J.D. Edwards – A Collaboration Thought Leader Or A Disguised ERP Follower? Part 1: About J.D. Edwards

P.J. Jakovljevic - 11/8/2000

Part 1: About J.D. Edwards
P.J. Jakovljevic - November 8, 2000

Executive Summary

Like most of its peers, J.D. Edwards is hoping to rebound by focusing on Internet collaboration and extended-ERP applications. The company has also differentiated itself from competitors by embedding Enterprise Application Integration (EAI) into its OneWorld product. While J.D. Edwards' move into the EAI arena is indisputably risky, we commend its determination to bite the bullet and include integration systems into the core product offering. However, we also believe that managing this large application portfolio, much of which involves partnering or extensive integration and customization, will be cumbersome.

This note presents in two parts a current evaluation of J.D. Edwards, examining its history, products, and marketing strategy, with specific recommendations for both J.D. Edwards and companies in the market for its products.

Part 1: About J.D. Edwards

Vendor Summary

Vendor Trajectory and Strategy

Major Developments

Part 2: An evaluation of the company and its future prospects.

Corporate and Product profiles are included with both parts.

Vendor Summary

J.D. Edwards & Company is a leading global provider of enterprise business software applications for distribution, finance, human resources, manufacturing, customer service and supply chain management. Founded in 1977, with headquarters in Denver, CO, J.D. Edwards is the fourth-ranked ERP vendor, with $944.2 million in revenue in 1999 (approximately 5% of the global ERP market). Until fiscal 1999 the Company had a history of solid growth, with an average of 45% annual growth since its inception (see J.D. Edwards & Company Annual Results chart).

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Figure 2.

J.D. Edwards began by customizing accounting and other business software for companies using IBM mid-range computers, particularly the IBM AS/400 platform. The WorldSoftware application suite for use on the AS/400 first shipped in 1988, and accounted for almost all of the company's revenue until the most recent three fiscal years. As IBM began de-emphasizing its mid-range systems, J.D. Edwards released in 1996, after three years of development, an object-based, cross-platform ERP product named OneWorld, one of the most technologically advanced ERP products.

The company has successfully transformed itself from a supplier of host-centric mainframe software into a supplier of open systems, which operate in multiple computing environments and are Java and HTML enabled. J.D. Edwards enables its Idea to Action concept (the name alludes to the ease with which customers can put their idea into action) with ActivEra, a collection of tools and technologies that extend J.D. Edwards' OneWorld and WorldSoftware ERP enterprise business solutions and its supply chain management solutions into a comprehensive applications suite.

J.D. Edwards distributes, implements and supports its products worldwide through 62 offices and more than 300 third-party business partners, and derives approximately 39% of its revenue from the international market. By the end of fiscal 1999, the Company had more than 5,500 customers with sites in over 110 countries. J.D. Edwards & Co. went public in 1997 and currently trades on NASDAQ.

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Vendor Trajectory and Strategy

J.D. Edwards has long targeted mid-sized companies equipped with midrange systems, most notably the IBM AS/400. Evolving its business strategy over the years, the company now also competes within the high-end of the applications market with such top-tier vendors as SAP, Oracle, and PeopleSoft. An industry downturn led J.D. Edwards to post a hefty loss in 1999. Like most of its peers, it is hoping to rebound by focusing on Internet collaboration and extended-ERP applications.

However, hoping to differ from its peers, at its FOCUS 2000 annual user group meeting in June 2000, the company announced a new corporate vision expressed in the phrase 'freedom to choose'. In other words, the idea is to take the best of ERP, CRM, eBusiness, and business intelligence components, enhance it with possibly the best of EAI and the workflow integration components and create something called collaborative commerce 'best-of-breed' products' mix ( For more information see J.D. Edwards Chooses Freedom to Choose EAI.)

To that end, J.D. Edwards has recently forged a number of alliances as the company looks to complement the functionality of its OneWorld product suite. Ten alliances have been highlighted in announcements since September 1999 (For more information, see J.D. Edwards' Alliances: Is It Too Much of a Good Thing?).

Other recent partnership agreements include the following:

Proforma Corporation, in November 1999. Proforma will provide business process modeling to improve an organization's ability to react to changing business needs.
Tradex Technologies, in December 1999. Tradex specializes in digital marketplaces and trading communities. This relationship allows J.D. Edwards to resell the Tradex Commerce Center Platform in the U.S. and to utilize the Tradex digital marketplace platform in developing its own trading communities for vertical markets. J.D. Edwards claims it has been targeting its software at integrating customers' supply chain operations with digital marketplaces. More than 45 such electronic exchanges now use J.D. Edwards' software, the company says.
Extensity, Inc., in December 1999. In order to offer Internet application solutions for e-business employees. J.D. Edwards will resell Extensity's automated travel and expense reporting software, which is designed to improve employee productivity and operational efficiency.

