PeopleSoft - Catching Its Second Wind From The Internet
Part 3: Predictions and Recommendations
P.J. Jakovljevic -
6/7/2001
Part
3: Predictions and Recommendations
P.J.
Jakovljevic
-
June
7, 2001
Executive
Summary
PeopleSoft, Inc. is one of the leading developers of enterprise business
applications, which helps governments, higher education institutions and
large-to-medium sized corporations manage human resources (HR), financials,
supply chain management (SCM), customer relationship management (CRM),
e-Business and business intelligence data from a wide range of operating
systems and hardware platforms.
From
its founding in 1987 PeopleSoft grew at a breakneck pace with a number
of consecutive years of doubled sales until 1998, when its sales all but
stalled due to increased competition and a saturated market. 1999 and
2000 were years of changes and adjustment culminating in a company with
a pure Internet platform, a new set of products, and a new assertive attitude.
Indisputably,
the most prominent event and the turning point for the company was the
delivery of PeopleSoft 8 in September 2000. The product is an Internet-based
collection of 160 applications, with 59 new applications in the 8 release,
that span well beyond PeopleSoft's HR stronghold into e-business collaborative
applications, CRM, SCM, professional service automation (PSA), and analytics
to name but a few.
TEC
predicts that within the next 12 months, PeopleSoft will have to officially
announce alliances with or acquisitions of vendors whose products would
provide it deeper B2B e-business infrastructure and vertical marketplaces
capabilities.
This
part of the note contains predictions about PeopleSoft and makes recommendations
to both PeopleSoft and Users.
About
This Note
This
is a three-part note:
BOTTOM
LINE
PeopleSoft Predictions
We
envision a healthy annual PeopleSoft growth (25%-40%) in 2001, much higher
than the market average, particularly owing to its strong customer base
within service industries and to its CRM offering (65% probability). However,
toppling Oracle's ERP market share remains a very tall order (20% probability
within 5 years time).
Within
the next 3 years, more than 35% of PeopleSoft's revenues will come from
outside of the North American market (65% probability), with the license
revenue contributing more than 35% of its total revenue within the same
period of time (60% probability). CRM and EPM products will be significant
contributors to PeopleSoft's sales revenue (up to 45% within the next
3 years). While overthrowing Siebel's leadership in CRM arena may
be achievable only within 4 years time (30% probability), taking the No.2
position in the CRM market is more likely within the same time period
(60% probability). We believe PeopleSoft SCM applications will match the
functionality of best-of-breed SCM vendors within the next 3 years (70%
probability). We also predict that PeopleSoft's hosting has a potential
of reaching 15%-25% of total sales revenue within next 5 years (60% probability).
We
expect more aggressive PeopleSoft's moves both on the acquisition and
joint ventures fronts in order to provide a strong solution for complex
and/or process manufacturing. It is quite likely (65% probability) the
company will pursue within the next 18 months acquiring a struggling ERP
vendor with a market capitalization value less than $100 million and with
a product offering and strong client base that would bolster PeopleSoft's
competitive position. The very likely acquisition candidate could be QAD,
Epicor or Ross Systems.
We
believe that, within the next 12 months, the company will have to officially
announce alliances with (30% probability) or acquisitions (70% probability)
of vendors whose products would provide it deeper B2B e-business infrastructure
and vertical marketplaces capabilities. It is very difficult to identify
potential candidates amongst the spate of resource-depleted start-up companies
with attractive product offerings.
PeopleSoft
Recommendations
PeopleSoft should expand its global presence (distribution, sales, services
and support), primarily by leveraging qualified local indirect channels.
PeopleSoft must continue its effort to penetrate the Small-to-Medium Enterprises
(SME) market segment with the entire product portfolio of component applications,
mainly through indirect channels and vertically focused ASP/outsourcing
arrangements. For the next year, PeopleSoft needs to continue sales momentum
to ensure its channel partners remain or become fiscally sound and deliver
on promises. It should also strike agreements to re-use code developed
by its partners.
