In-Depth

PeopleSoft Nabs J.D. Edwards

HR specialist's move will lead to big mid-market score

• By Stephen Swoyer
• 06/05/2003

The two companies say that the merger will create the second largest enterprise applications software company, with $2.8 billion in annual revenue, approximately 13,000 employees, and more than 11,000 customers in 150 countries.

A purveyor of packaged ERP applications for 25 years, J.D. Edwards & Company has a large installed base, particularly among AS/400 shops. Perhaps as a result, the company has traditionally enjoyed success in the mid-market as well as with manufacturing integration.

PeopleSoft’s move comes as something of a surprise, largely because one-time ERP powerhouse Baan was also recently on the trading block (http://info.101com.com/default.asp?id=1224)—and at a far more agreeable price. Baan owner Invensys PLC this week sold the troubled software maker for $135 million to a group of American investors. (Invensys purchased Baan for $700 million in 2000.)

According to PeopleSoft and J.D. Edwards representatives, there’s a great deal of synergy—and very little customer overlap—between the two companies. “We’ve brought … verticals that are different than the verticals PeopleSoft focused on, so by combining our enterprises … we will have the strongest, broadest set of offerings in the software industry,” said J.D. Edwards chairman, president, and CEO Bob Dutkowsky during a conference call.

Nevertheless, Kelly Spang Ferguon, a principal CRM analyst with consultancy Current Analysis Inc., speculates that the merger will largely benefit PeopleSoft, which has struggled to penetrate mid-market accounts, even as it has a very limited presence in manufacturing. J.D. Edwards, Spang points out, is well-positioned in both segments. “PeopleSoft is trying to break more into the manufacturing segment, where J.D. Edwards is traditionally strong, and PeopleSoft is also trying to penetrate the mid- market, another area of strength for J.D. Edwards,” she writes.

Dutkowsky boasted that his company has 7,000 mid-market customers.

PeopleSoft will probably take some time to integrate its new acquisition. On Monday, the two companies said J.D. Edwards will be incorporated as a wholly-owned subsidiary and that the two organizations will be integrated. There may be some integration among sales forces. PeopleSoft CEO Craig Conway conceded during Monday’s call that “separate, wholly-owned subsidiary is really a financial reference.”

The two companies have also been somewhat vague about the extent to which J.D. Edwards’ software will be integrated into PeopleSoft’s existing application stack. When the HR specialist acquired CRM vendor Vantive in 1999, for example, it incorporated Vantive as a CRM product division with its own sales force and general management. PeopleSoft has since expanded and rechristened the Vantive technologies under the PeopleSoft CRM brand.

Monday, PeopleSoft’s Conway stressed that there is very little overlap between the two companies’ product offerings. “One of the most compelling things about this acquisition and merger is that besides the success that J.D. Edwards has in the mid-market, they’re also very extremely highly respected for their manufacturing and distribution applications, so we can translate that domain expertise up into the large enterprise market in our own product line,” he explained. “Likewise, PeopleSoft is a world leader in HR applications, and J.D. Edwards can co-opt that domain expertise into their mid-market product line.”

Nevertheless, Conway did acknowledge “there will be some reconciliation [between over-lapping products], but very little, because of the market segmentation and the industry segmentation.”

In this regard, J.D. Edwards’ CRM components are seen as vulnerable, largely because PeopleSoft’s CRM stack—which consists of 30 modules—are considered more mature. “PeopleSoft has a more mature CRM offering than J.D. Edwards, and therefore it remains to be seen what PeopleSoft does with the J.D. Edwards CRM product—whether this becomes the basis of the PeopleSoft mid-market offering or whether it is ultimately replaced with PeopleSoft’s own mid-market CRM solution,” Ferguson suggests.