PeopleSoft CEO compares Microsoft .NET to ... asbestos?

Just two weeks after PeopleSoft's announcement that it is porting all of its products to Linux, CEO Craig Conway is making it clear that PeopleSoft's push toward Linux is a move away from Microsoft. "The answer to the death grip Microsoft has on the industry is an alternative operating system," he said at a PeopleSoft conference in Australia. "That's why PeopleSoft has decided to port all our applications to Linux," he said.

Conway drew a sharp contrast between PeopleSoft's server-based architecture and Microsoft's .NET framework, which leverages Microsoft operating systems on both the server and the client. "Running enterprise software on a PC is a known bad thing. It's like asbestos," he said. ".Net is a home formula to make your own asbestos. PeopleSoft is absolutely convinced enterprise software should not be resident on PCs."

Conway's remarks show how far PeopleSoft has come since the early 1990s, when it boasted of being one of the first enterprise application vendors to fully leverage Microsoft technology. One would have expected such a comparison of Microsoft to asbestos from Oracle's Larry Ellison, not PeopleSoft's Conway. Although, Ellison would have probably added that the comparison was an insult to the former asbestos industry.

CNET has more details on Conway's speech.

SSA GT making good on its product extension promise by interfacing BPCS with Warehouse BOSS. Last month I commented on the strategy of both MAPICS and SSA GT in building a large installed base by acquiring weaker competitors, then leveraging sales of common extension products across the entire installed base. It now appears that SSA GT is following through on this strategy by interfacing BPCS, its core ERP suite, with Warehouse BOSS, which it picked up in its acquisition of the Interbiz unit of Computer Associates last year. Warehouse BOSS is a fairly robust warehouse management system, running on the IBM iSeries (formerly AS/400), which makes it a good fit with BPCS, which runs on the same platform. Warehouse BOSS is a good example of how a product that SSA can leverage to multiple segments of its user base--it now has links to several ERP suites from SSA: PRMS, BPCS, and KBM.

The press release is on the SSA Web site.

Is Sarbanes-Oxley the new Y2K?

The Sarbanes-Oxley Act was passed by Congress in 2002 in response to a number of high profile financial scandals, such as those at Enron and WorldCom. Its goal is intended to make corporate accounting procedures more transparent to investors and regulators. Although the law includes a number of new mandates, there are two sections that have clear implications for corporate information systems. Section 404 (Management Assessment of Internal Controls), with a deadline at the end of 2003, requires management to assess each year the effectiveness of its own internal controls and procedures for financial reporting, and Section 409 (Real Time Disclosure) requires companies to disclose material changes in their financial condition or operations on a rapid and current basis. These two Sections each spell more spending on IT.

First, Section 404, which requires audit of internal controls, will likely lead executives to reexamine and possibly replace operational systems that are not well integrated with financial systems. For example, an A/P system that does not systematically match purchase orders and receivers to vendor invoices prior to payment might be vulnerable to fraud. Or, an invoicing system that is not integrated with shipping might allow a manager to improperly recognize revenue that was not yet earned.

Furthermore, the timeliness requirement of Section 409 seems to call for a much more transparent and integrated financial reporting system than many companies have today. For example, companies that are accustomed to working on a 10 day financial closing period would seem to be at risk for non-compliance with the real-time disclosure requirement, which is currently interpreted as demanding disclosure of material events within 48 hours. The problem is particularly acute for firms with multiple operating units and decentralized systems. Such companies will either need to adopt a common financial reporting system, or integrate multiple systems with a financial reporting layer at the corporate level, and/or implement an enterprise performance management (EPM) solution to provide real-time analytics. In any case, Sarbanes-Oxley spells increased spending for enterprise systems.

In a recent survey of Fortune 1000 companies by AMR, 85% of respondents said that Sarbanes-Oxley will require changes to their IT and application infrastructure. This is reminiscent of the late 1990s, where companies made large investments in new systems to prepare for the Year 2000 (Y2K) date roll-over. If so, Sarbanes-Oxley comes none too soon for vendors of enterprise systems, who have been looking for the next Y2K since, well, Y2K.

