CRM May Be PeopleSoft's Main Business in 18 Months

SAN FRANCISCO (06/07/2000) - Customer relationship management could become PeopleSoft Inc.'s main business in 18 months, according to the company's chief.

His comments came as the U.S. enterprise applications vendor this week unveiled the latest version of its Vantive CRM software.

PeopleSoft completed the acquisition of CRM specialist Vantive Corp. at the end of last year as a way of catapulting the company into the CRM arena, one of the hottest markets at the moment.

Craig Conway, PeopleSoft chief executive officer and president, is also optimistic about his company's position in the enterprise applications market.

He believes that the vendor has firmly put behind it the bad times of last year when all ERP (enterprise resource planning) software firms were hit by a decline in customer buying related to fears about the likely impact of the year 2000 (Y2K) problem.

Earlier this week, Conway talked to IDG News Service in a phone interview about PeopleSoft's businesses and also the fate of rival ERP vendor Baan NV Co. He confirmed that PeopleSoft and Baan had held discussions nine months ago about a possible PeopleSoft buyout of the ailing company. Last week, U.K. automation and controls group Invensys PLC announced its plans to buy Baan for US$709 million in cash.

IDGNS: How is the launch going of the latest version of Vantive, release 8.5?

Conway: It's gone very well. I think people were anxious to see whether Vantive's assimilation with PeopleSoft would be a net add or net loss. We run our different product lines as essentially separate companies which use the same toolset and are totally responsible for their own profit and loss. Since January 1, we have added 60 new developers to Vantive and we have trained 300 PeopleSoft consultants on Vantive.

IDGNS: Where are you headed with CRM? Does CRM ultimately eclipse your ERP business?

Conway: I think it's more like PeopleSoft will be viewed as a company offering e-business applications for employee management, supplier management and customer management. The fastest growing category for PeopleSoft is CRM. We could see in the next 18 months that CRM is our largest product line. At the moment our human resources management services business is number one, but only by $15 million, financials is right behind it, CRM is about $100 million behind that. HRMS is a $300 million to $400 million business for us.

IDGNS: Do you have a unified sales force? One of Baan's problems was that it failed to integrate the sales forces of its different acquisitions, according to analysts.

Conway: We have three sales organizations. They do report to a general manager, so we do get synergy between the three. There's no alternative to having three specialized sales, we have such a broad product line, who could keep up with everything that's going on with CRM, SCM (supply chain management), HR and Financials? Each one is a full-time job.

Baan did so many things wrong. The surprising thing in retrospect is that by luck or by bad luck, they had 12 months where they did everything wrong.

IDGNS: Was PeopleSoft ever interested in acquiring Baan?

Conway: We had some discussions with Baan about nine months ago. We evaluated them and concluded it was not the right timing for us, we were more interested in CRM than their manufacturing or other core businesses. In retrospect, it was a good decision, a litany of problems just came back to hurt Baan.

It started with too many acquisitions -- that was problem one. Problem number two was that the acquisitions happened in the worst year possible for applications, the one year ERP slows down, Baan is trying to ramp 12 different acquisitions. It was a year from hell and very problematic. A company loses money, meaning it loses viability, then they're basically a dead company walking.

IDGNS: Might you still be interested in acquiring Baan's CRM business? Analysts have suggested that Baan's new owner, Invensys, is likely to sell it off.

Conway: It's the kind of the same type of issue as to whether you acquire one of your distributors or not. Say, we wanted to acquire our South African distributor and they want $10 million for the business, if we offered each of their people a job, we'd be millions ahead. It's the same thing when you think about acquiring the CRM part of Baan. If you do, you have the costs of acquiring it, integration and solving customer issues or else you could say to their customers that you'll convert them for free to your product if they pay for the consulting service. It might take shorter time to get there to steal customers.

IDGNS: So, are you offering Baan customers a migration strategy to PeopleSoft?

Conway: Yes, when we first started seeing Baan wander into harm's way around December, we decided to offer an integrated approach to Baan customers. It's not a case of "how about us?" but offering something that's really creative, aggressive and prepackaged that can go to directly replace Baan. We're in the process of launching it right now. Migration takes a while with customers, it's like grief -- first it's denial that anything's wrong, then anger that the company's at risk and finally resignation with customers looking to change.

IDGNS: Is PeopleSoft likely to spin off businesses?

Conway: I don't have an answer to it. For a while, you could take your dog public with a multimillion dollar market capitalization. Some sense of reality has now returned to the equity market. If you're doing a spin-off purely for financial reasons, you may not achieve them. We'll keep looking at it, our ASP (application service provider) business might be a good example. We had our first ASP live customer on February 1, we now have five live customers and 12 signed up in the process of implementing the technology.

IDGNS: How well has PeopleSoft expanded its operations internationally?

Historically, the company has had problems with its international business.

Conway: I made it one of my nine objectives when I took over 13 months ago, every quarter our international business has gone up. It's a lot of work, it's not just converting our software to other languages, but it's different tax laws, HR regulations and so on. PeopleSoft 8.0 is the first release we ever had a global release for, it was a big milestone for us.

IDGNS: Has the ERP business recovered from last year's slump?

Conway: The big news is that this is a great category. Since 1999 was a tough year for enterprise applications, everyone assumed it's a bad market, but in the next 90 to 120 days all the major application vendors will change their architectures from client/server to the Net. It was 10 years ago the last time this happened when people moved to client/server (from mainframes).

Very shortly every CIO (chief information officer) will feel the pressure to convert their applications. The whole deck gets shuffled. Wall Street is starting to appreciate that PeopleSoft is a company that is probably pretty well-positioned as the next architectural shift happens. We completely changed our architecture two and a half years ago. I'm very much more upbeat on PeopleSoft, we came out of tough period. The morale here is dramatically different than what it was six months ago.

PeopleSoft, based in Pleasanton, California, can be reached at +1-925-225-3000 or via the Internet at http://www.peoplesoft.com/.

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