There is much speculation as to what the future holds for the so called ‘Big Five’ in the UK accountancy world – with brand changes, acquisitions, legislation and regulation all pushing constant change.
As a result, Pricewaterhouse Coopers, KPMG, Deloitte & Touche, Arthur Andersen and Ernst & Young are required to continually reinvent themselves at an ever-increasing pace.
The same can be said of the UK Enterprise Resource planning field. Here too, there are a traditional ‘big five’ of companies, which dominate their sector.SAP, Baan, Peoplesoft, JD Edwards and Oracle have long been recognised as the ERP leaders in the UK – despite ever increasing competition from dotcom companies and consultants.
This traditional top five has however looked less assured over the last 18 months with the release of generally poor results. Some have reported job cuts and large losses.
This has come as a shock to these five companies as they had become accustomed to a seemingly never-ending demand for their products.
However a major slowdown in sales has prompted the companies to reconsider their future directions and image.
Most ERP vendors suffered in 1999 – not just the big five – with most pointing to the Y2K bug, company consolidation and locked down budgets as the main reasons behind the slowdown.
Baan has suffered arguably the most of all the vendors. It has reported six consecutive quarters of net losses and profitability remains elusive for the company.
The company announced a corporate restructure at the end of last year, which included the resignation of chief executive officer Mary Coleman. Baan also said it was to lay off 450 of its workforce, close 14 offices and taken a $200m restructuring hit.
The Amsterdam-based company posted a 1999 fourth-quarter loss of $236m (£149.4m) in February, in line with the profit warning it had issued the month before. The loss compared to a loss of $295m for the same quarter in 1998. Results were not all bad news however. Licence revenues increased by 92% up to $49m from $25.6m the year before.
Despite negative results Baan has seen sales increase. Reports of a 9% increase in fourth-quarter revenue were posted over the same period in 1998, while licence revenue increased 92% over the comparative period in 1998.Peoplesoft beat average Wall Street estimates for its fourth quarter earnings announced in February, but still posted a net loss. What’s more revenue dropped 9.5%. Results included a $5.57m (£3.5m) loss and sales fell from $411.3m to $372.3m on the same quarter in 1998.
Overall revenue and net income for 1999 were lower than the previous year. Revenue was down from $1.47bn to $1.43bn and net income fell from 4164m to $21m.However despite the doom and gloom the fourth quarter result for the company were better than expected.
Director for product management for financial products in Europe, Rob Cools, said: ‘Our fourth quarter was excellent and overall in 1999 we were not hit as hard as we thought we would be.’
Meanwhile Oracle was the only ERP vendor to remain reasonably unaffected from the difficulties of last year. A number of analysts believe this is in part due to the great things expected from the company regarding e-business.
They believe its ERP customer-relationship management and procurement offerings are ahead of the rivals’ equivalent offerings despite the fact its web-enabled application suite Oracle Applications Release 11i has still to be unveiled.
It’s CRM and order management solutions are also not expected until later this year. It is however, universally accepted the company embraced the internet far sooner than the likes of SAP – standing it in good stead as proved with the 76% increase in application sales in 1999 compared to the previous year.
Neil Brooks, says: ‘We redesigned our research and development over four years ago towards the internet and we were the first company to use XML internally. ‘It is because of this early work and our adoption of ERP wrap arounds such as supply chain management and HR competencies that we have not had bad results and indeed we have seen a positive growth in every quarter in the last two years.’Over at SAP, the company managed to hold on to its number one spot, cemented after posting better than expected fourth quarter results last year. It reported a 43% increase in product revenue to $1.12bn (£0.7bn) and a net income rise to $315m for the quarter, which compared favourably with the same period in 1998.Overall last year revenue grew 14% over 1998 and net income rose 14% to $598m. As the results were made public, company co-chairman and CEO, Hasso Plattner proudly boasted it would double its 1998 revenues of $4.29m in 2001.A major factor last year for the company was the introduction and considerable spend which was channelled into mySAP.com for the internet – the launch of easier to use applications.
It has been criticised for embracing the internet too late but over the course of the last 18 months it has embarked on an internet strategy and delivered a web portal for its applications.
