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Your career affected by shift from ERP to SCM and CRM?

So how does this shift from ERP to SCM and CRM affect your career plans?
Eric Lehti



Supply Chain Software Spurs JDE to Record $1 Billion for Fiscal 2000

by Timothy Prickett Morgan (Midrange Computing - Monday Morning Update)

When J.D. Edwards & Company bought supply chain software company Numetrix
last year, executives at the company probably had a very strong sense that
the traditional client/server enterprise resource planning (ERP) software
market was over and that adjunct programs to traditional ERP suites--such as
supply chain management (SCM) and customer relationship management
(CRM)--would be where the action would be for the foreseeable future. It
will come as no surprise to astute watchers of JDE, which has grown from its
humble AS/400 beginnings to become one of the top five open systems
application software vendors in the world, that JDE has been proven right.
The company broke $1 billion in sales for the first time in its history and
appears to be on its way to hit $1.2 billion in sales for fiscal 2001.

After a very difficult second half in fiscal 1999 and first half in fiscal
2000 (which ended October 31), JDE is back on track with respectable
double-digit growth rates. They may not be the 35 to 40 percent growth rates
that investors were spoiled by in the heyday of the ERP market from 1996
through 1998, but a 20 percent growth rate in a mature software market is
nothing to shake a stick at.

For the fourth fiscal quarter, JDE had license revenues of $137 million, up
36 percent from the $101 million it got during the same quarter in fiscal
1999. However, overall revenues for the quarter were up only 7 percent to
$277 million, because services revenues dropped 10 percent to $140 million.
For the full fiscal year, overall revenues were up 6 percent to just over $1
billion, with license fee revenues up 34 percent to $419 million and
services revenues off 8 percent to $582 million.

On the profit side, JDE reported a net profit of $9.6 million after
restructuring charges (8 cents a share), and for the full fiscal year, it
reported a loss of $15.4 million (14 cents a share). While the net loss for
the year did not make Wall Street very happy, it was not unexpected and was
a marked improvement over the $39 million loss for fiscal 1999 (37 cents a
share).

Rick Allen, JDE's chief financial officer, says the company was so
encouraged by the results it got in its fourth quarter that it was revising
upwards its estimates for fiscal 2001. Allen said in a conference call with
Wall Street analysts that the company was revising its expected software
license revenue estimates to 30 percent growth over fiscal 2000 levels--it
had previously said it would be 25 percent--and also said that the company
expected 10 percent growth in its services business. If JDE meets these
numbers, it will be kissing $1.2 billion in revenues for fiscal 2001. The
company also said that it expected to have $95 million in license sales in
the first fiscal quarter of 2001 and $145 million in services sales during
the same period; Allen also said that the company expected earnings per
share in the range of 1 cent.

Company founder Ed McVaney said in the conference call that high growth had
returned to JDE and its industry sector, and that the pipeline for future
sales was robust. He said that JDE was specifically benefiting from the move
to B2B and collaborative computing, and that many of JDE's customers were
ripping out their old client/server ERP systems, which are anywhere from
five to seven years old, and replacing them with Web-enabled suites like
JDE's just announced OneWorld Xe suite for OS/400, UNIX, and Windows NT/2K
servers. He also said that the company has recently installed its 1,000th
OneWorld customer (meaning there are still some 5,000 customers using the
WorldSoftware green-screen suite for AS/400s), and it had eight customers in
production with OneWorld Xe, which was announced on September 18. McVaney
also said that he was particularly encouraged that the competition is
thinning out in the enterprise software market, that JDE's success rate
against SAP AG and Oracle (the number one and two application vendors in the
world, respectively) is on the rise, and that the average deal size JDE's
sales reps and partners are taking down is increasing.

Chief operating officer David Girard said that the company closed 25
transactions worth over $1 million in the fiscal fourth quarter, twice the
number of that during the same quarter in fiscal 1999. He also indicated
that these deals represented almost half of the total licensing revenue
during the fourth quarter of 2000. (This is that rip-and-replace thing I
just mentioned.) For the full fiscal 2000, JDE had 73 deals worth over $1
million; again, twice the number it closed at in fiscal 1999. The big deals,
when done right, are the profitable deals, so you can understand why JDE is
fired up. Girard said that eight of the 25 big deals closed in the fourth
quarter had huge supply chain components, and that the company's sales of
Advanced Planning (formerly Active Supply Chain) software grew sequentially
from Q3 by 70 percent and accounted for 25 percent of total license sales in
Q4. He also said, in something of a shocker, that if all the CRM and SCM
additions are lumped together, they represented 55 percent of total license
sales in Q4. JDE is in the process of backcasting support for Advanced
Planning to WorldSoftware, which is important. It has also just delivered a
version of Advanced Planning for discrete manufacturers in October, and,
considering that 40 percent of its installed base is discrete manufacturers
that need supply chain solutions, JDE is very optimistic about the future.

There's almost always a downside in the complex software business, and JDE
still has some work to do to boost services revenues and their
profitability. Like other vendors, JDE was spoiled by the Y2K bump.
Customers are not as pressured as they were in 1998 and 1999 to implement
solutions, so they don't look at services in necessarily the same way. JDE
has to sell services on their own merits; it knows this, and it is working
to build a services team that can do this. There was also some talk about
tweaking maintenance fees, and I presume this meant an upward, not downward,
price tick. If you know how JDE has changed its prices, let me know at
<mailto:tpm@midrangecomputing.com> tpm@midrangecomputing.com.
 
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