| Thiru Vengadam is a man in a hurry. The soft-spoken country manager of PeopleSoft in India has been jetting around the country in the last few months, aggressively pitching for business in corporate boardrooms and touting the advantages of his company's software vis a vis that of established rivals in India like SAP and Oracle. |
| Among other things, he's pointed out that PeopleSoft's software is cheaper than SAP's or Oracle's software. |
| Vengadam's frenetic pace reflects a dramatic phenomenon: a relatively new software boy is in town and has triggered off one of the biggest wars in the enterprise applications (software applications that help companies to automate their business processes) market in recent times. |
| PeopleSoft entered India late and has been around in India for almost two years but it's now racheting up the stakes in a no-holds-barred fight for marketshare. The chief weapon in its armory? Price. |
| Says Vengadam: "We are 40 per cent to 50 per cent cheaper than our rivals in terms of the cost of ownership." |
| The stakes are high: a larger chunk of the over $ 100 million business process software applications market, which is projected to grow at an annual clip of 10-15 per cent in the next few years (33 per cent in terms of new clients coming to the market between 2004 end to 2005 end). |
| Says Vengadam: "Our aim is to get at least 50 per cent of the incremental new clients in the market in 2005." |
| But PeopleSoft's rivals aren't exactly sitting quietly. They're taking the war into PeopleSoft's camp, namely, solutions for the services industry. |
| Confirms S P S Grover, senior director at Oracle: "Service companies like telecom firms and banks are looking for an integrated solution. They want a total IT solution. And we can provide that through our e-business suite and Information Architecture." |
| The war, to some extent, is an extension of the global war between SAP, the German software giant, and the $ 2.9 billion PeopleSoft. |
| The US-based company has taken on SAP in the human resource management and payroll processing areas in particular. Now it's racing to bag more clients here. |
| Independent market share statistics on the enterprise software applications business are complex, difficult to come by and are often outdated. |
| One proxy is the number of customers a company has. PeopleSoft has already doubled the number of its clients from 70 at the end of December 2003 to 130 currently, thanks also to the fact that it acquired rival US company JD Edwards globally. |
| JD Edwards already had 30 to 40 clients in India. But Vengadam says he is aiming to hit the 200 mark by the end of this year "� or 30 per cent of all new customers this year. |
| Certainly, PeopleSoft has snared some big clients. It bagged Hindustan Petroleum Corporation Ltd's (HPCL) ERP implementation project. This involves over 2,300 concurrent licensed users of PeopleSoft software "� and mind you, SAP accounts for nearly 99 per cent of this area. |
| Says a senior HPCL official: "There was a price advantage in PeopleSoft's offer, without losing any technical functionalities." BPO company Daksh (which IBM recently acquired) too opted for end-to-end ERP solutions from PeopleSoft. And the Manipal group is using the company's software to integrate information on its 15,000 students across the country. |
| Other corporate clients say they have not been unhappy with the PeopleSoft experience. Patni Computers used Peoplesoft to automate its finance and HR processes and the company's head of management information systems Rajiv Kshirsagar says: "We found PeopleSoft to be customer friendly and committed to supporting us for a long period of time. As far as reputation was concerned, we looked at their global reputation rather than what they have done in India." |
| Patni which has bought applications from disparate vendors (for example, it uses Siebel for CRM) hopes to integrate 75 per cent of its business process applications with PeopleSoft software within the next three years. |
| Still, PeopleSoft won't find the going easy. It has formidable rivals "� and they have dominated the Indian market for years. SAP, for example, has over 550 clients and a 57 per cent share of the enterprise resource planning (ERP "� software applications used to automate a company's business processes, ranging from areas such as the financials, to payroll, human resources and product management) market. |
| SAP also accounts for 26 per cent of the customer relations management space (CRM "� software applications that help a company integrate with its customers). |
| SAP won't just roll over and give up its market share. In SAP's scheme of things, India will be among its five markets globally (up from the current top 10), within the next few years. |
| SAP India president and managing director (Indian sub continent) Alan Sedghi is dismissive about PeopleSoft. "To me it is a company of yesteryear. Its claim to fame is HR applications. But even here with 150 clients we outnumber it many times. Our footprint is unmatched. We don't bother about competition." |
| PeopleSoft also faces competition from Oracle, the big daddy of the data base software market. Oracle India is launching a range of new ERP, CRM and supply chain management (SCM "� software that helps companies integrate their vendors, wholesalers and retailers) software. |
| In an interview to Ice World in November last year, Oracle India managing director Shekhar Dasgupta said that the US company was reaching down to a mass market by launching software solutions for small and medium enterprises. |
| Oracle has over 200 ERP clients. Notes Grover: "PeopleSoft is competition only in the HR segment. What we are offering is an integrated solution where database, CRM, SCM and business intelligence are offered as a comprehensive package. That is our USP. " |
| Oracle has other strengths: its 6,000 plus customers who buy its database software (in which it has a near monopoly) are potential ERP solutions customers too. What is more, 60 per cent of PeopleSoft-installed software run on data base software turned out by Oracle. |
| Undeterred, PeopleSoft has chalked out a multi-pronged growth strategy. First, it intends to aggressively seek customers for software for the manufacturing sector, a business in which it earlier lacked expertise. PeopleSoft can now piggyback on the strengths of J D Edwards, which specialises in software for manufacturing. |
| It's not ignoring services businesses, either. Vengadam says that these businesses are pregnant with possibilities "� many telcom companies, banks and educational institutions are realising the need to implement ERP, CRM or SCM. PeopleSoft is talking to at least three or four telecom companies and expects to clinch deals with them soon. |
