J.D. Edwards hasn’t had an easy time selling its OneWorld XE software, the latest version of its flagship enterprise resource planning (ERP) system.
The sales problems forced the company to announce this week that it expects to report a loss of $0.01 or $0.02 per share for the first quarter of fiscal 2001, ended Jan. 31. The company will report its results on March 5.
The firm also said that first quarter sales will likely shrink to between $208 million and $218 million compared with $232 million in the year-ago period.
In the year-ago quarter, the company lost $152,000, although on a per- share basis, the company reported a break-even bottom line.
In a prepared statement, J.D. Edwards CEO Edward McVaney said, “We did not execute well this quarter.”
A company spokesman says OneWorld XE, which was introduced in September, has been installed at 30 customers, and demand is strong. But the firm is addressing its sales problems.
J.D. Edwards is betting on a new chief operating officer, Hank Bonde, to spearhead the turnaround. Bonde will report directly to McVaney and is replacing Dave Girard, who will stay with the company until the end of the month to help with the transition.
The company is also hiring Les Wyatt as chief marketing officer, a new position. Wyatt will work alongside Jim Maikranz, the company’s senior vice president for worldwide sales.
The company will provide the details on its revamped sales strategy when it announces its quarterly results next month.
J.D. Edwards phased out sales of its older World Software ERP system by the middle of last year, and the spokesman says that One World XE is a more difficult sale to close because it’s a more complicated system. That partly accounts for the failure of the XE’s product sales to offset the lost revenue from World Software.
World is a 1990s’ era ERP system that runs on IBM AS/400s, while XE is described as an ERP2 system, which combines ERP, customer relationship management, and E-procurement for B2B marketplaces.
In addition to the AS/400, XE runs on Microsoft Windows NT and most mainstream versions of Unix, including IBM AIX, Hewlett-Packard’s HP/UX, and Sun Microsystems’ Solaris.
The spokesman says an ERP2 system will manage a company’s relationships with 30 or more suppliers and a similar number of customers.
Because of the extra complexity, the spokesman says, “the sophistication of the sales process has increased. It used to be that a sales rep would go to a customer and say, ‘Let me sit down with IT and talk about feature function.’ Now they come in and say, ‘Let me sit down with the CFO and talk about return on investment.’”
Given the multimillion-dollar price tag of ERP2 systems, clients are often booking them as a capital expense. That means the final decision on the purchase is made by the board of directors, and that can also drag out the sales process.
The complexity in selling ERP2 systems is also leading J.D. Edwards to hire salespeople who have more experience in specific vertical markets, the spokesman says. The market experience will enable sales reps to go to prospective customers and explain how XE can be used to integrate their operations with their suppliers and customers.
Still, even as the company hammers out its new strategy, it has its work cut out for it. Douglas Lynn, a vice president with The Meta Group, a market research firm, says his clients are mostly mid-sized firms, or those with annual sales in the $100 million to $1 billion range, which overlaps with the market J.D. Edwards is targeting. Many are less eager than they were just a year ago to jump on the B2B marketplace bandwagon.
“We’re not getting overwhelming demand from our clients,” Lynn says. “They’re not saying ‘B2B, gotta go, gotta go.’”
For example, many parts suppliers in the auto industry already find their margins being stretched beyond the breaking point, and they consider B2B marketplaces just another means for manufacturers to further squeeze them.
While Lynn doesn’t doubt that B2B marketplaces will grow in prominence, for many firms they are yet another example of a technology in search of a solution.
Given the absence of an overwhelming demand for B2B applications means that software developers must “convince the market that B2B is something they have to do,” Lynn says. “It’s kind of like pushing on a rope.”