopleSoft) and ensuring the upgrade path from World to OneWorld.

In contrast, because of OneWorld's immaturity, there were initially only a few operational installations, while experienced service and support personnel were also limited, as both the internal and external professional services organizations made the slow transition to OneWorld. Thus, many enterprises facing tight Y2K-related deadlines at the time (the late 1990s) had to opt for a coexistence strategy of OneWorld and World, which could work off the same data at the same time. Many enterprises would logically then deploy the most mission-critical, shortest timeframe functions on World and implement OneWorld in non-mission-critical areas. Eventually, most of these problems were solved by the still independent J.D. Edwards. However, the bottom line has since resulted in an attractive J.D. Edwards 5 (now PeopleSoft EntepriseOne) product suite, while the World product has been all but relegated to the status of a "stabilized" product, with a quite disenchanted channel and disconcerted user base (for more details, see J.D. Edwards Finds Its Inner-Self Within Its 5th Incarnation).

PeopleSoft in the Growing SME/SMB Market

Concurrently, as the small to meduim enterprises (SME) and small to medium businesses (SMB) open season started several years ago, the last few years have seen a growing awareness of this market segment as a more fertile ground than the upper echelon, and pre-merger PeopleSoft had not been an exception. Indeed, former PeopleSoft had achieved some notable milestones (i.e., over 1,100 mid-market customers, or 25 percent of all customers, whereby this figure is now over 30 percent after the acquisition). Yet, PeopleSoft has had its share of trials-and-errors, and resultant mid-market strategy reiterations that all the larger enterprise vendors have espoused during last several years. Namely, several "creative" pricing, software functional scope repackaging, hosting arrangements, channel strategy revisions, and so on, have resulted with customary limited success of nearly all large vendors in their "tier-dropping" initiatives, with PeopleSoft not being an exception.

For example, even immediately before acquiring J.D. Edwards, PeopleSoft yet again further refined its offering in April 2003. After building on more than six years of its mid-market feats and by delivering thirteen new mid-market solutions designed specifically for companies with $50 to $500 million (USD) in annual revenues. Preconfigured to automate mid-market business processes, these PeopleSoft Mid-Market Solutions included an unlimited user license for PeopleSoft applications, training, and implementation services—all for a fixed price for one module (process), such as "source-to-settle" and "recruit-to-hire", at a time, with the option to deploy additional applications to extend business processes as needed. The solutions were mainly a packaging exercise but they did address key issues such as the cost of integration, the hidden costs of unpredictable user license requirements, and training costs. It also provided potential users with a way of spreading the cost of their purchases. The initiative did not bring any new functionality to the table, albeit it was designed to address the recurrent problems of cost and complexity that high-end vendors face whenever they attempt to sell into mid-market enterprises.

Back in 1997, PeopleSoft, for the first time, launched an orchestrated effort to target smaller enterprises by forming a separate Mid-Market Division. At that stage, the company delivered PeopleSoft Select, which included a software and services solution for human resources (HR) and financials. During 2000, PeopleSoft announced Accelerated Solutions for HR and Financialsa solution that included applications, technical and end user training and implementation services, while in 2001, PeopleSoft launched Accelerated SCM, Accelerated CRM, and Accelerated ESA (Enterprise Service Automation), all aimed at customers with $500 million (USD) or less in annual revenues. Also in 2001, PeopleSoft announced the launch of its Accelerated Alliance Program, a select group of systems integrators that provide customers with high quality, low cost implementations. During 2002, PeopleSoft delivered Accelerated solutions to countries including France, the United Kingdom, the Netherlands, Australia, New Zealand, and Canada. For more information on PeopleSoft's mid-market attempts in the past, see Welcome to the CRM Mid-Market Abyss-PeopleSoft and PeopleSoft Internationalizes Its Mid-Market Forays.

While there has been nothing inherently faulty in the vendor's approach (PeopleSoft had even attempted to overcome a typical "cookie cutter" approach, as each of its solutions would be preconfigured by developed industry templates to reduce cost and complexity, but would also allow for available extensions based on each customer's need), it has, nevertheless, failed to strike the true differentiating chord with the target market. In addition to typical faux-pas that have been discussed at great length in Cookie-cutter Solutions Won't Cut It with the Mid-Market, prior to the J.D. Edwards' acquisition, PeopleSoft had been additionally hampered by the lack of strong native supply chain management (SCM) and manufacturing functionality.

Unfortunately for both aspiring vendors and needy users, small and mid-size enterprises, like their bigger brethren, generally operate in a dynamic, competitive environment and have global, multisite operations that are either wholly owned or that function in a complex supply chain relationship. Consequently, all these companies need some level of support for advanced collaborative functionality, scalability, SCM, customer relationship management (CRM), e-procurement or e-sourcing, and distributed computing environments. Additionally businesses in different industries have different requirements and laws, regulatory requirements and business practices that vary by geographic regions (for more information, see Mid-size Companies Have Full-size IT Issues).

On the other hand, these enterprises have to accomplish these feats with less (or completely without) IT staff and a much more limited budget compared to their bigger counterparts, which demands a "zero level" of tolerance for errors, and a little time for tweaking technology to match their business needs and for getting their staff members up to speed. Indeed, increasing customer expectations, growing regulatory requirements, intensifying global competition, and so on affect small, mid-size and large companies alike in terms of real time responsiveness, and the first two have the additional burden of limited working capital, and limited business analysts and IT support staff. These companies typically require integrated basic functionality straight out of the box, while the functionality comparable to upper mid-market and large enterprise software solutions, ever-lower total cost of ownership (TCO), and "always-on" reliability and availability go without saying. However, these enterprises do not want to be too terribly bogged down into figuring out which switches and parameters within a large overkill tier one application have to be turned off, so that just enough and manageable functionality remains available (see Catering to Small and Medium-Size Enterprises).

To recap, these companies have complex business requirements similar to their up-market brethren, they value integration and a "one-stop-shop" provider's capability, but with modular components, and, as a rule, they have smaller IT budgets and project teams, creating the "do more with less" mantra as the order of the day. Furthermore, these enterprises typically look to scale both horizontally (i.e., to extend business processes across departmental silos, e.g., to achieve customer order capturing integrated with order management) and due to growth (organic or through acquisitions).

The well-known and much publicized major factors of success in business applications for the mid-market segment have traditionally been flexible pricing, packaging, and deployment options; speed of implementation; vertical focus; interconnectivity to other applications and legacy systems; product scalability and scope expandability; Internet and wireless device accessibility; low cost business-to-business (B2B) electronic connectivity; and a single point of contact possibly with a local consulting and implementation support. Furthermore, PeopleSoft's internal research indicates that cost, complexity, and risk are key considerations for these targets, with a distinction that the first time buyers (so-called "green field plants") put the highest importance on price, best-of-breed modular but integrated functionality, speed of implementation and quick ROI, whereas experienced (repeated or follow-up) buyers value the vendor's reputation and support and integrated software and services solutions the most. Therefore, PeopleSoft seems to have captured (or at least tackled) most of these, 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 [UI] intuitiveness).

This concludes Part Two of a four-part note.

Part One detailed recent announcements.

Parts Three will continue the market impact.

Part Four discuss challenges and make user recommendations.