A summary of Sarbanes-Oxley is on the AICPA web site.

PeopleSoft climbs aboard the Linux bandwagon. At its user conference in Las Vegas on Tuesday, PeopleSoft announced that it is porting and optimizing all of its applications for Linux, the open source operating system. PeopleSoft will partner with IBM for Linux deals, with IBM providing its xSeries hardware, DB2 database, and WebSphere Application Server. PeopleSoft plans to complete the migration of all of its products to Linux by the end of 2003.

Although Linux has made great strides in establishing itself in data centers, its role has been largely restricted to running Web servers, file servers, and messaging platforms. Its growth beyond such infrastructure services has been limited by the fact that, until recently, there have not been many enterprise-class applications that can run over Linux. But now PeopleSoft joins a number of other enterprise system vendors, such as SAP, Oracle, and QAD, in offering support for Linux. This trend appears to be growing, and if it continues it could allow Linux to play a central role in the application architecture of many organizations. Some industries that rely more on custom applications, such as financial services, are already heavy users of Linux, which offers a cost-effective and reliable platform for high volume transaction processing. With vendors of commercial software such as PeopleSoft getting on the bandwagon, this trend to Linux will likely accelerate.

For a more extensive discussion on Linux total cost of ownership (TCO), see my post on Dec. 17, 2002.

Latest word on the street concerning MAPICS. I'm hearing from reliable sources about some interesting developments concerning MAPICS, following its acquisition of competitor Frontstep last year. At the time of the acquisition, I was skeptical of the ability of MAPICS to support such a wide variety of products: MAPICS XA (written for the IBM iSeries, a.k.a. AS/400), Point.Man (UNIX/Oracle), its Syteline ERP system acquired with Frontstep, plus some secondary products that both MAPICS and Frontstep had acquired, such as the Distribution Architects warehouse management product. The Syteline product itself includes the newly release V7 (completely redeveloped for Microsoft .NET) as well as earlier versions (written on Progress database for Microsoft or UNIX). That's a pretty wide variety.

Although I am still concerned about the ability of MAPICS to support so many products and platforms, it appears that the company at least has a plan. As I noted in my April 19 post, a large installed base is a competitive advantage in the currently weak market for new license sales. And MAPICS, now having over 5,000 customers with 10,000 installed sites, lays claim to one of the largest installed base populations of any enterprise system vendor. The issue will be how to leverage that installed base into new business. With that goal in mind, it appears that MAPICS is taking the following actions:

1. MAPICS plans to develop a set of common complementary products that will be interfaced or integrated across all of its core systems. For example, interfaces from certain products from the Frontstep acquisition may be built to facilitate implementation by MAPICS XA clients. Or, interfaces from certain products within the MAPICS family may be built to facilitate implementation by existing Frontstep clients. If my vote counts, I would suggest a good candidate would be the MAPICS advanced planning and scheduling (APS) product, formerly known as ThruPut, one of the few APS systems that are based on the Theory of Constraints approach to scheduling known as drum-buffer-rope.
   


2. MAPICS plans to continue support for older versions of Syteline on the Progress database. This will be a huge relief to the Syteline user base, most of whom are still running older versions and may not appreciate being forced to upgrade to Microsoft .NET. In this market, MAPICS can ill-afford to alienate its customers, and this is a wise move.
   


3. MAPICS is hoping to use the strength of its Frontstep User group to build a stronger user community among all its users. It will strongly support gatherings of all its users, which it will need as an audience to sell its common product extensions.