| Secondly, PeopleSoft is making pitches to companies that have already implemented ERP, CRM or SCM in the last four to five years and are now looking for a major upgrade or a replacement. |
| Says Vengadam: "Many customers see a roadblock in upgrading their systems because of the high cost our rivals charge. We see a large opportunity there." Vegadam hopes that companies that already have an old installed base will account for a third of PeopleSoft's customers in 2005. |
| Thirdly, PeopleSoft is also seeking to cater to companies that are unwilling to pay hefty sums to implement business process automation. It has partnered with Indian software company Zensar Technologies in an initiative called "Shared Service Program." |
| Companies can outsource their HR functions to Zensar "� the shared service program is powered by PeopleSoft software "� and pay according to usage, instead of implementing a solution on their own. |
| In all this, PeopleSoft keeps on pounding home the message that it's cheaper than Oracle or SAP. Vengadam brandishes a presentation by research agency Metagroup which shows that PeopleSoft's products on a total cost of ownership basis are 25 per cent cheaper than Oracle's and 51 per cent cheaper than SAP's. |
| PeopleSoft argues that that's because it takes six months to implement ERP, while rivals take an average of nine months. |
| Secondly, PeopleSoft software requires less server memory, fewer manpower resources and is easier to learn "� only two weeks of training, vis a vis six months for the software of its rivals. |
| Thirdly, unlike its rivals PeopleSoft offers flexible modules, which easily integrate with other rival company applications. So a customer does not have to automate all its business processes at one go. |
| PeopleSoft also claims that its post implementation costs are also substantially lower than those of its rivals. Vengadam again refers to the Metagroup study, which claims that Oracle is two-and-a-half times more expensive on implementation while SAP is less than 10 times more costly. |
| That, Vengadam says, is because the company offers maintenance and service levels which its rivals don't match "� software updates for four years from installation without any extra charge (this is part of the maintenance cost) compared with for two years by rivals; tax updates (for those who use ERP in financial and payroll operations) at no extra charge for six years; andindefinite technical software support. |
| In a further bit of boosterism, Vengadam adds that PeopleSoft has a revolutionary licensing policy "� the licence to use the software applications is not restricted to an entity or a company. |
| The company's suppliers, vendors, customers and any other legal corporate entity promoted by the company can use the licence at no extra cost. |
| But its rivals rubbish the PeopleSoft price advantage. SAP says that it charges a premium price but offers more value. So the total cost of ownership is not higher than that of PeopleSoft. |
| Says Sedghi: "Of course there is a premium attached to our product because we deliver more value. Yet I have not come across a case where we have been commercially unattractive." |
| The German company also points out that PeopleSoft too charges its clients an annual maintenance fee, and SAP's software updates, tax updates and technical support come free. |
| Says Sedgi: "We also don't charge anything extra. We are maintaining and supporting installations that were installed as early as 1992-1993." |
| SAP also rejects PeopleSoft's contention that the US company implements its software far more quickly. |
| SAP says that the average time it takes to implement ERP ranges from four-and-a-half months to seven months. It took SAP just 11 months to take a large (over 8,000 licences) ERP project at ONGC live and running. |
| For its part, Oracle fires a broadside at PeopleSoft "� the company not have any price edge, Oracle says. Oracle has an ERP product for the lower endof the enterprise market. It takes just 15 to 45 days to implement it "� and costs only Rs 16 lakh. |
| Grover makes an extra point: the total cost of ownership of an Oracle product is lower because it offers an integrated (data base, business intelligence software) solution which PeopleSoft can't offer. |
| Yet PeopleSoft has the odds stacked against it. Many big companies don't take price into account at all. |
| Confirms Bajaj Auto's IT head Anil Khopkar: "Price is not a criterion at all. After all, we have a turnover of over Rs 5,000 crore and spend Rs 6 crore to Rs 8 crore on business process automation. Even a 20 per cent lower price does not lead to major savings. What we look for is stability, whether the system will run for the next five years. That is what SAP offers." |
| Nor do large companies that have already implemented ERP or CRM find any reason to switch to a new software supplier. Says Jai Menon, director at Bharti Tele-Ventures, which implemented Oracle applications a few years ago: "These processes are working fine. |
| Until they give us trouble, I find no logic in changing to a new vendor." |
| PeopleSoft also doesn't have a large installed base of clients in all industries. Says a senior executive at Hero Honda, the Delhi-based motorcycle company which was able to recover its investments in SAP in 18 months: "We looked around and saw that most of the automotive companies in the country had implemented SAP and it had a stable system for this industry." |
| Probir Mitra, general manager, IT, Tata Motors,makes the same point when asked why the Tata company picked SAP: "SAP has a market presence that is many times higher and a broader functionality coverage than PeopleSoft. Furthermore, based on our information, PeopleSoft did not have any automotive industry presence." |
| PeopleSoft is aware of such issues. That is why it is trying to tap newer industry segments in the ERPCRM market and ramp up the number of its alliance partners, companies that implement the project on its behalf. |
| For instance, PeopleSoft is planning on adding two more alliance partners for the construction and healthcare areas, which it thinks will have a potential for large ERP projects. |
| To cater to the needs of small and medium businesses, it wants to double the number of its alliance partners from two to four. |
| PeopleSoft is also pushing its brand by organising 18 special events across the country, where its technology will be showcased to potential clients. |
| Yet the big question remains: can PeopleSoft become as large as or larger than SAP and Oracle in the Indian business process automation market? For an answer, wait till the end of 2005. |
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