Peoplesoft is broadening out the scope of its core enterprise resource planning (Erp) applications in a bid to win repeat business from its existing customer base.
Although the package supplier acknowledges it has traditionally been poor at generating pull-through sales from its installed base, it now realises this is increasingly important to take on SAP and thrive in a market that is slowing as a result of the Year 2000 problem and economic difficulties in the Asia-Pacific region.
Ray Gadbois, Peoplesoft?s vice president of corporate marketing, explained the company's strategy at the firm's user conference in San Francisco this week.
"We?re the number two in backbone Erp systems and our direction for growth is to leverage that backbone and bring it to market in new ways. It?s the next evolution of our business and whether we had the Year 2000 issue or not, we would do it. Customers want a tightly integrated system and this is a logical extension of the backbone," he says.
But he continues: "There is uncertainty associated with the Year 2000 issue. Peoplesoft has been experiencing 100 per cent growth, but this year, we expect it to be 60-70 per cent and the year after, 25-30 per cent. We?ve already admitted that things will slow due to the Year 2000 and Asia Pacific economic issues, but I think solid growth is achievable."
As a result, the firm is looking at new channels to market and has introduced an outsourcing programme with the Big Five consultants, a scheme Gadbois describes as a Peoplesoft Inside strategy that is being offered in three ways.
The first is dubbed IT outsourcing and simply covers the management of hardware and software. The second, business process outsourcing, involves the management of both IT and functions such as the human resources department, while application service provision involves IT outsourcing over the Web.
But Gadbois also says that Peoplesoft is trying to leverage its Erp applications by offering industry-specific solutions, new analysis or socalled Enterprise Performance Management (EPM) packages, and ebusiness applications.
He believes that the market for analytic packages is worth up to $3 billion and has the advantage of giving Peoplesoft a foot in the door of the CIOs office because such offerings help executives in the decision-making process.
According to Rick Bergquist, Peoplesoft?s vice president of technology, the company?s EPM technology will enable users to extract and transform data from Peoplesoft applications, third party sources and legacy systems. This data is then put into a data warehouse defined by Peoplesoft?s own schema, but based on any relational database.
The analytical applications take the data and can drill down into it, manipulate it and also generate reports.
The first application for performance measurement is in beta now and will ship at the end of this year, but others aimed at specific markets such as finance will ship next year. These include funds transfer pricing and activity-based management.
The new ebusiness applications, on the other hand, will come under the banner of the Peoplesoft Business Network (PSBN). This technology has been housed in a separate unit with its own profit and loss account to ringfence it from the rest of the business should the initiative fail.
PSBN will ship as add-ons to the firm?s human resources packages and include a customisable HTML front end or portal, dubbed My Peoplesoft.
The portal will be workflow-enabled and integrated with calendaring and email, but users will also be able to access information from Peoplesoft?s own packages and from third party suppliers or 'merchants'.
These merchants will be expected to join a certification scheme and pay for the right to integrate their applications and data into PSBN, but the applications will be arranged into logical 'communities' such as advisory services to make access easier.
While users will be able to buy communities as part of PSBN, the product will also come with a range of application programming interfaces, based on the Microsoft Com model, so that they can integrate their own merchants as required.
Details of the architecture are due to be announced in the first quarter of next year, when usage based pricing will also be revealed. Various merchants including online stockbroker Charles Schwab have already signed up to the scheme and the first products are due to ship next year.
But release cycles will not be incremental in line with Peoplesoft?s traditional model. Instead they will be based on functional enhancements and will plug into Peoplesoft 7.5.
While PSBN will initially be targeted at workplace users, Peoplesoft also plans to expand it to cover users outside the organisation in the next iteration, and intends to integrate it with its new analytical applications over time.
Dave Duffield explained the rationale behind PSBN: "If we do it right, we see ebusiness as the next paradigm shift. But the ebusiness strategy is quite separate from the core Peoplesoft business strategy. It?s an experiment, an innovation for the future. It will have its own sales organisation and is very much in keeping with our core values, but if it doesn?t work the core business in not in jeopardy."
He added that he expected both the EPM and the ebusiness applications to start generating small revenues next year.
But one of the main points behind broadening out its offerings and building on the core footprint, according to Mark Lane, Peoplesoft?s vice president of international marketing, is to help the company sell back to the customer base and so boost revenues.
"We?ve not done a good job in the past of going back and looking at our customers and selling back to them, but SAP is very good at that and we need to do it too. At the moment, we focus our resources on the difficult sell, which is the new sale, and don?t do enough to generate revenues from the installed base," he says.
But, he continues: "Some 75 per cent of companies with a turnover of $1 billion have made a commitment to one Erp vendor and that figure is 55 per cent in Europe. So we?ve managed to establish mindshare in some major organisations and given the level of market saturation, it makes sense to focus on those customers."
As a result, in future the company plans to spend more time communicating with its customers and undertaking more aggressive marketing campaigns such as direct marketing and seminars.
It also intends to dedicate individual sales people to work with account managers on customer accounts with the aim of increasing customer satisfaction and boosting implementation numbers.
This will be taken one stage further in the US, however, where a named account strategy will be introduced next year to improve sales coverage.
Ron Codd, Peoplesoft?s chief financial officer, also says that the main reason behind the company?s decision to reorganise itself from nine into three business units was to increase flexibility in deploying sales staff to boost pull-through sales.
The units comprise a products group, which deals with manufacturing, retail, transport, telecoms and utilities, and a services division, which looks after healthcare, professional services companies like management consultants, higher education and state and local government. The third unit looks after federal government business.
Each have their own sales, marketing, development and services organisation and a separate profit and loss account. But Peoplesoft is also backing up its vertical market reorientation with new products in the shape of industry solution templates for customers.
Lane explains: "The industry solution templates provide documentation that clearly defines where we?ve got product, where our partners have product and where the gaps are, which may be filled by acquisitions. The industry solution templates support our whole vertical market strategy."
He continued: "Our strategy last year was to go into core industries and instead of being just one company, become effectively multiple companies with a focus on specific opportunities. The reason for this is that, as the company grows, we need to be more nimble in focussing on specific opportunities or customer needs."
As a result, to try and make itself easier to do business with, Peoplesoft has introduced two new schemes - Peoplesoft Advantage and Peoplesoft Select.
Lane explained: "Advantage is a tactical offering. We?re rebundling our services offerings to try and reduce cost for customers. It?s a matter of blocking and tackling some of the stuff SAP is doing and also to ease some of the Year 2000 pressures."
The initiative is based around a chargeable series of service bundles offered by both Peoplesoft and third parties. It is meant to cater to a customer?s full application lifecycle needs, including selecting, purchasing and implementing applications, support, upgrades, training and maintenance.
A subset of this is Peoplesoft Express, which provides medium-sized companies with a fixed price services bundle to speed implementation and includes an upgrade programme and support.
Peoplesoft Select, on the other hand, is a Windows NT-only implementation scheme aimed at the small to medium business marketplace. It is currently only available in the US and is targetted at companies with turnover of about $250 million.
However, Peoplesoft plans to roll the programme out in Europe in the first half of next year and will position it as suitable for organisations with sales of about $100 million. It is also considering whether to sell the scheme via the channel rather than sticking to its current US direct-only sales model.
Howard Gwin, senior vice president and general manager of international operations, concludes: "The midmarket is a big part of many international countries? GDP and we see great opportunities there. There?s a tremendous pull for the SelectPath process and we believe it will be a large growth market. I think Select is going to be huge - the US has doubled each quarter and we?re expect to increase staff here by 200-400 next year."
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