PeopleSoft Continues Change Into CRM Firm With Annuncio Purchase

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PeopleSoft's purchase of the intellectual property and partial assets of online CRM technology firm Annuncio Software this month represents another step in a three-year journey for the company.


That journey has changed PeopleSoft from a maker of human resources software with a New Age management style into a full-service customer relationship management provider with a hard nose. It began with a drastic change in leadership in 1999 as founder David Duffield, currently company chairman, stepped aside for current president/CEO Craig Conway.


The company has moved from the precipice of collapse and become a vital competitor for software giants Oracle and SAP. PeopleSoft entered the CRM field in January 2000 with its acquisition of Vantive.


However, analysts said that despite the Vantive acquisition, PeopleSoft lacked all the tools needed to compete fully in the CRM market, most importantly an online and marketing aspect.


"The Vantive product PeopleSoft acquired has some obvious strengths in the call center and customer service environment," said Eric Schmitt, senior analyst with Forrester Research, Cambridge, MA. "There were some gaps in the marketing front."


The acquisition of Mountain View, CA-based Annuncio's assets will give PeopleSoft a leg up into the online CRM market. Annuncio's technology adds e-mail campaign management, marketing automation and online personalization to PeopleSoft's repertoire of CRM functions.


"Annuncio's products are strong in many of the areas that are weak in PeopleSoft's [products]," said Rochelle Shaw, senior research analyst with Stamford, CT-based Gartner Inc. "Its major strengths are its personalization capabilities and its real-time reporting and tracking features."


A Gartner report on PeopleSoft's CRM software noted that the application is weak in some areas, such as campaign management, Web content management, data mining and personalization. Annuncio's technology could fill some of those holes.


"In the software business, there's never a 'last piece of the puzzle,'" said John Grozier, vice president of CRM business development for PeopleSoft. "But we're getting a good piece to put into our overall solution."


PeopleSoft expects the Annuncio deal to be closed by the end of first-quarter 2002. Financial terms were not disclosed.


Duffield founded PeopleSoft in August 1987 with the launch of a client-based human resources system. The product launch was part of a trend at the time away from traditional mainframe-based computer systems to server-based networks.


Now that has changed as well. Upon his arrival, Conway ordered PeopleSoft's software developers to rewrite nearly all the company's applications to convert them from server- to browser-based programs.


Most of Annuncio's software is browser-based and fits Conway's directive, Grozier said.


Conway's arrival signaled a major shift in PeopleSoft's management style as well. He ended free breakfasts for employees and banned employee dogs from the office, both of which had been signatures of Duffield's easy-going regime.


"There's been a clear changing of the guard," Schmitt said. "It's had a tremendous positive impact on PeopleSoft."


The changes appear to be paying off. After its stock declined in the late 1990s, PeopleSoft returned to profitability in 2000 and has steadily climbed since.


As of third-quarter 2001, PeopleSoft has racked up $133.8 million in net income for the year. Analysts estimate the company will have finished with a total 2001 income of $185 million.


PeopleSoft has been on a buying spree lately, thanks largely to bargain-basement prices on software development firms. In addition to the Annuncio purchase, PeopleSoft bought online business software maker Calico Commerce Inc. in December for $5 million.


"Our ability to do transactions like this is testimony to the success of our company as a whole," Grozier said. "There are very few people now who are doing acquisition activity."


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