A similar scenario is taking place at JD Edwards. Spokesman, Trevor Solomon, says: ‘We treated last year as an opportunity to invest in our core products and build relationships with the likes of Siebel and Areba. We are now hoping to take advantage of that work during 2000.’
ERP made simple
ERP is an umbrella term for integrated business software systems that power the corporate information structure, helping companies control their inventory, purchasing, manufacturing, finance and personnel operations.
The market has seen rapid change over the course of the 1990s with a move away from a purely IT concern based on generally dated mainframes.ERP systems are now very often the centre of management functions across geographic sites and the increasingly complex networks of the larger multinational companies.
However there appears to be a stigma attached to ERP terminology and a number of companies appear to be moving away from that description.
At the beginning of the year Baan reported a massive reorganisation amid the announcement it wished to be called an e-commerce provider. This move has been compounded by the view that ERP’s client/server will not do any better in 2000, the majority have began a move towards the internet.JD Edwards, SAP and Oracle are building up online internet exchanges; most ERP players are trying to add customer relationship management functionality as well.
The number of companies that are expanding their core offerings is continually growing. JD Edwards has announced in January a partnership with Tradex technologies to offer online business-to-business exchanges.Oracle and SAP have already moved towards gearing up exchanges in vertical markets like hi-tech and manufacturing.It appears the web and e-commerce therefore holds the key to the future of the five companies.
Baan’s recovery strategy involves focusing on providing online order-fulfilment and supply-chain management applications and to continue investment in CRM suite it acquired from Aurum Software. As part of image changes, it now likes to be known as a business to business vendor.It will spend less time building industry-specific and custom extensions to its ERP suite, which haven’t proved marketable. It believes it will continue to produce ERP growth ‘but in a different way.’
Solomon, adds: ‘Quarter one of this year has been good and an improvement on last year at the same period. Overall I think we are the vendor that the others fear the most as we have the most modern and agile business architecture; which means we can introduce new products quicker than the others can. For us e-business is the way forward.’
More internet, specifically business to business e-commerce is set to become upper most in the minds of the Dutch company Baan and its recently released product E-Enterprise includes applications to help companies set up web-based storefronts.
JD Edwards, the Denver-based company, which was once considered a more of a mid-tier company, has increased its sales staff over the last year while its rivals have scaled down their sales operations.The company added a web portal front end to its OneWorld ERP applications and is integrating the supply-chain management applications it acquired from Numetrix last year. Meanwhile it is tackling CRM and business to business procurement by reselling applications from Siebel Systems and Ariba. It, too is one of the companies inching away from an ERP based company image.Peoplesoft is looking forward to a better year this year. In the second quarter the company expects to release Peoplesoft 8, which will make its ERP applications available through a web browser.Rob Cools, says: ‘The future is exciting. However where we used to have four main rivals we now have a whole new range of organisations that are up and coming.’It is also planning to offer complete integration between its ERP applications and Vantive’s CRM applications. Through a reseller agreement with procurement vendor Commerce one the company is hoping to make waves in the business to business marketplace.Many analysts do not believe SAP will be able to return to its former glories when it was growing at a rate of 40%+ every year.In an attempt to recapture its former glories, it has attempted to rid itself of its ERP image and move further towards an e-commerce business provider.The German-based company has however been warned by analysts that time is not on its side and other companies are moving in on its intended patch.A recent attempt to make up for lost time included the launch of new business applications for handheld and wireless internet devices earlier this month – a move which confirmed its shift away from traditional ERP seller towards web-friendly applications.
It also announced the formation of a new subsidiary – SAPMarkets – dedicated to creating business to business marketplaces on the internet.My.comSAP marketplace solutions manager, Nigel Ford, says: ‘We are moving from being strong in the multi-tier business applications to new areas of the internet.’
Meanwhile JD Edwards has recently announced it is to form a new business unit to focus on building online trading exchanges, although Oracle appears so far to have made the most successful attempt at attacking and succeeding in this market and has undergone a makeover towards an e-business.
Oracle’s Neil Brooks, concludes: ‘The one favour Y2K has done for ERP firms is to make companies into a checkpoint of the core parts of their ERP functions. Many have still to purchase their replacement systems.
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