In some ways, MAPICS appears to be adopting a similar strategy to that of SSA GT, which is also creating a large installed base by acquiring weaker competitors. SSA GT is also known to be planning to offer common complementary products to all of them. As I noted last week, such complementary products do not need to be "best of breed." They just need to be "good enough" to keep existing customers from leaving the fold. But SSA is different from MAPICS in that most of its acquisitions have been on a single infrastructure platform: IBM. With MAPICS, the challenge will be in supporting multiple platforms: IBM iSeries, Microsoft .NET, and Oracle/Unix.

The other challenge, which MAPICS doesn't seem to recognize, is the name "MAPICS" itself. MAPICS is clearly a brand that screams "IBM." For those of us old enough to remember, the MAPICS system was originally an IBM product from the 1980s, one of the first real MRP II systems for the mid-range computing platform. In the 1990s, IBM sold MAPICS to Marcam, which later spun it off as its own company, where it remains today. But today MAPICS (the company) is staking a good part of its future on Microsoft, and to me at least, it is constantly going to have to explain to people like me that it is no longer just in IBM's camp. As much as I hate the constant name changes in the enterprise systems marketplace, in this case a name change might really be warranted.

SSA GT rumored to be leading contender for Baan

I stumbled across two articles this morning, out of the UK, that indicate SSA Global Technologies is in the lead to purchase Baan (see my preceding post). The articles point out that, earlier this month, SSA GT raised $75m from General Atlantic Partners LLC specifically for new acquisitions. So, there may be some truth to the rumor.

If true, this would be an interesting play for SSA, which would be adding Baan's extensive product line in ERP, business intelligence, CRM, product life-cycle management (PLM), and supply chain management (SCM) to its already diverse collection of systems. Over the past two years, SSA GT has been cornering the market for systems built on IBM's iSeries (formerly AS/400) hardware platform, starting with its own BPCS ERP system, plus its acquisition of Computer Associates' Interbiz division last year (picking up PRMS, KBM, Warehouse BOSS, and a slew of other products), and its acquisition last year of Infinium's well-regarded financial and HR applications (see my post on Oct. 31, 2002). Adding Baan to the mix would introduce an extensive set of enterprise class systems built for Unix and Microsoft platforms. Baan's industry focus on aerospace & defense (Boeing is a showcase account), automotive, electronics, and industrial machinery would complement and strengthen SSA's focus on most of the same industries, although A&D would be a new vertical. And interestingly, another of SSA's legacy ERP products, ManMan, was originally created as a spin-off from an older version of Baan (Triton). The acquisition creates a possible upgrade path to the current version of Baan for those ManMan clients.

If SSA is successful, it will be a remarkable story. In the late 1990's, SSA was pretty much considered down and out for the count. But it emerged from bankruptcy in 2000 as SSA Global Technologies, a private company with a significant established installed base in a few key verticals, such as pharmaceutical manufacturing and industrial products. Over the next two years, it became clear that SSA was adopting a strategy of growth by acquisition. With major new customer wins for most vendors being few and far between, SSA's strategy to build a large installed customer base through acquisitions has a certain appeal. For example, SAP is relatively healthy today compared to some of its competitors, largely on the strength of sales and services to its installed base. So, if you don't have a large installed base, you can try to buy one--especially in today's market, where established vendors such as Baan may be purchased on the cheap.

As most enterprise system vendors continue to struggle, SSA GT is quietly building a portfolio of products and an installed base it hopes it can leverage for a sustainable revenue stream. This will be easier if it can develop new products that are "good enough" to leverage across multiple systems--new products such as business intelligence, common financials, and CRM. Such "horizontal" offerings don't need to be best-of-breed. They just need to be good enough to extend the life of the customer's installed system, to spare them the pain of migrating to a whole new platform. In today's risk adverse atmosphere toward large IT projects, such an approach does make sense.

Datamonitor and Yahoo UK have more details on this latest rumor.

