Making the Most of It
PeopleSoft holds its annual Conference and willy-nilly shows why it's such an attractive target.
PeopleSoft made a good tactical decision to treat this year's Connect conference as nothing more than business as usual. If you're Damocles, the best thing to do is sit at the dinner table and converse, just as if there were no sword hanging over your head.
Of course, courage is likely to stray into bravado in such situations. It's hard to read anything else into the announcement of a multi-year, $1 billion partnership with IBM, Oracle's arch-enemy. Or course, if you push past the obvious flaw, you can see that the partnership is a good idea and could lead to good things, but one's first reaction is, "Huh?".
This decision to carry on normally was a help to me, because I saw something that I think has been largely missed by analysts. Ever since the disastrous decision to merge with JD Edwards, PeopleSoft has been doing very well and is fundamentally in pretty good shape. Consider the following:
- PeopleSoft Enterprise is the best ERP product on the market, questions
of scope aside. (It doesn't have the geographic, industry, or functional depth
of some of its competitors.)
- The acquisition of JD Edwards is largely a fait accompli. The damage has been done; things can only go up from here.
- PeopleSoft's ten-year strategy--its choices about how to keep the current product thriving and at the same time enter the web services era--is the best in the industry.
- And, rather than deserting a sinking ship, important, name-brand customers are deciding to run risks in order to get their hands on that product.
Consider that all these things have been achieved with a management team and personnel in siege mode--under constant pressure, undernourished, and always thinking that escape might be a better option. It's impressive.
Not that everything is perfect. The treatment of the old JD Edwards customers
verges on shabby. The go-to-market strategy of the combined entity remains confused. For every really interesting product move that I found, there was one that was ill-judged or confused. I'll talk some more about this toward the end. But first, let me turn to what's new at the company.
The Big Announcement: IBM and PeopleSoft
The proposed IBM partnership is an essential part of PeopleSoft's rather clever approach to solving the basic problem for all the ERP companies: "How do I morph from a rapidly-growing company that depends on new sales to a caretaker of my existing customers?" The old, rapidly-growing ERP company made thin products and fat Power Points and spent its money on SG&A. The new one makes products that work and spends its money keeping customers interested.
The problem is multi-faceted, and the solutions are, too. One facet of the problemis that you don't want the product to age as technology changes. So you need a long-term technology plan. SAP set the agenda for this with its Netweaver marketing. So even if you think that the notion of a technology stack integrated with an application stack is hooey, you can't say so these days. You have to have a competitive story.
For a while, PeopleSoft didn't have one. (They said they were an application company and let other providers create the stack.) Now, they have a better story. Without having to build the stack themselves (an effective impossibility with their resources), they have acquired one that is at least as plausible as SAP's and also has a recognizable brand name: Websphere.
This isn't just a marketing move. IBM and PeopleSoft are putting $1 billion into this over the next few years, and starting soon, the IBM technology will be shipped free with every copy of PeopleSoft.
Even though PeopleSoft will remain open, the eventual plan is for IBM to supplant other stack components, such as BEA, WebMethods, and even PeopleSoft's own integration framework, where appropriate. When and if enterprise services architecture and composite applications start to become normal within IT, a coherent stack that is done right will simply be more attractive than a stack put together from components.
Not all the details of the future technology or of the agreement are worked out. PeopleSoft still works on BEA's Tuxedo and Jolt products and will continue to do so, at least until IBM commits to rewriting "2 million lines of code." But Netweaver, too, is still mostly a collection of technologies and an idea bout bringing them together. So PeopleSoft isn't really too far behind in the race.
What seems to me to be missing from the announcement is an idea about what this stack ought to do. We saw lip service to Enterprise Services Architecture and composite applications, but at SAP, there seems to be more awareness of how all this might work and also more practical experience. SAP has been trying to build composite applications for some time now, and they have also been recruiting a developers' network. I'm not sure at all that the goal is reachable, but if it is, they're clearer about how it might be reached.
Still, PeopleSoft and IBM have plenty of time to figure out what ESA and a single stack means, assuming Oracle lets them. The main thing now is that they haven't let the marketing success of Netweaver go unimitated.
Total Ownership Experience
Really more important to PeopleSoft's fortunes as an independent company is the Total Ownership Experience. I talked in May about this $800 million investment they are making over three years. This conference gave me more detail, much of which is quite interesting.
The first piece of good news for customers is that the EnterpriseOne (JD Edwards) product will have TOE improvements built in starting in the next release (8.11). Improvements in the user interface, as well as product enhancements, give the old OneWorld customers a reason to upgrade.
PeopleSoft needs this, because they're trying to impose their four-year support system on a JD Edwards customer base that isn't used to it. Support for XE, the old JD Edwards product ends February 28 of next year. An 8.11 release that is attractive to look at and easy to use provides a carrot, as well as a stick for these XE customers.
The second piece of good news is a much improved approach to upgrades. Instead of applying the new version of a product to the living production data, PeopleSoft will now apply it to a new database and import the production data into the new database, using Ascential's ETL tool. (No, I don't know how the licensing works.) This is far more efficient, and it also gives people a chance to cleanse data while they're upgrading and thus gives them one more reason to upgrade.
The third is significantly better reporting in both the Enterprise and EnterpriseOne product lines. Somebody's been doing some thinking at PeopleSoft about how to make data more useful and easy to distribute, and the solutions they're providing, which incorporate a deeper embedding with Crystal, are very attractive.
TOE is a hit and miss proposition, and I definitely did see some misses. Some user interface improvements that were advertised as providing "fewer clicks" simply stuffed more onto a screen, rather than using any actual insight into how people work. But the hits are good.
