J.D. Edwards’ ease of use attracts customers

WHILE COMPETITORS SUCH as SAP and Siebel spent most of the last decade focused on Global 2000-class customers, J.D. Edwards has been quietly establishing itself as a major supplier of ERP software for the midrange market by focusing on ease of installation and integration. Now with the economy turning and frustration with multimillion-dollar IT projects on the rise, larger organizations are beginning to consider J.D. Edwards as a viable alternative. In an interview with InfoWorld Editor in Chief Michael Vizard and Test Center Director Steve Gillmor, company CEO Bob Dutkowsky talks about his company’s approach to the development of collaborative applications for the enterprise.

InfoWorld: Last May your company released Version 5 of its suite. What is the strategic initiative around that release?

The other big strategic initiative is to lay out an architecture for our customers that makes them aware of where we are today and where we anticipate the market going. We’ll bring more new software to the market in the next two years than we’ve brought in any two-year period in our 25-year history. That innovation spans all of the families of J.D. Edwards 5 — ERP, CRM, supply chain, advanced planning, business intelligence, [and] content management, and will touch all pieces of our portfolio of products.

InfoWorld: There’s a lot of discussion about Web services these days and the impact this technology will have on collaborative applications. What’s your take on this?

Dutkowsky: Obviously J.D. Edwards 5 is not rich with Web services today, but over time we’ll add Web services — if in fact Web services become a reality that drives the solutions business. I think there’s a whole set of work that needs to be done on developing some standards and some business processes around Web services. I think Web services have tremendous promise, but from a pragmatic point of view, customers have business problems they need solved, and today’s solution is a far more suite-oriented approach.

InfoWorld: So what are your customers asking for today then?

Dutkowsky: They want to be able to connect new applications to legacy applications inside the enterprise. They’re asking us for more business processes to help improve the execution in the enterprise and in the collaborative enterprise. Obviously, a way to accelerate that over time is through the deployment of Web services. But customers are not going to wait for that — they want that now. One of the hallmarks of J.D. Edwards 5 is we took all of the software and tried to break it up into smaller pieces so the customer can buy applications or solutions to business problems that they have today and integrate that into existing legacy systems. So in a very simplistic way, we turned J.D. Edwards 5 into a source for Web services. It’s now smaller, component software.

InfoWorld: What’s the benefit of doing that?

Dutkowsky: I talked to about 500 customers face-to-face, and if you distilled down what they asked for as the next killer app, it was ease of use. They want to take the power and functionality and promise of this collaborative software and make it easier to implement and install — make it easier to train people on and to get the productivity promise that it really has. When we talk about integration best practices and that we’ve invested heavily in a one-look-and-feel initiative across all of J.D. Edwards 5, we think we’ve moved a long way toward enhancing and delivering on that promise of ease of use. My guess is, in the next three to five years that will be the killer app. All businesses are trying to mask the complexity of these systems. The software vendor that figures out how to make it really easy to use, implement, and deploy is the one that’s going to be the winner in the long run in this space.

InfoWorld: What is driving all the interest in business process integration these days?

Dutkowsky: It’s the process that a business has to go through today to assure their management and their board of directors that they can, in fact, integrate an application and get value back. It’s one thing to buy software and stick it on a server and have the network capacity to run it; it’s another thing to get a return on that investment. Business process is where the value comes from. So I think it’s just the way that software needs to be sold and installed today and justified in a business. We have a set of offerings that are business processes that are easily deployed along with our software, and we have consulting practices that help the customer derive value from that. What we find is when we bring the whole package — consulting, the software, the business processes, the services and maintenance afterwards — our sales cycles are far more efficient and the customer derives value quicker so they come back and buy more from us much faster.

InfoWorld: Are people using your applications as a foundation to build other applications?

Dutkowsky: We have a toolset that they can buy that helps them accelerate the deployment of additional applications that they may build because the integration is very simple. The fact of the matter is, a lot of customers bring legacy applications to the table, so it’s not like they just build it from scratch.

InfoWorld: What most differentiates J.D. Edwards in the suite space?

Dutkowsky: Today, everybody has an ERP from someplace. Either they built it themselves or they bought it from somebody, and it’s either delivering value or it’s not. When the value is not acceptable and the customer is looking for a different pathway to get better performance, with us they can do that with the big bite or they can do it with small pieces. One of the hallmarks of J.D. Edwards 5 is those seven families of products; the customer can start anywhere they want with any of the seven families. It used to be you had to buy the big ERP system — you had to take all of it before you could get any value from any of it. That’s why the implementations lasted so long. With J.D. Edwards 5, the customer can start anywhere they want and wind up anyplace that they want, or never wind up with any more of J.D. Edwards 5 than the first module that they chose.

InfoWorld: So how does that contrast with some of your larger competitors?

Dutkowsky: When you look at J.D. Edwards’ performance over the last three quarters, part of the reason why we believe we’re growing and a lot of our competitors have revenues that stopped growing is we’ve made the leap to [this] small-bite, quick-chew kind of philosophy. Collaborative software, for years, has been a big bite and a long chew. I don’t think that’s what the market wants in the post Y2K, post dot-com, post e-business era. Lots of people went to boards of directors and asked for blank checks to re-engineer their business around a different model, and boards gave out blank checks, of which they’ve seen very little return on investments. Now boards are saying they want a quick, easy-to-install, easy-to-rationalize business case [where] they can measure the return on investment quickly. And when they see the return on the investment, then they’ll fund the next project.

InfoWorld: Isn’t it hard to overcome the inertia of the established ERP system?