Invensys looking to divest Baan

Invensys, the $2B London-based industrial conglomerate, has announced that it is looking to divest its holdings in a number of its businesses, including Baan. Baan, once an up-and-coming contender to SAP, fell onto hard times in the late 1990s and was acquired by Invensys in 2001 as part of its strategy to provide enterprise systems "from the plant floor to the boardroom." But Invensys itself is facing a slump in demand and needs to find ways to increase cash. The move creates additional uncertainty for the Baan installed base. Baan's announcing its intentions prior to having a deal in place certainly didn't help sooth the concerns of users. Unfortunately, good choices for ERP from financially stable vendors are becoming fewer and fewer.

As a side note, AMR is reporting that the Invensys Protean ERP product for the process industries and the Wonderware MES are not part of the divestiture plan.

Computerworld has some observations from customers and analysts on Baan's situation.

Microsoft sees enterprise applications as key to future growth. BusinessWeek has a good overview of Microsoft's plans to establish itself as a dominant play in enterprise applications, such as ERP and CRM, for small and mid-size businesses. I wrote previously about the problems Microsoft will face in executing this strategy, especially in terms of competing against its current ISV partners and creating channel conflict among its resellers. BusinessWeek points out that Microsoft intends to train the 24,000 resellers of its system software to sell its applications also. I don't understand how this can fail to result in channel conflict and dissatisfaction among those value-added resellers (VARs) that really understand how to sell and implement enterprise systems.

On a personal note. On Wednesday evening, April 16, I'll be speaking at the joint dinner meeting of APICS Orange County and ASQ on the subject of "Enterprise Systems in an FDA-Regulated Environment." Here's the abstract.

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Manufacturing firms in all industries use computer systems, such as ERP, Product Data Management, Supply Chain Management, and Quality Management to meet requirements for managing resources and ensuring product quality. But companies in regulated industries, such as the life sciences (pharmaceuticals, biotech, medical devices, etc.), must comply with additional governmental requirements to ensure the integrity and trustworthiness of such systems.

In this fast-moving presentation, Frank Scavo will outline how FDA regulations affect the use of computer systems in the design, manufacture, and distribution of medical devices, drugs, and biologic products. Specifically:

1. How FDA regulations for Good Manufacturing Practices (GMP) and Quality Systems affect use of computer applications such as such as ERP, Supply Chain Management, and Product Data Management



2. What FDA expects you to do to validate a computer system "for its intended use"



3. New FDA draft guidance regarding use of electronic records and electronic signatures (21 CFR Part 11)

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Reservations are due by noon, April 14, and may be made by calling APICS Orange County at (949) 863-7625. Or, contact me if you would like more information.

PeopleSoft is tired of being the best kept secret in supply chain management. PeopleSoft is well-known as an ERP developer with strong roots in the HR function. But what is not well known is that when it comes to supply chain management (SCM) applications, PeopleSoft has more installs than Manugistics, a big name in SCM. Last year, AMR released statistics that show PeopleSoft with 7% of the SCM installed base, following SAP (26%), in-house/custom (23%), Oracle (10%), and i2 (9%). Manugistics has 5%. Interestingly, the category "other" has 38%, showing that the supply chain management category is still a highly fragmented market and ripe for a financially sound vendor such as PeopleSoft to increase market share.

Recognizing this opportunity, PeopleSoft lately has been pushing its significant capabilities in SCM. Last year, PeopleSoft hired Patrick Quirk out of i2, to serve as VP and GM of PeopleSoft's SCM division. This year, the release of PeopleSoft 8.8 is slated to include increased functionality for supply chain planning and better integration with the rest of the enterprise suite. This latter point is important because for too long PeopleSoft has allowed its SCM modules, which it picked up years ago in its acquisitions of Red Pepper and Distinction, to stand apart from its core system. In Version 8.8, these modules are now completely rewritten in PeopleSoft's development toolset, PeopleTools. It is also being reported--and a local PeopleSoft sales manager confirms--that PeopleSoft is hiring over 100 new salespeople. Expect to see a good part of these feet on the street to be hunting for SCM deals.

Manufacturing Systems has more on PeopleSoft's renewed focus on SCM.