PeopleSoft Building Muscles To Overcome The Rough Patch Part 3: Target Markets, Alliances, & Competition

PeopleSoft Building Muscles To Overcome The Rough Patch

Part 3: Target Markets, Alliances, & Competition

P.J. Jakovljevic - June 24, 2002

Event Summary

At the beginning of 2001, PeopleSoft Inc. (NASDAQ: PSFT), one of the largest enterprise applications providers, ebulliently indicated its continued interest in rounding out its product portfolio through favorably priced acquisitions. Instead, the company recently unveiled a number of new products developed either internally or via alliances. It is likely its recently tamed new revenue generation has played a part in the company backpedaling its bullish attitude on acquisitions.

Recent announcements include:

New Products

• PeopleSoft eSettlements Part of PeopleSoft's Finanacial Management Solution
  
  
• General availability of PeopleSoft Enterprise Service Automation (ESA) 8.4
  
  
• Expansion of Human Capital Management (HCM) solutions
  
  
• Supply Chain Management Solutions Strategic Sourcing and Trading Partner Management (TPM)
  
  
• Next generation Enterprise Portal
  
  
• CRM solutions for Government, Insurance, Energy, and High Technology

Alliances

• Vigilance Supply Chain Event Management
  
  
• Agile Software Company Comprehensive Product Life Cycle Management

Financial Results

This is Part Three of a four-part report on recent PeopleSoft announcements. Part One detailed the announcements. Parts Two and Three discuss the Market Impact of these announcements and Part Four will make User Recommendations.

Target Markets

Looking at PeopleSoft's target markets, the company now globally targets all the way from multi-billion global corporations down to small-to-medium enterprises (SMEs) with only' over $50 million in revenues. As for the target sectors, these are very broad higher educational institutions, insurance, healthcare, financial services, government, high-tech/electronics, telecommunications and utilities, manufacturing associated with retail/consumer packaged goods (CPG), and the professional services organizations.

Although increasingly professing manufacturing interests, PeopleSoft in 2002 will still likely see the strongest focus on the financial services sector, followed by professional services, healthcare and high-education, and then manufacturing, distribution and retail. Nevertheless, the vendor does have manufacturing functional coverage within its ERP suite and is able to claim coverage of many common manufacturing styles. Looking at the high-tech sector, for example, it includes support for multi-mode manufacturing, global supply chain visibility and advanced planning and scheduling (APS) optimization. Then, the industrial products offering handles mixed-mode manufacturing dealing with make-to-order (MTO), private label, custom-made, original equipment manufacturer (OEM), and catalogue-standard components, whereas the utilities suite focuses more on the web-based solutions and analytics for distributed asset management and optimization.

Back to technology, the product is portal based and requires only a browser, it is scaleable, multi-lingual (with the support for Unicode, yet to be delivered by competitors en mass), with embedded security, and founded on open technology (e.g., XML, SOAP, UDDI, Java, etc), with PeopleSoft's wholehearted endorsement of Web services. Also, PeopleSoft's architecture should challenge competitors' offerings with advanced homegrown XML messaging hub middleware called PeopleSoft Integration Broker, and application programming interfaces (APIs) options that promise to ease bi-directional integration (either via application messaging, business component interlinks, application engine, and/or workflow).

The new architecture should also enable release independence, allowing upgrades of a single module without the need to upgrade the full suite. Furthermore, PeopleSoft has possibly the strongest product technology in terms of support for almost all industry relevant OS and DB platforms and/or middleware standards and in terms of scalability & performance metrics, system monitoring & load balancing (e.g., by using BEA Systems' Tuxedo Monitor tool), backup & recovery issues, authentication, and authorization & transaction security issues.

However, although the above offering is formidable, it may still not offer obvious differentiating, groundbreaking traits compared to competitive offering. While its above new product enhancements may likely offer a value proposition to its current customers, these will not necessarily help PeopleSoft leapfrog competitive offerings, at least not very soon. It appears that the Tier 1 vendors have lately been engaged in the game of outwitting competitors in functional tidbits in one area, while quickly trying to catch up with competitors' small advantage in other areas

In PeopleSoft's case, the fact remains that it is still the best-attuned offering (in terms of pricing, vertical extensions, customizability, professional service approach, etc.) to the needs of large, service-oriented enterprises, or for greenfield' sites. Beside HCM and ESA, PeopleSoft's impressive higher education solutions with applications for both the management and delivery of student administration, learning management and fundraising activities would be cases in point.

Also, PeopleSoft 8.4 Financial Management functionality is one of the strongest and broadest in the market. It features a high degree of flexibility (e.g., daily periods in the calendar, unlimited account key, etc.) and offers treasury management, as well as strong expense self-service module that is tightly integrated with Accounts Payable and Payroll modules. Having garnered strong HR/Payroll and more recently ESA and financial functionality, PeopleSoft offers a strong and comprehensive vertical industry solutions for non-manufacturing industries like government, utilities, financial, insurance, professional services, healthcare and higher education.

