PeopleSoft Internationalizes Its Mid-Market Forays

PeopleSoft Internationalizes Its Mid-Market Forays
P.J. Jakovljevic - September 26, 2002

Event Summary

On August 26, at its annual user conference, Connect 2002, PeopleSoft Inc. (NASDAQ: PSFT), one of the leading business applications providers, announced the expansion of its mid-market offering, PeopleSoft Accelerated Solutions. The solutions will be available in France, the United Kingdom, the Netherlands, Australia, New Zealand and Canada. PeopleSoft also announced an expanded relationship with IBM Corporation (NYSE: IBM) to offer customers rapid implementation services and pre-configured hardware and database solutions.

PeopleSoft Accelerated Solutions are designed to be rapidly deployed and affordable for small- and medium-sized enterprises (SMEs). The fixed-price solutions include PeopleSoft's Internet-based applications, technical and end-user training and implementation services. PeopleSoft offers Accelerated Solutions for Customer Relationship Management (CRM), Supply Chain Management (SCM), Enterprise Service Automation (ESA), Financials, and Human Capital Management (HCM), all which have been localized for the language, currency and regulatory requirements of each country. The company claims its comprehensive Accelerated Solutions can be implemented in eight to 12 weeks.

IBM will offer pre-configured eServer infrastructure solutions that include the highly scalable DB2 database software, and a eServer xSeries or pSeries. IBM Global Services (IGS) and its network of business partners will deliver fixed-scope, fixed-price implementation services for PeopleSoft applications. The first preconfigured bundled solution to be delivered will be PeopleSoft Accelerated CRM for the financial services, discrete manufacturing and wholesale distribution industries.

This is Part One of a two-part analysis of recent announcements by PeopleSoft. Part Two will continue to discuss the Market Impact and make User Recommendations.

Market Impact

While the small-to-mid-enterprises (SMEs) open season started over four years ago, the last two years have seen a growing awareness of this market segment as a more fertile ground than the upper echelon, and PeopleSoft is no exception. However, PeopleSoft deserves commendation for achieving notable milestones (i.e., 1,100 mid-market customers so far, or 24% of all customers, whereby one out of every three new PeopleSoft customers reportedly also comes from this segment), while still evolving and perfecting its offering.

Look also for a continued evolution of these applications, as this is by no means the company's first attempt to penetrate the still untapped lower-end of the market, neither has it been the only Tier 1 vendor that has ever attempted it. Quite the contrary, since over the last several years the market has seen a plethora of fixed-scope and fixed-price applications, pre-packaged vertical solutions, attractive support programs and hosting services with catchy names (e.g., Fast Forward', Select', Accelerated', Genesis', etc.), all aimed at making it faster, simpler and cheaper for enterprises under a few hundreds $ million to use them. However, all of these typically have also implied some form of trade-off in the name of expediency. The features forsaken will have been functionality, customizability, platform options, solution scalability or extensibility.

Unfortunately for both vendors and users, SMEs, like their bigger brethren, generally operate in a dynamic, competitive environment and have global, multi-site 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 functionality, scalability, SCM, CRM, e-commerce, and distributed computing environments. And they have to accomplish these feats with less (or completely without) IT staff and a much more limited budget compared to their bigger counterparts. For these reasons, the first generation of Tier 1 vendors' offerings for smaller enterprises has had only a limited success. In that regard, it is still not very clear from the above typical PR announcement what the killer' value proposition differentiator for PeopleSoft might be, and the company will have to do a much better job of fleshing it out elsewhere.

PeopleSoft SME Background

PeopleSoft for the first time vocally launched an orchestrated effort to target smaller enterprises back in 1998. At that stage, the company had only two offerings named PeopleSoft Select, for human resources (HR) and financials, while its notion of what represented mid-market was also quite fuzzy then. During 2000, it created its first Accelerated Solutions for HR and Financials, while a new MidMarket Division was formed and Accelerated SCM product was launched at the beginning of 2001, by which time the company had acquired 450 customers. During 2001, the company launched a formalized product line called the Accelerated Solutions, which were expanded by solutions for CRM and ESA, all aimed at customers with $500m or less in revenue then (see PeopleSoft Joins The Hunt For SMEs). A number of vertical solutions delivery and the launch of Accelerated Alliance Program have taken place early in 2002.

Recently, PeopleSoft has further polished both its definition of the mid-market (which now limits it only to enterprises with less $300m in revenues given its average mid-market customer size has been ~$105 million, which is much more focused definition compared to some of its peers still referring to companies with even over $1 billion revenues as the mid-market) and its Accelerated Solutions offering. To that end, it now offers the following ten distinct Accelerated Solutions:

1. Accelerated CRM
   
   
2. Accelerated Procurement
   
   
3. Accelerated Manufacturing
   
   
4. Accelerated Distribution
   
   
5. Accelerated Support
   
   
6. Accelerated Sales & Marketing
   
   
7. Accelerated HR
   
   
8. Accelerated Enterprise (combined HR + Financials)
   
   
9. Accelerated Financials
   
   
10. Accelerated ESA

PeopleSoft Strategy

PeopleSoft seems to have conducted a due diligence, learned a few lessons, and grasped the key factors for greater success in the coveted low-end market segment. Its mid-market strategy may consist of the following three informal steps:

1. Identify an opportunity and focus on it
   
   
2. Build a solution that best fits that opportunity
   
   
3. Deploy channel strategy

As for the first step, the company estimated enormous opportunities in the market segment consisting of companies with less than $300 million in revenues. The company estimated a vast, largely untapped market of potential customers, with over 62,000 like companies in the US alone. The opportunities have, therefore, been identified!