Furthermore,
it should use its channel to expand business in its existing customer
base, by offering enterprise applications beyond traditional ERP solutions
(CRM, EPM, SCM, E-Commerce, PSA) and Vertical Industry-Specific products.
Better effort should be conducted to sell these individual applications
to non-PeopleSoft users on a stand-alone basis.
PeopleSoft
should better publicize its analytic applications and Enterprise Warehouse
in light of its ability to provide a complete solution that spans both
operational and analytic aspects of business. It should also rethink the
nomenclature of some products, namely, the word "workbench" may not intuitively
denote an analytic application.
The
company should remain committed to timely new product introductions, and
to the reduction of product complexity and implementation price by maintaining
the R&D budget for next year to be at least 16% of sales revenue. 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 or any early adopter dissatisfaction could be very detrimental
to the company's future.
PeopleSoft
should broaden product functionality in process and/or complex manufacturing
and in SCE either by acquiring one of the above-mentioned leading mid-market
ERP vendors or by developing a product in-house.
PeopleSoft
should more clearly define the PeopleSoft 8 product upgrade requirements
from its earlier releases. With many components to choose from it may
be difficult to understand what the necessary requirements are to run
the new applications. It should also further facilitate connectivity to
external Internet exchanges and/or 3rd-party products. The company also
needs to produce a roadmap of its applications, functional details, and
expected availability timelines. It should also publicize customer references
for its fledgling new product components, and particularly in the above-mentioned
markets where it still has a low visibility.
User
Recommendations
PeopleSoft is generally worth considering in HRMS, financial, and supply
chain enterprise applications realms - it offers an attractive product
portfolio, with dedicated ongoing service and support. 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 PeopleSoft sales representative
for more information on PeopleSoft 8 and request a list of recent customers
and ask them about the product.
As
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, high-tech electronics, wholesale
distribution, and consumer packaged goods (CPG). 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, current and potential users
are advised to inform themselves about these, particularly in the above-mentioned
industries of focus. Companies outside of the above-mentioned industries
of focus, and companies that are in need of deep supply chain optimization,
transportation planning and SCE, may benefit from evaluating other products
at this stage.
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). Consideration should also be given to the products availability
and endorsement of "web standards." Should a different XML standard be
adopted (industry wide) after installation, identify who will be responsible
for accommodating the change and what measures have been engineered into
the application to support evolving standards. PeopleSoft will have to
prove the speed and ease of integrating suppliers and providing complex
sourcing in an environment that incorporates a multitude of business partners
running on diverse platforms.
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 cost of a migration. In order to preserve the
existing customers' business rules, a certain amount of application logic
must be "mapped" into XML. For customized applications this could represent
a significant amount of coding and require a complex understanding of
the business rules. Find out what resources are required to preserve the
business rules and most importantly, who pays for it. Non-PeopleSoft Vantive
CRM product customers should promptly clarify their support status and
PeopleSoft's CRM product development strategy.
As
with all new releases, users should employ a critical approach in their
evaluation of PeopleSoft 8 and require all potential vendors to demonstrate
specific business processes. Though demonstrations do not guarantee a
trouble-free implementation, they can go a long way toward helping users
understand how the software might behave in their environments. 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. Non North American
users and users from non-English speaking countries should inquire about
the availability of global payroll, multi-lingual and multi-currency capabilities
from PeopleSoft. It is very likely that it will take several release cycles
before the local support (for example, payroll) will catch up with the
support for PeopleSoft HR global markets.
Conclusion
of Part 3
This concludes Part 3 of a three - part note on PeopleSoft.
Part
1 contains a summary of the history of PeopleSoft, it current trajectory
and strategy, and major developments during the past two years.
Part
2 contains an analysis of PeopleSoft's Strengths and Challenges.
Part
3 contains the bottom line information with predictions, and recommendations
for both PeopleSoft and users.