The enterprise portal solutions are another no-brainer offering during the economic slowdown as purported by PeopleSoft's success of nearly 500 installations since the initial release. If one takes the value proposition of a portal to deliver all pertinent information to an individual in fulfillment the tasks of his/her role, to a single point with the ability for workflow automation and self-service, and with the consequent reductions in cost and increase in productivity it is just the sort of technology one can more easily justify to invest in at the time of slump. Features such as knowledge management, document indexing, search, nomenclature management, and publishing, are being written into the core product rather than being regarded as additions, and portals are also being rewritten to ensure tighter integration to demonstrate they can embrace a wide variety of applications and content sources, still with faster performance.

Further illustration of integration is the ability to have elements of the portal delivered as Web services and the creation of a standard interface for the portlets (Pagelets in PeopleSoft's case) displayed in the portal window. PeopleSoft's focus on supporting the above trends and on delivering the portal as overlaying personalized user interface may prove to be a crucial bet. An intuitive portal might prove to be a simple and effective way to integrate process-centric information from disparate systems, and to possibly subtly hijack' the user base of other back-office systems in place, as elements of different vendors products should become interchangeable. Having garnered a deep set of integration capabilities, and many above features such as Intelligent Context Manager, might differentiate PeopleSoft within the enterprise portal market, where, together with SAP, it remains at the forefront of ERP vendors' portal offerings.

Other PeopleSoft's initiatives, although logical and required, have largely been small steps in the right direction, and it is questionable whether any individual feature should be a compelling order winner for new customers. Still, one should expect existing client base to find value proposition and incentive to implement them. For instance, by delivering PeopleSoft MarketPay, the company has extended its financial systems expertise and taken a temporary thought leadership over its direct ERP competitors, which are currently only at early planning stages of developing the capabilities of handling electronic payment settlements (EIPP).

Still, there is an impending but dubious PeopleSoft's effort in presenting the buy-side and sell-side users (and their superiors) a compelling value proposition like improvement of procure-to-pay' processes (e.g., invoice reconciliation, matching, workflow, payment, etc.) and consequent cost cutting before the product takes off for real. Although some other vendors like Clarus and Ariba offer similar products, the market awareness for the need has yet to be jump-started in earnest.

Alliances

The alliances with Agile Software and Vigilance also seem to be prudent moves to bolster PeopleSoft's offering, and fill the functional gaps in a quick-to-market fashion. The Agile alliance, bringing together PeopleSoft's SCM and CRM functionality with Agile's PCM software for complete lifecycle visibility and profitability of manufactured products, should round out each vendor's products and position PeopleSoft better itself against rivals, such as SAP, Baan or IFS, which natively provide similar functionality, and against Siebel and i2, which recently respectively partnered with PTC and EDS for similar purposes.

The arrangement should position PeopleSoft better in its tackling of the discrete manufacturing market, partly by possible penetration of Agile's accounts and by both parties' focus on high-tech OEM and contract manufacturers. The above spate of product lifecycle management (PLM) functionality blending with other enterprise applications should address the long crying need in the market to reduce traditional inefficiencies (silos) in the product development process, as manufacturers strive to reduce the time-to-market of new products, including the tighter control and involvement throughout the entire supply chain.

One of the more important prospects of PLM, other than the import/conversion of CAD drawings into ERP bills of materials (BOMs), should be its ability to allow better and secure collaboration (concurrent engineering) among members of virtual teams comprised of all trading partners, in addition to all involved internal employees (not only product designers). As a result, products should be designed faster, while suppliers are included early to offer cost savings or quality enhancing suggestions, whereas customers should provide a due feedback on their perception of price vs. value/features ratio, and all that should continue 24x7x365 around the world.

The same holds for the SCEM functionality that provides real-time visibility throughout the entire value chain at a granular, operational level outside the radar screen of traditional ERP/APS planning engines (i.e., events, both anticipated or unplanned exceptions), with workflow management and analytics to identify priorities and rules to resolve discrepancies. To that end, by using PeopleSoft SCM with Vigilance's SCEM, companies have the ability to recognize (sniff) events as they occur across an entire business process across many enterprises, and to pass that resulting information to the most appropriate persons. Furthermore, the partnership could well be extended to event management in the realm of CRM (e.g., to escalate customers' complaints or to act on an unfulfilled sales order). Likewise in the EIPP case, while some specialist companies like Categoric have long offered this functionality, big players like SAP and i2 are still at an early stage of incorporating the functionality within their suites.

