During the challenging period from 2003 to 2005, our studies of the JD Edwards user base indicate that the EnterpriseOne product line was losing more accounts than it was winning. Today, however, EnterpriseOne is experiencing a modest yet significant reversal. Based on discussions with sources inside and outside of Oracle, Andrews Consulting Group concludes that EnterpriseOne is once again experiencing a net gain in customers. Moreover, existing customers are stepping up their investments in the software as well. Interestingly, much of the new account growth is coming from emerging economies and from companies that are smaller than typical customers.
Before I say anything further about our findings, let me stress that our opinion is based on information from many sources and not upon any direct statement from Oracle itself. Nonetheless, we are confident that EnterpriseOne is enjoying a net increase in installed accounts for the first time in several years. Moreover, we believe that this trend could continue for some time.
This is good news for a user community that experienced a gradual yet steady decline for several years. While every software vendor experiences some account attrition, EnterpriseOne customer losses accelerated after PeopleSoft announced it was acquiring JD Edwards in 2003. When Oracle announced its takeover bid for PeopleSoft a week later, uncertainty over the future of JD Edwards applications mounted rapidly. As a result, defections to SAP and Oracle’s E-Business Suite began to rise.
In 2006, however, our findings indicate that the EnterpriseOne customer base stabilized, then began growing again. Much of the credit for the turnaround must go to Oracle’s Applications Unlimited pledge and its delivery of EnterpriseOne 8.12. Together, these actions reassured users that their software not only had a future, but that they would not be forced to switch to Fusion Applications. In addition, Oracle made modest progress in educating its sales force about EnterpriseOne and building relationships with selected EnterpriseOne resellers.
Taken together, we believe that these actions led to an increase in account acquisitions during the second half of 2006, and that acquisitions have remained strong so far this year. We recently received more evidence to back our findings when we interviewed Lenley Hensarling, Vice President and General Manager for JD Edwards EnterpriseOne, at Oracle’s headquarters. Based on his comments and those from multiple other sources, we have drawn the following conclusions.
- EnterpriseOne is making inroads in smaller companies. Based on figures presented to us, we are confident that the rate at which new EnterpriseOne accounts are being acquired has picked up over the last year. At the same time, the average deal size has grown smaller. This is because EnterpriseOne is gaining more accounts among smaller firms than it did in the past. While some of these accounts are graduating from small business accounting software, others are outgrowing mid-market rivals to JD Edwards such as Microsoft Axapta and Lawson.
- New accounts are on the rise in Asia and Eastern Europe. Much of the growth in EnterpriseOne accounts is coming from emerging markets. Eastern Europe and Asia in general and Greater China in particular are proving to be hotbeds for new accounts. In the case of China, we expect that EnterpriseOne is getting a boost from IBM’s investments in the country. For instance, IBM is dedicating significant resources to sell its System i to China’s exploding manufacturing and distribution sectors. This can only help EnterpriseOne, as it can run natively on the system’s i5/OS operating system.
- Reseller-driven sales are on the rise. During the dark days before the Oracle acquisition, many resellers abandoned JD Edwards for greener pastures. As a result, channel sales withered as a percentage of total EnterpriseOne sales. Over the last year, however, channel sales as a percentage of total sales have returned to historical averages.
- An expanding functionality footprint is broadening EnterpriseOne’s appeal. As we will explain in an upcoming post, Oracle plans to expand EnterpriseOne’s functionality by integrating it with several of its other acquisitions. These include Oracle Transportation Management (OTM), formerly known as G-Log, and the Demantra offerings for demand management. By gaining a wider footprint in these and other areas, EnterpriseOne should make it onto the short lists of more companies in the coming months. In particular, integration with Demantra should help the solution’s cause with manufacturing and distribution firms that maintain retail operations.
- EnterpriseOne is becoming Oracle’s “lead with” solution for commercial real estate. One area where EnterpriseOne has been a perennial heavyweight is in the construction and property management industries. The strengths of the solution in project management, real estate budgeting and forecasting, and lease management are convincing much of the Oracle field force to lead with EnterpriseOne in real estate firms. This could allow the solution to harness a growing trend in which large enterprises are spinning off their properties as separate entities and looking for software to manage them. It could also help EnterpriseOne gain traction in Europe, where legislation could spur growth in the number of real estate investment trusts (REITs).
Fresh Interest from Existing Customers
Turning the focus from new accounts, it should also be noted that existing accounts have stepped up their spending on upgrades over the last year. As Hensarling revealed at Oracle’s Applications Unlimited event on January 31, over 45% of all customers have upgraded or are upgrading to EnterpriseOne 8.10 or higher. This represents a marked move away from OneWorld Xe to the newer, web-enabled releases and is a significant sign of health within the installed base.
We have also noticed a significant increase in purchases of additional modules and licenses on the part of many companies. This willingness to deploy new functionality and extend it to new users indicates that EnterpriseOne customers have regained their confidence in the platform. In addition, we are seeing a small but growing number of customers purchase other Oracle products — particularly Fusion Middleware, OTM, and Demantra — and integrate them with EnterpriseOne.
It may be true that on Oracle’s eye-popping financial statements, the latest growth in the EnterpriseOne customer base hardly makes a dent in the income column. From the standpoint of the product’s market viability, however, it has a far greater significance. It is a sign that EnterpriseOne has turned a crucial corner in its road back to relevance. Considering the fact that Oracle has plans for new releases into the next decade, that road could keep winding along for a long time to come.
Have you seen any evidence of EnterpriseOne account growth in your industry or region? On the other hand, are you seeing account losses? Is EnterpriseOne gaining or losing traction in your own company? If you have an opinion, we want to hear from you. Please share your observations in the comment section below. Let us know which way you see the JD Edwards market heading!