Gartner positive, but questions remain

While PeopleSoft's planned acquisition of JD Edwards is a good move, some issues need to be resolved in the coming weeks and months, says one Australian analyst.

While PeopleSoft's planned acquisition of JD Edwards is a good move, some issues need to be resolved in the coming weeks and months, says one Australian analyst.

The two companies are definitely a complementary fit, says Gartner Australia analyst Kristian Steenstrup (pictured), speaking before Oracle's announcement at the weekend of a takeover bid of PeopleSoft.

"In some areas, such as financial systems, they're both strong, but in most others one is stronger than the other."

PeopleSoft's strengths in payroll and HR will be complemented by JD Edwards' supply chain capabilities, "and with the meshing of the two, their intellectual capital will be multiplied".

Some question marks remain, however, most notably how much platform and technology integration there's going to be, says Steenstrup, who monitors enterprise applications.

"Is the plan to have a merged product line or parallel lines?"

If the new entity continues selling heritage PeopleSoft products to PeopleSoft's traditional market and likewise with JD Edwards, "you don't get the multiplier advantages of a merger", he says.

"It would make sense to merge the products into a single architecture, a single technology, to make one marketable, deliverable product."

He cites the example of Microsoft, whose acquisition of Navision and Great Plains resulted in four different products which allowed Microsoft to say "we cover ERP".

However, he points out that Microsoft doesn't plan to keep offering them in that form.

"They say they'll release a new, integrated next-generation product in 2005 and that makes sense."

PeopleSoft needs to announce similar plans within the next few months if it intends to go down the merged product line path, he says.

"What will happen to JD Edwards' World and OneWorld platforms and to PeopleSoft's own products?"

The issue of architecture unification makes mergers in the software industry more expensive and difficult than in other sectors, he says.

In the Asia-Pacific region, the merged entity "will be able to reduce the cost of service delivery by reducing duplicated overheads", he says.

"In the region, the two have the same geographic spread, ie strong in New Zealand, quite strong in Australia and weak in China, Taiwan and Korea. The new entity won't necessarily be any stronger in those countries."

PeopleSoft is well represented in higher education, finance, insurance and other service industries, whereas JD Edwards' client base is largely in manufacturing. The fit in New Zealand is better than in the US, Steenstrup says, "where we'll see some integration in coming years".

JD Edwards New Zealand general manager John Speed says the two companies have no mutual clients in New Zealand.

"There's not much overlap at all."

But they do sometimes bid for the same customers. Speed told Computerworld that the score is even from recent bids in which they've been up against each other.

According to analysts IDC, JD Edwards' annual sales in New Zealand amount to $17 million, compared to $14 million for PeopleSoft. Employing 55, JD Edwards' staff is larger.

JD Edwards has 85 New Zealand clients. It has had a presence here since 1986 when its products were introduced by a distributor which was acquired by JD Edwards itself in 2000.

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