Dutkowsky: There are what we like to call second surgeries, where somebody’s put in an ERP system, struggled with it or got value from it for two, three, four, or five years, and then it’s time to upgrade that system. And before they just jump and upgrade it like lemmings — there’re a lot of businesses that are stepping back now as educated buyers of ERP systems. And what do they typically look for the second time around? Ease of implementation, [something that’s] easy to customize and has a rapid return on investment. That’s what J.D. Edwards sells and that’s our hallmark compared to an SAP or an Oracle.

InfoWorld: Are you making any headway in the Global 2000 space?

Dutkowsky: There are prospects of customers inside the Global 2000 that fit our model very well. We have some big customers such as Johnson & Johnson, Wal-Mart, Coca-Cola, Federal Express, Bank of America, Hertz, and United Technologies. But here’s what they have in common: They’re usually a decentralized company that has multiple divisions, and that division actually looks like a midmarket kind of account. We’re already upstream, but where we’ll be focused upstream is in those decentralized, divisional-driven companies that have flexibility.

InfoWorld: Now that Microsoft has entered the ERP space, how do you view them as a potential competitor?

Dutkowsky: We view Microsoft as a good partner, and their initiatives with Great Plains and Navision in our view sit below our value proposition. They’re in that huge, unwashed kind of SOHO [small office/home office] space, and we sit slightly above that. And then there’s SAP and Oracle that sit above us in the Global 1000 kind of businesses. Microsoft has entered the application space, but we see them as a partner that has a set of values that sits in a different place than ours. But anybody who lets their guard down with Microsoft is making a mistake. At the same time, we have some very aggressive partner initiatives going on with Microsoft, so it’s coopetition at its finest. It’s the nature of the industry.

InfoWorld: In the past, ERP suppliers forced business to bend to meet the software. In the future, will software bend to meet the business?

Dutkowsky: It must bend or you cannot compete. The days of changing your business to map to my software [are] over. And [they] should be over. The software is sophisticated enough today and the customer is sophisticated enough today to not tolerate that anymore. That’s why we think we’re growing and our competitors have stalled, because our systems are architected to do that.

InfoWorld: How important will real-time or near real-time computing initiatives be going forward?

Dutkowsky: The more responsive that an enterprise system or a collaborative system can be to the needs of the business, the more competitive the business becomes. The tolerance for latency has gone way down. I think that’s one of the buying criteria that companies have today.

InfoWorld: Given the complexities around EAI, do you see an opportunity for hosted EAI services?

Dutkowsky: In our space in the midmarket, the customer doesn’t have the infrastructure or the sophistication to try to manage that, so I think that there’s opportunity for growth in that space. The bigger guys can build the infrastructure and kind of handle it themselves, but in our market space I think there’s good opportunity there. I think there [are] some skills that J.D. Edwards has with our consulting and service capabilities, but we obviously need our partners — in particular the big systems integrators — to help us on some of those fronts. We’re half owners of an ASP out on the West Coast of the United States, which offers the infrastructure to a customer if they don’t want to run the application. So we have that capability.

InfoWorld: What about running ERP applications through an ASP model? Is that viable?

Dutkowsky: I think customers are becoming more willing to outsource their applications to an ASP. But I’ll tell you honestly, our experience has been to date that most companies are not leaping to the ASP model. We’ve been part owners of an ASP company now for a couple of years, and we have several very committed successful customers out there such as Brigham’s Ice Cream. But the vast majority of our 6,500 customers are running [their applications] themselves. But there’s potential there. If you look at the customers who have spent tremendous amounts of money just to build the infrastructure … I’ll bet a lot of those guys that have been sold CRM systems wish they [hadn’t built] up all the infrastructure [in light of] the non-return on investment they’ve received. They probably wish they outsourced it for awhile, got it to be a return on investment, and then brought it back in-house.

InfoWorld: Speaking of CRM, you recently moved into this category by acquiring Youcentric. What’s your general strategy?

Dutkowsky: One of the things that was appealing to us was the fact that Youcentric is based on J2EE and it absorbs the database of the existing legacy systems or it attaches itself to the database. Consequently, the customer doesn’t have to build tremendous infrastructure to add Youcentric’s CRM to their business model vs. Siebel where you have to have a big buildup before you can even make Siebel work. In our midmarket’s case, we thought that the Youcentric approach was far more applicable to what the customers really want, which is to avoid a lot of that up-front cost and get a rapid return vs. having huge investments. We realized that we needed a CRM solution a few years back and we decided to partner with Siebel, the industry leader. The fact of the matter is Siebel has done very little business in our selected segments because it’s too complex. It’s not easy enough to use, it costs too much to install it, and you have to build a dedicated infrastructure. We bought Youcentric, which is a better product for our customer set. We resold Siebel for almost two years and we worked for two years to integrate Siebel into J.D. Edwards and made minimal progress. We’ve owned Youcentric now for nine months and we’ve announced three versions of the integrated product. After banging our head against that wall for two years, the fact of the matter is the Siebel doesn’t fit in that space. Just like you can try to shove Oracle or SAP downstream and you’ll find some places where it fits, but generally speaking the product is too complex for that market space.

InfoWorld: So as the CEO of J.D. Edwards, what’s your primary goal?

Dutkowsky: I want to see J.D. Edwards continue to improve its execution at the rate it has been over the last few quarters. We think we’re beginning to hit on all cylinders, but we’re not declaring victory yet. We have a lot of work to do and we’re going to continue to drive the business to improve. But if we could just continue to make the progress that we’ve made over the last few quarters over the next four or five quarters, then I would be a happy CEO. We’re in a 15-round heavyweight fight, and we’re now in about the fifth round. We know what it’s going to take to be successful in this battle, we’ve taken some of our competitors’ best shots and we’ve laid out some good shots, and we know we have the exact strategy it’s going to take to continue to grow and to support our customers and be an important player in this whole collaborative software space. The rebirth of J.D. Edwards is on.