CRM Solutions

PeopleSoft's intent to offer vertical CRM solutions is a prudent way to respond to Siebel that has early offered vertically relevant solutions in the CRM space. As the CRM market continues to mature with many ERP vendors' offerings, sophisticated vertical solutions have emerged as another way to differentiate. Given that business processes and rules differ much across industries, organizations increasingly expect CRM solutions to provide out-of-box, industry-specific functionality, in addition to flexible underlying technologies and data models to support their stringent business requirements. The caveat, as usual, is that the announced solutions are still in development, and that PeopleSoft will also have to ramp up strong relationships with system integrating (SI) partners to bring these solutions to the market. Still, there seems to be a notable opportunity for PeopleSoft within the government and insurance markets, which have not been very penetrated by CRM applications, and where PeopleSoft has long forged strong customer references and SI alliances.

Competition

However, to put things in the right perspective, one should bear in mind that PeopleSoft's license revenue in 2001 was still less than the corresponding revenue in 1998, back when the company was only a HRMS/ERP player. PeopleSoft's major recent success areas are still less in conventional manufacturing management and more in portals, e-procurement, CRM and SCM. It may be worth noting that only ~30% of PeopleSoft's sales come from manufacturing companies, and of those, possibly only a half are buying manufacturing ERP and SCM applications, while the rest are going for HR, CRM, financials and distribution suites. Consequently, SAP and Oracle still feature much broader functionality footprint as indicated by a number of acquisition and/or alliances PeopleSoft had to turn to recently, which, with their impending endeavors to complete re-architecting their products, may position them better than PeopleSoft in the future.

PeopleSoft's competition is also growing in direct proportionally to its product offering growth, which might become too much to cope with given PeopleSoft 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 some (albeit not many) competitors. In a pure ERP sense, it competes against SAP, Oracle, and J.D. Edwards in the higher-end of the market, while in the Tier 2 range it faces Intentia, IFS, Baan, SSA GT, QAD, MAPICS, and Geac as some of just as fierce competition; and with its strong focus now at the SME level, it will face an army of competitors spearheaded by Microsoft's 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.

Looking at the SCM market, PeopleSoft challenges SAP and J.D. Edwards and the pure player likes of i2, Logility, and Manugistics. On the e-procurement/SRM front PeopleSoft stacks itself again against SAP and against the pure players Ariba and CommerceOne. As mentioned earlier, PeopleSoft also has to be taken quite seriously in the CRM space against Siebel, SAP and Oracle, while these join IBM, Plumtree, Epicentric, BEA Systems, Sun/iPlanet, BroadVision, Hummingbird, Vignette and many others in the battle for the portal space. In the professional services automation (PSA), there are again Lawson, J.D. Edwards, Ariba, Siebel, SAP, Oracle, and a number of PSA specialists such as Deltek, Niku, Evolve, Novient and Changepoint. Thinking vertically, in the healthcare space, it particularly competes with Lawson Software and Infinium, whereas in the higher education, it faces SCT, Jenzabar, and Datatel, on top of ubiquitous SAP and Oracle nemeses in all markets.

This mind-boggling competition may remind the customers of the fact that PeopleSoft does not necessarily deliver the best value to everybody across the board. PeopleSoft 8, achieved through a radical rewrite of over 14,000 PeopleSoft 7.5 enterprise suite panels and/or program sessions and through acquisition of the Vantive CRM product, is still a relatively immature product, with an awful amount of work in progress, as can be inferred by the above announcements as well.

If one is to judge by the general industry benchmarks, it will take at least until late 2002, for only some of these product's initiatives to be fully integrated, while, it is very likely that a plethora of disparate products will for some time to come be connected via XML messaging only, since a huge pile of PeopleSoft's cash can speed R&D up only in a very limited way. Another caveat may be the longevity of partnerships given the likelihood of Agile merging with another vendor, as it had almost done it with Ariba last year (the deal was called off due to Ariba's abrupt financial difficulties in 2001).

The cost, time and effort to upgrade PeopleSoft to a newer version continue to be a concern to some users too, but that is particularly true with migration to PeopleSoft 8, which might require a considerable effort, one that feels like a new implementation. The fact is that PeopleSoft is one of more intricate and expensive products to deploy. Like SAP and Oracle, PeopleSoft should also carefully reevaluate its product migration strategy from current product instances (7.5 and earlier), in order not to alienate and disillusion its loyal customer base.

The overall ease of administration given that only a browser is needed to invoke any PeopleSoft 8 function, and the opportunity to eliminate (or partly reduce) the custom code needed for web-enablement of PeopleSoft 7 might in some instances be a valid reason to upgrade. Still, depending on the extent of customization and use of self-service in earlier product releases, customers will have to conduct a thorough cost/benefits weighing exercise in order to determine whether to attach the custom code to the new code in PeopleSoft 8 or to go for a straight porting to PeopleSoft 8. In other words, whether to conduct a technical upgrade first and then re-engineer to web-based processes, or whether the two should happen concurrently during the migration.

This concludes Part Three of a four-part report on recent PeopleSoft announcements. Part One detailed the announcements. Parts Two and Three discuss the Market Impact of these announcements and Part Four will make User Recommendations.