In the second step, PeopleSoft identified its target customers' characteristics and needs, as to tailor the most appropriate solution. To that end, other than being the companies with less than $300 million in revenues, and, as already indicated earlier on, 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).

PeopleSoft's research also indicates that cost, complexity, and risk are the 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 return on investment (ROI), whereas experienced (repeated or follow-up) buyers value the vendor's reputation & support and integrated software & services solutions the most.

Consequently, the company has made genuine attempts to provide value proposition for both profiles of mid-market customers. Each Accelerated Solution bundle selected PeopleSoft 8 product functional components, which have being sold to larger enterprises too, but with preconfigured implementation, training and support services, resulting therefore with accompanying rapid, fixed-time and fixed-price implementations. The company has come up with each solution after a painstaking process of analyzing its first ~400 mid-market customers, identifying the functionality that each customer had found critical to be implemented first, identifying the highest ROI impact component, and finally, developing a pre-configured product set, integrated business processes and fixed-price implementation scope for each particular solution.

Product Differentiators

Moreover, to exceed the notion of dj vu offering from its peers in the past, PeopleSoft has attempted to offer a few differentiating extras' in its solutions, which are often neglected (or intentionally omitted) by many competitors and often come as unpleasant extra cost' surprises for the customer after the fact. Some of these lie in a pre-configured modular integration, as the modular product structure enables customers to cherry-pick what they need and when they need it, thereby avoiding the proverbial overkill factor' of large applications. To that end, each available solution can be combined to create extended business processes, and, alternatively, any number of available add-on modules can be supplemented, and each solution and/or add-on module has a pre-configured fixed-price no frills implementation scope.

These have been developed from PeopleSoft's own Compass Methodology, which uses accelerated tools to pre-define the planning & strategy phases of the implementation, and thereby avoid all-too-commonly dreaded "scope creep" (the company touts estimated average 37% reduction in time and cost so far). The methodology also caters for optimized best practices, as necessary workflows, interfaces, and data conversions have been mapped out by each solution beforehand. Although PeopleSoft, like every other vendor, frowns at customizations, these are not prohibited, as a built-in change control allows for customizations' tracking, but these implementations will logically carry a different price tag.

PeopleSoft delivers Accelerated Solutions both via its eCenter hosted and customer owned options. For users who want the security of an in-house application with implementation assistance, PeopleSoft will work with their IT departments onsite to integrate the suite with existing legacy systems. Users with more resources may want to opt to have PeopleSoft perform the set-up, quality check and installation, but let internal resources make desired customizations and enhancements. Finally, for users interested in a truly "hands-off" deployment, PeopleSoft hosts Accelerated Solutions through its eCenter. As always, prospective clients should choose the option that best suits their business environments and IT skill base.

Once the project scope has been agreed upon and the appropriate solution has been pinpointed, PeopleSoft touts its no frills' complete solution delivery purported with unlimited user license number for an upfront flat rate, fixed price implementation and training, pre-configured hardware, rapid but full implementation rather than with a stripped-down' scope (i.e., standardized data conversion maps, developed testing scripts across all products, and pre-defined configuration data baseline best practices come delivered as a part and parcel of the implementation).

Also, by delivering projects (full-fledged implementations rather than only pilots) via its 35 mid-market implementation centers across North America (an implementation server is hosted in each centre), the company believes to have eliminated on average up to 50% traditional on-site delivery costs, as it eliminates hardware and database administrator requirements well until deployment on site, as well as consultants' travel and other expenses for the customer, it creates a non-invasive environment that removes on-site distractions by a daily grind business, customers gain access to the highest skilled PeopleSoft consultants that are not burned out by extensive traveling, and these resources can be leveraged across multiple customers.

Delivery Channel

The third pillar of success in this target segment lies in the delivery channel, for both implementation services and localized regional and vertical industries expertise. To that end, all of a handful of selected partners were made privy to the same above-mentioned implementation tools that PeopleSoft's own mid-market consulting group uses for deploying the accelerated applications, along with the usual marketing, sales and technical support.

Early in 2001, IBM and PeopleSoft announced possibly a marquee partnership to speed up the delivery of business applications for SMEs, as PeopleSoft had early targeted IBM Business Partners to offer mid-market prospects a rapid deployment program for PeopleSoft 8 accelerated applications. The companies then announced Architecture Jumpstart, an ISO 9000 certified, rapid eBusiness deployment program designed for the fast implementation needs of mid-market customers. The pre-packaged turnkey solution included a workstation and a Windows NT application and database server, all pre-bundled and offered with fixed pricing to deliver a completely installed and configured environment which includes demo, testing, training and production databases.

The recently extended deal with IBM makes further sense, as powerhouses like IBM can concurrently provide hardware, database, middleware, and systems integration services, particularly with IBM's recent purchase of PricewaterhouseCoopers Consulting (PwCC), which is possibly the biggest PeopleSoft implementing practice worldwide (see Enterprise Applications Battlefield Mid-Year Scoreboard). The new enriched alliance expands a preconfigured offering that now includes a broader server options (either the xSeries or pSeries) and the DB2 database, while IGS will be offering the fixed-price implementation services for the three above-mentioned targeted segments. IBM's domain expertise in many aspects of enterprise infrastructure and in these vertical markets, combined with PeopleSoft's increasing capability and visibilities within the realm of CRM, should be a compelling value proposition for mid-market enterprises.

This concludes Part One of a two-part analysis of recent PeopleSoft announcements. Part Two discuss the Challenges and makes User Recommendations.