Go To Market
The original messaging and organization around the JD Edwards
acquisition always seemed flawed to me. JD Edwards is by no means simply a
mid-market solution; there is significant overlap between what it does
and who it serves and what PeopleSoft did and the people it serves.
Making sense of this overlap, both organizationally and in terms of
marketing, has been a problem for PeopleSoft, but after a year,
some progress seems to have been made.
I had a long, well-monitored talk with Lenley Hensarling, the JD Edwards
product manager, and he provided some interesting color.
Lenley characterizes the practical difference between the two systems, which
I will paraphrase
as follows. "Enterprise consists of multiple, lightly integrated products
EnterpriseOne is a single, totally integrated product." Where the
Enterprise pillars offer significantly more than what the old JD Edwards
offered, Hensarling is trying to fold in some of their functionality ideas,
but done in EnterpriseOne terms. Where the old JD Edwards product holds sway--
manufacturing comes to mind--he is leading the rest of PeopleSoft.
Thus,
PeopleSoft's "new" demand-driven manufacturing initiatives are centered
in Denver, and people who are looking for this functionality are going to
be finding more of it in EnterpriseOne. But the supply chain functionality--by
which PeopleSoft tends to mean what I call sourcing and purchasing--will be centered
in Pleasanton, and you'll get more sourcing capability in Enterprise than
in EnterpriseOne.
The one exception to all this is the old Numetrix supply chain functionality, which is being put under the Supply Chain pillar.
In a way, from a PeopleSoft point of view, the Enterprise One pillar is gradually,
gradually becoming a manufacturing pillar, but unlike the rest of the pillars, it also
has sales order, financial, HR, and purchasing capabilities.
Given the realities of the situation, this is probably as well as PeopleSoft can do.
It's not great. Even a person as smart as Lenley can't really be both the "manufacturing
czar" and the EnterpriseOne product manager. (These are my characterizations.)
Even among capable people, too many responsibilities leads to a lot of cream-skimming. As one gets
farther down in the organization, it leads to the soft spots that several customers
I talked to complain about.
There are other reasons besides lack of focus for these soft spots--which can range from
some of the rather silly TOE improvements that I saw to the lateness of both
the EnterpriseOne release and the Enterprise HCM release. Plain and simple, it seems that PeopleSoft's
resources are stretched. Trying to satisfy everything that customers need
with "only" $450 million across three product lines is not easy.
And even that $450 million is in some senses an exaggeration. Hensarling
is distributing his resources about 1/3, 1/3, 1/3 among maintenance, TOE,
and functionality improvements, which presumably include both technology
and application improvements. The maintenance is essentially making
up for past sins; the TOE is a good idea, as I said, but also in a way
making up for things. Only a relatively small amount is left for all the
new functionality that is needed by customers, not just in manufacturing,
but in all the areas.
Leadership
In the meantime, the fight for life goes on. Announced at the conference
was a new program for encouraging upgrades, which included a $100,000 giveback
on new license fees for customers who agree to upgrade soon.
It is a mistake to believe that nobody is buying. At the conference, 3M announced that it was accelerating its adoption of EnterpriseOne and Enterprise and now was planning to use an integrated Enterprise Financials/HR and EnterpriseOne manufacturing as the basis for its new shared services. 3M's new CIO comes from a PeopleSoft implementation, and 3M has long been a user of JD Edwards software, so none of this is surprising. But it's still an important statement.
Any customer interested in buying isn't just going through an exercise in denial. It still makes sense to buy these products. It is irrational, I believe, to think that Oracle will sunset any of these products any time soon. If the product is providing benefits; if the customer assurance program provides some insurance; if turning to another vendor would be a silly waste of time and resources, customers will buy.
Evidently, one reason they buy is that they like and trust the senior management team. At the conference, the performances by Conway and Gupta seemed to me to be as likely to dissipate that trust as to strengthen it, but what do I know..
Wouldn't knowledgeable customers know that the hundreds of new enhancements to Enterprise One that PeopleSoft has delivered in the past year were developed by the old JD Edwards, so that when Conway claims that PeopleSoft has delivered more enhancements in the last year than JD Edwards ever did, it's at best a rather wholesale appropriation of credit?
And aren't these customers knowledgeable consumers, so that when an executive says that the ownership experience will be improved by 60% by 2005, these customers will wonder what on earth that can mean? I heard this phrase several times, and each time I remembered the old soap ads, that claimed the soap was "1/4 cleansing cream," when nobody ever knew what cleansing cream was.
What would a Short Take about PeopleSoft be without a ritual complaint about PeopleSoft's rhetoric? But maybe, in an election year, maybe we're all inured to baseless or meaningless claims and used to the fact that the press never questions them.
The Challenge to Oracle
For the past year, PeopleSoft has been challenging Oracle in every
way that it can: in the press, in the courts, and in keeping the company
running. Given its real strengths, it seems a shame that it has to win
all those challenges in order to survive. At the conference,
the loss in the courts, coupled with the assumption that license
goals in the third quarter will not be achieved, made most neutral
observers think that it's now a question of when and how, not a question
of whether.
These observers do not see all the strengths I was seeing, or if they
do see them, they discount them. Still, if that blindness extends to the
institutional owners of PeopleSoft stock, they will probably end up correct.
But even if they are, there is still a challenge that PeopleSoft poses,
and that is how to make the most of the asset. For years, PeopleSoft
has been able to develop faster than its competitors, with fewer resources.
They have been able to make a really good product--apples to apples, the best.
And they have been able to keep a huge customer base remarkably enthusiastic
about them.
If Oracle does succeed, it will be a challenge for them even to recognize
these facts about PeopleSoft and an even greater challenge to learn from
what PeopleSoft has done well. If it comes to that, let us hope that they
accept those challenges and overcome them.
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