ERP giants must properly integrate to succeed in e-business

The latest results from enterprise application vendor Peoplesoft throws up some interesting questions about the year ahead. These centre on how traditional ERP giants will manage both development and sales of a diverse product set.

Peoplesoft's surprise announcement that it had produced much better than expected results in the last quarter of 1999 mirrored those reported by SAP earlier in January. Peoplesoft's EMEA performance in particular - up 42 per cent on the year - was similar to that achieved by SAP, albeit through a different route. While SAP bounced on aggressive selling of mySAP.com, Peoplesoft took advantage of new analytic applications that bolt to its financials suite, and a continuing strong market for CRM products through its Vantive acquisition.

Both companies are a microcosm of the larger enterprise applications market. Last year was comparatively poor for these giants, with JD Edwards and Baan experiencing problems maintaining momentum while Oracle pushed ahead but from a comparatively low revenue base. All blamed Y2K as the prime limiting factor but all knew that Y2K lockdown had started the year before. All missed out on having believable CRM and Internet product stories, yet all moved rapidly towards rectifying the position.

Mixed picture on positioning
What has emerged in 2000 is a mixed picture where positioning is unclear. Peoplesoft and JD Edwards have bitten the partnering bullet and are doing whatever is necessary to fill out their offerings. They know they cannot provide everything needed for the e-enabled enterprise, though Peoplesoft's CEO, Craig Conway, claims, "We are offering best of breed applications within a suite." He means certain applications in the e-procurement and CRM areas can be sold standalone or as part of a wider offering.

JD Edwards has its Siebel and Ariba relationships in place, mirroring Peoplesoft's position with Vantive and CommerceOne. SAP is trying to do everything itself but is losing out to Siebel in front office applications. Oracle has partnered and acquired, but is prevaricating on bringing product to market as it wavers between CRM one month and ecommerce the next. Baan is re-positioning itself as an e-business vendor with functionality in every application category. But its CRM product Aurum accounts for around 70 per cent of current licence sales and its own website is acknowledged as being technically poor.

The challenge ahead
With so many new areas of activity piggybacking to core back office transaction systems, the challenge is going to be keeping marketing, development and sales in line across all market sectors. In the past, sales people had a clear line of sight to target CEOs and CFOs with financials, plus some manufacturing capability or human resources applications. Today, there is much more to think about. Sales people gravitate towards big deals and rarely care about the wider view. But this will be difficult to sustain because these giants are positioning themselves as holistic applications providers.

This requires a much higher level of understanding about business need, especially when tied to getting ready for ecommerce. It needs a view that corresponds to Ovum analyst Cassandra Millhouse's view of "universal business applications".

Scott Latham, senior analyst for ecommerce at AMR Research, remarks that such an approach will bring into question issues around many applications and how they work together: "Understanding the impact of applications for ecommerce is much wider than people realise," he said.

Alistair McGill, Peoplesoft's marketing director, admitted that squaring this circle will be hard work: "We're organising ourselves so that sales people do see the bigger picture, but I agree that managing it all is not going to be easy."

McGill went on to say that customer enquiries suggest the need to question the viability of the underlying application infrastructure. "It doesn't necessarily mean starting again, but customers should realise that what they are doing has impact across a broad spectrum of applications."

Making the most of installed user baseThe giant application vendors have the opportunity to capitalise on their installed user base for emerging requirements in both Internet enabled CRM and supply chain as integral parts of providing a cohesive e-business offering. Whether they will make gains across the board or find their efforts diluted is not known.

Meanwhile alternative, specialist vendors like Siebel Systems in sales force automation and e-front office, and i2 Technologies in e-supply chain and demand planning, have already done the marketing work needed to capture mind share, with sales following at a brisk pace.

The big question then is who wins and whether customers will end up having properly integrated front to back applications. No-one knows.