PeopleSoft tells its customers merger not ‘foregone conclusion’

When discussing the future of PeopleSoft Inc., Rick Bergquist, chief technology officer for the Pleasanton, Calif.-based enterprise application vendor called up a timely baseball analogy.

“Most people thought the Boston Red Sox were out of it once the New York Yankees took a 3-0 series lead,” Bergquist said.

Bergquist was in Toronto on Thursday to talk about the firm’s new direction. PeopleSoft’s destiny is in its own hands, Bergquist said. Right now the goal is to continue to support customers, grow the company and, most importantly, have a strong sense of product innovation. Within the next five years the goal is to surpass SAP as an ERP leader, Bergquist said. This will occur through multiple software product releases, including the recent third edition launch of Enterprise One, he added.

The current situation between Oracle and PeopleSoft is “not a foregone conclusion,” Bergquist said. As long as PeopleSoft continues to show the board and shareholders that it is continuing to see growth and is striving to innovate with new technology offerings the firm will be successful, Bergquist said.

According to Bergquist, PeopleSoft’s future roadmap will be based on the concept of the adaptable enterprise initiative, specifically delivering an composite-application integration platform environment that includes collaboration, portal access and analytics. The recent middleware partnership with IBM Corp. to standardize PeopleSoft apps on WebSphere is also part of the new strategy, he added.

In Canada, customers are aware of what is going on in terms of the Oracle situation but it hasn’t affected growth, particularly in the public sector, said Andrew Aicklen, vice-president and managing director for Toronto-based PeopleSoft Canada Co. If anything, the situation has given PeopleSoft good brand recognition, he quipped. Aicklen noted that in PeopleSoft Canada has been exceeding previous license revenues and “growing nicely over the last 18 months.”

The J.D Edwards acquisition has been particularly beneficial for Canada, Aicklen said, which obviously has a large manufacturing base. The Canadian user groups are very strong and have been good in providing feedback as well, he added.

The recent departures of former head Craig Conway and former executive vice-president of products Ram Gupta appear to be part of PeopleSoft’s moves to achieve this new focus. PeopleSoft’s board removed Conway from his position as president and CEO earlier this month, having lost confidence in his ability to lead the company. Former founder and chairman of the board David Duffield who had given up the CEO post to Conway in 1999, has been brought back to run the software vendor.

“Reorganizations occur because you need different generals at different times,” Bergquist said, adding Duffield’s strength is in innovation, which is PeopleSoft’s main focus right now.

“As the number two ERP vendor, right now the competition we have to go beat is SAP,” Bergquist said. For PeopleSoft to challenge SAP, innovation has to be the focus of the company, hence Duffield’s return. Duffield handed off the reins five years ago in order to strengthen the operational aspects of the company, Bergquist said, adding at the time, the internal operations of the company wasn’t as strong as it could have been.

Over Conway’s tenure a lot of good things had happened, including the growth in operational methodologies and building the consulting arm of the company which has grown from a “second thought” to training and certifying the consultant team.

Duffield has great foresight and a strong sense for innovation, which is what the company needs has it moves ahead, Bergquist said, and noted that PeopleSoft originally grew through Duffield’s sense of innovation and growing technology such as human resources applications. Overall, it’s not a case of moving backward, rather it’s a case of now having the operational, sales and consulting areas in place to back behind Duffield’s vision and a renewed innovation push, Bergquist said. “There is a balance now in moving forward.”

During Conway’s keynote speech at PeopleSoft’s Connect 2004 user conference the week before he was fired, Conway acknowledged that the company had made well-intentioned errors while trying to implement some of its software licensing and upgrade policies with the J.D. Edwards user base. Bergquist noted that while it has been a relatively seamless transition “the process isn’t complete…I don’t think we’re finished with the process of harvesting each other’s capabilities.”

According to Toronto-based Warren Shiau, software analyst for IDC Canada, when it comes to ERP applications, PeopleSoft’s strength has been an emphasis on enabling customers to strengthen business processes within a heterogeneous environment rather than forcing organizations to only use PeopleSoft applications.

PeopleSoft plays on the application layer and has been open anywhere else, regardless of platform, software or database, Shiau said. Users are looking to run more efficiently to IT infrastructures, particularly by using Web-enabled processes, he added.

While vendors such as SAP or Oracle are building down from that application layer into the middle tier software it appears that “they’re really looking at offering this functionality so that users can integrate into an SAP or Oracle world,” Shiau said, adding that PeopleSoft appears to be developing this “out-of-the-box” functionality to quickly operate in a heterogeneous environment.

Indeed, PeopleSoft exceeded analyst expectations in its just-ended quarter, reporting on Thursday a 12 per cent increase in revenue, to US$698.8 million, and a slight uptick in revenue from software license sales.

The quarter, which ended Sept. 30, was the first for which analysts can compare PeopleSoft’s results including J.D. Edwards & Co., which it bought in July 2003. PeopleSoft fell short of expectations in its last two quarters, and analysts had been expecting shaky results in the third quarter before PeopleSoft announced earlier this month that it had topped estimates. PeopleSoft said at the time it would report revenue of up to US$695 million.

Since PeopleSoft’s board replaced Conway with Duffield, speculation has grown about whether the change indicates a softening stance toward Oracle, whose hostile takeover attempt Conway bitterly opposed. Duffield addressed that issue immediately on PeopleSoft’s financial results conference call with analysts.

“It’s been amusing to listen to what people think I’m going to do,” Duffield said. He maintained that his goal is to revitalize PeopleSoft, not to facilitate or block a sale to Oracle.

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Jim Love, Chief Content Officer, IT World Canada

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