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More on the PeopleSoft JDE deal
But what does it all mean?
Yesterday's news that PeopleSoft is acquiring JD Edwards took many by surprise, writes Fran Howarth, of Bloor Research. But PeopleSoft has made no secret about its growth ambitions over the last 15 months or so, and was touted as a potential acquirer of Baan.
What has taken people aback is the scale of the acquisition. Many had expected PeopleSoft to make an acquisition in a particular product niche, such as supply chain management.
What does this acquisition bring to users of enterprise business applications? The combined PeopleSoft-JD Edwards entity will now command the number three position worldwide in the market. It can now play alongside the big players and can use the same arguments as the others that their size and scale make them better equipped to throw money into development and customer support.
In terms of products and target markets, both PeopleSoft and JD Edwards are very complementary. PeopleSoft has always been strong in HR and has been trying to beef up its manufacturing capabilities; JD Edwards has enormous strengths in manufacturing, but will benefit from PeopleSoft's HR and services exposure.
In more detail, PeopleSoft's main strengths are in HR as well as services industries, covering financial services, telecommunications, healthcare, government and education; JD Edwards' sweet spots are asset-intensive industries, including manufacturing, construction, CPG, paper and pulp, and real estate.
Apart from a couple of niche products, the two vendors were hardly ever among the top three or four competitors in a customer sales opportunity. Together, they will bring to market one of the broadest integrated application suites on the market - including the greatest choices for hardware and database systems on the market.
And in terms of development, both firms have also announced a commitment to open standards. JD Edwards has announced that the new platform it will bring out will support web services and PeopleSoft is currently porting all 170 of its applications to support Linux for the next release, planned for November 2003.
However, JD Edwards also has a large installed base in applications running on the AS/400 platform and will continue to support this market going forward. Further details of joint development opportunities will come later in the month. At present, the dialogue is only just getting started. But JD Edwards' CEO Bob Dutkovsky says: "Our commitment to our installed base is very strong, especially our loyal AS/400 installed base. Our strategy is for ease of migration to where our customers want to go."
One thing that the acquisition will bring PeopleSoft is greater exposure to the mid-market. The vendor targets large and medium-sized organisations, but is better known for its flagship global customers. JD Edwards, on the other hand, has always been very strong in the mid-market.
As the recent results for the largest enterprise applications companies have shown, average transaction sizes have been reduced and licence sales have been decreasing - and have taken much longer to close, especially those above $1 million. This has led to many of the market leaders announcing plans to go after the mid-market, including SAP and PeopleSoft. This acquisition will take PeopleSoft further towards its goal.
Going forward, neither party will be drawn on joint development potential, preferring instead to point to the synergies and cross-selling opportunities that exist. For PeopleSoft, its supply chain and manufacturing products have been the fastest growing in terms of sales, and this acquisition gives the combined company the opportunity to bring such solutions as strategic sourcing and e-procurement downstream to mid-market customers. For JD Edwards, the acquisition will bring it exposure in the large enterprise market for such products as enterprise asset management and advanced planning.
Not all mergers and acquisitions are successful but, according to PeopleSoft's CEO Craig Conway: "We are already way ahead in profits planning and execution".
Both companies claim to have complementary cultures and can point to the fact that they are financially stable and cashflow positive. For both firms, the main impetus for the merger was to increase operational efficiency. But speed is of paramount importance in mergers and this is just the beginning of the long-expected consolidation of the enterprise applications market. Time will tell. © IT-Analysis.com