PeopleSoft, Inc. is one of the top developers of enterprise business software, which helps governments and large-to-medium sized industrial clients manage human resources, financial, manufacturing, inventory planning and distribution data from a variety of operating systems and hardware platforms. Founded in 1987 and with headquarters in Pleasanton, CA, PeopleSoft is the third-ranked ERP vendor with $1.3 billion in revenue in 1998 (approx. 8% of the global ERP market), behind SAP and Oracle. The Company went public in 1992 and has grown from a $113 million HRMS vendor in 1994 into a $1.3 billion software powerhouse in only five years (see PeopleSoft, Inc. Annual Results Chart). In 1988 PeopleSoft delivered the market's first network-based human resources management system (HRMS) software. The Company has since broadened its software offering to include financials (in 1992), distribution (in 1994) and discrete manufacturing (in 1996). PeopleSoft designs its products for both the client/server and Internet models of computing. It is currently developing the PeopleSoft Business Network (PSBN), which should incorporate business transactions, knowledge and analytical tools within and beyond enterprise boundaries, and which should make that content available to employees, customers, and suppliers through a personalized Internet portal. The Company also develops industry-specific products for healthcare, higher education, retail, insurance, communications markets, etc., and generates more than half of its revenue from services that include software maintenance and support, customer education and training, and consulting (see enclosed charts). By the end of 1998 the Company had licensed system installations to approx. 3000 customers worldwide. PeopleSoft has offices in 18 countries and over 6,600 employees. The Company's revenue primarily comes from US and Canadian markets (approx. 86%).
Fig. 1
Regarded as one of the best and the most comprehensive HRMS applications available, particularly in terms of user friendliness, flexibility and speed of implementation, with a continued heavy investment in R&D (17% of total revenue, 19% of total workforce); Very strong and complete vertical industry solutions for financial, insurance, healthcare and higher education.
Large and loyal HRMS and financial modules customer base, providing significant recurring revenue stream (approx. 70% of global HRMS market place).
Strong and very efficient direct sales force, in terms of revenue growth and revenue per sales employee (approx. 61% growth and $0.9 million revenue per sales employee in 1998).
Fig. 2
Increasingly competitive and shrinking market. PeopleSoft's revenue growth in 1Q99 and 2Q99 has been driven primarily by maintenance, with dramatic deceleration in license revenue (down 61%), in total revenue (down 3%), and in net profit (down 91%) compared to the second quarter of the last year (see PeopleSoft, Inc. Quarterly Results Chart).
Lack of more aggressive action in strong markets like CRM/Front-Office (only exhibited in partnering with Siebel and Vantive), and indecisive strategy regarding PSBN (without clear differentiators and target markets).
Still not regarded as complete ERP solution provider, very far behind main competitors (SAP, Baan, J.D. Edwards) in manufacturing functionality; acquisition of "Red Pepper" supply chain product has been very poorly exploited so far.
Fig. 3
1999 will be very challenging; We predict significantly reduced annual revenue growth (max. 15%) with break-even or minimal profit margin (max. 10%) as the most optimistic scenario (75% probability).
Reviving top-line revenue growth primarily through license revenue growth is of utmost importance in order to preempt further layoffs, exodus of key high ranked employees, share price volatility. PSBN and EPM initiatives have potential for increasing revenues, however the coveted annual growth of 25%-35% is not achievable (75% probability) without strong product offerings in CRM and manufacturing area.
Year 2000 and after - PeopleSoft will still be a major player, however, the pressure of being overthrown by J.D. Edwards from No.3 position is mounting (70% probability).
Target Small-to-Medium Enterprise (SME) market segment primarily with the PeopleSoft Select, PeopleSoft Advantage and PeopleSoft vertical industry offerings, bundled with the thin-client technology, and possibly through renting options with Application Service Providers (ASP) partners, like USinternetworking and Corio.
Use direct sales force to increase penetration into existing customer base, mainly by offering new analytical Enterprise Performance Management (EPM) applications and e-business supply chain (PSBN) components.
Expand global presence (distribution, sales, services and support), primarily by leveraging qualified local indirect channels. J.D Edwards and MAPICS would be good examples of success in this regard.
Broaden, without any further delay, product functionality, particularly in process manufacturing and in CRM, either by acquiring one of the leading mid-market ERP vendors (SSA, QAD, etc.) or CRM vendors (Vantive), or by developing a product in-house/Momentum Business Applications, Inc.
SOURCE:http://www.technologyevaluation.com/research/articles/peoplesoft-are-business-intelligence-and-e-commerce-enough-15196/
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