PeopleSoft Plans ESA Revolution

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PeopleSoft’s got a brand new market. It’s called enterprise service automation, or ESA, and CEO Craig Conway believes his company will take this new market sector by storm.

Of course, ESA is so new that most of us don’t know it actually exists. But not to worry, enterprise service automation is real and the demand is there. The trick will be to make sure PeopleSoft and those that follow it don’t go too far in promising that ESA will revolutionize the way companies do business: No one wants or needs a repeat of marketing bubbles like e-procurement (as in Ariba and its ilk).

But if PeopleSoft remains true to form, that won’t happen. This is a company that has made a virtue out of being relatively hype-free, even at the risk of lagging the market.

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The reason that ESA is real is the same reason that e-procurement was real: the business interactions and processes that PeopleSoft calls enterprise service automation are already in place at most companies. The problem — and the opportunity — lies in the fact that existing ESA processes are either non-automated, non-integrated, non-leveragable, and/or non-distributed. In other words, like procurement, customer relationship management, and other enterprise software solutions, ESA is about using integrated enterprise software to better manage existing business processes.

PeopleSoft defines enterprise service automation in relatively simple terms. The primary areas it covers are services procurement, resource management, project and contract management, and time and expense billing. The basic idea is relatively simple: companies need to manage their spend on services — everything that isn’t a specific product, part, or hard asset — in much the same way they are now beginning to manage their spend on direct and indirect materials. The term is relatively broad because services costs are all over the map: consultants, contract employees, repair, maintenance, and the like all fall under the bailiwick of ESA.

There’s no doubt that most companies have little or no way to manage these functions, and manage the projects, contracts, billing and expenses that go with them, in an enterprise-wide fashion. This gives us the usual enterprise software opportunity: if you could integrate all these functions into a single set of applications that provide management and visibility across the enterprise, you could improve efficiency, uncover new opportunity, lower costs, and increase productivity.

OK, that’s the hype. But the opportunity is there, as is the software. In fact, part of the brilliance of PeopleSoft’s move is that most of its ESA functionality comes out of existing products. The company’s acquisition of SkillsVillage earlier this year is fueling part of services procurement, existing functionality in PeopleSoft Financials powers the contract management component. Opportunity management for services can be handled by PeopleSoft CRM. And riding herd over the whole ESA offering are services and financial analytics that provide metrics on how well a customer is faring in each of these domains. And, unlike virtually every other major concept launch in recent memory, PeopleSoft launched ESA with 35 customers already in its pocket.

Of course, not all these customers knew they were buying ESA. That’s marketing for you. Regardless, ESA is working for PeopleSoft because it’s a natural add-on that should be relatively easy to upsell to the customer base. Adding to the luster is the fact that ESA’s biggest play is on the human capital management side — procuring and managing personnel — that is PeopleSoft’s strongest hand. The sum of the parts is a new market that will be everything that Ariba’s e-procurement wasn’t. A real market with real demand serviced by a vendor (or vendors) that has both real products and real customers.

Is ESA a slam dunk? It’s as close as they come, though admittedly because ESA is evolutionary, not revolutionary. Will PeopleSoft have ESA all to itself? Hardly. What Craig has really done is package existing functionality in a new wrapping. Virtually everything that PeopleSoft calls ESA can be replicated by another vendor. Will this be the next Ariba-like flash in the pan? I doubt it. Like e-procurement, ESA is a fundamentally good idea. Unlike Ariba, PeopleSoft has the products, management and customers to sustain the effort. It’s nice to be back in the old economy again.