J.D. Edwards claims that the underlying workhorse for its strategy is the latest release of its flagship ERP product, OneWorld Xe (where "Xe" stands for "extended enterprise"), which provides a flexible architecture, pre-integrated applications, and interoperability; this will power the J.D. Edwards ActivEra suite to deliver inter-enterprise collaboration. The OneWorld Xe software release, which can also be used in electronic exchanges was announced in October 2000 (For more information, see J.D. Edwards Touts Leadership in Collaboration and Flexibility - There Seems to be Some Notable Functionality Too ). In January 2000, the company also announced a new business initiative for its application hosting solution called JDe.sourcing.

We approve of J.D. Edwards' positioning itself as an ERP vendor to persuade enterprises to extend their activities into e-collaboration. However, we also believe that managing this large application portfolio, much of which involves partnering or extensive integration and customization, will be cumbersome despite its highly marketed flexible EAI product strategy.

While we believe that the worst was over in 1999, 2000 continues to be a challenging year for J.D. Edwards. The Company has entered 2000 with a great deal of painstaking integration efforts remaining, both with its recently acquired products and with products of its partners, such as Siebel and Ariba, to name but a few.

J.D. Edwards has recently conducted a strategic restructuring aimed at reducing costs and revitalizing the company's position as a leading provider of enterprise software solutions. To that end, the company has announced a cutback of nearly 800 jobs or 13% of total staff (for more information, see No More Mr. Nice Guy With J.D. Edwards).

Earlier in the year the company also experienced top management changes for the second time in two years with the reappointment of C. Edward McVaney, one of the company's original founding partners, to the post of president and CEO. (For more information, see Yet Another 'Big 5 ERP' CEO Casualty).

Major Developments

Following is a summary of major developments for J.D. Edwards during the past year with respect to the following areas:

Market Strategy
Product Development
Acquisition
Alliances
Competition

Market Strategy

In June, J.D. Edwards announced a major international expansion of its JDe.sourcing application hosting program through partnerships with leading ASP providers in Asia, Europe, Africa, Latin America, and North America. For more information, see One Step Closer to the Global ASP.

As mentioned earlier, at its FOCUS annual user group meeting in June J.D. Edwards also unveiled a slew of initiatives that they claim will really change the enterprise applications vendor's direction. For more information, see J.D. Edwards Chooses Freedom to Choose EAI.

Product Development

In June at the FOCUS meeting, J.D. Edwards previewed the latest components of it Active Supply Chain solution, its reincarnation of technology acquired from Numetrix in 1999. For more information, see J.D. Edwards FOCUSes on Active Supply Chain.

On October 2, J.D. Edwards announced the general availability of OneWorld Xe, the company's new "extended enterprise" product which offers around 300 Internet-ready applications that will supposedly enable companies to choose the most appropriate collaborative solutions to meet their business needs 2000. (For more information, see J.D. Edwards Touts Leadership in Collaboration and Flexibility - There Seems to be Some Notable Functionality Too.)

Acquisitions

The Company completed two acquisitions during the fiscal year ended October 31, 1999. In February 1999, it acquired The Premisys Corporation, a privately held provider of visual configuration software and consulting services. J.D. Edwards claims that the technology acquired from The Premisys Corporation is integrated with its flagship OneWorld product suite.

In June 1999, J.D. Edwards acquired Numetrix, a pioneer in the advanced planning and scheduling (APS) software market. For an analysis of Numetrix' acquisition, see J.D. Edwards and Numetrix Ponder the Future as One.

Alliances

As already mentioned, a number of major alliances were announced by J. D. Edwards during the past year. Listed below are references to some other significant ones:

Competition

To learn how J.D. Edwards fared in a case study of four major ERP vendors, J.D. Edwards, Lawson Software, Oracle, and PeopleSoft, which is based on a software selection effort that was facilitated by TEC during the second half of 1999, see Enterprise Financial Application Software: How Some of the Big ERP Vendors Stack Up.

For a discussion of the ERP Market with a listing and rating of the major vendors, see Enterprise Resource Planning Systems Evaluation & Selection Audio Conference.

Conclusion of Part 1

For more information on J.D. Edwards see Part 2 of this Technology Note.