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Commentary: J.D. Edwards layoffs will not affect most enterprises

The company is experiencing declining sales, but the 800 layoffs do not mean that its focus on developing ERP or other core products will weaken.

See news story: J.D. Edwards lays off 800 in restructuring

By Yvonne Genovese and Chad Eschinger, Gartner Analysts

Like many enterprise resource planning (ERP) software providers--such as SAP, PeopleSoft and Baan--J.D. Edwards has suffered from the general weakness of the market, which has caused it to make internal changes.

In April 2000, for example, J.D. Edwards replaced Doug Massingill as president and CEO with C. Edward McVaney, who was president and CEO from the company's inception in 1977 until November 1998.

J.D. Edwards made its structural changes due to declining sales of its traditional ERP products. However, the 800 layoffs do not mean that the company's focus on developing ERP or its other core products will weaken.

Most of the layoffs occurred in its field staff, including sales, marketing and training personnel. Only minimal job reductions came from development.

These layoffs will not likely affect enterprises significantly. J.D. Edwards will continue with its strategy of adding front-office applications to its ERP core. Like other ERP providers, J.D. Edwards has long recognized that it must expand from technology focused inside the enterprise to outward-looking offerings. Accordingly, ERP vendors are scrambling to integrate supply chain management and customer relationship management with its ERP suite. J.D. Edwards has done this largely by internal development but will likely pursue partnerships more in the future.

The main risk to the company with this announcement is that Wall Street and prospective customers will perceive it as evidence of significant problems--similar to System Software Associates' and Baan's layoffs, which resulted in pipeline evaporation, employee flight and decline for the companies.

J.D. Edwards must mount a marketing campaign to squelch that view and return itself to profitability once the restructuring charge is taken in its fiscal 3Q00.

However, the announcement regarding the layoffs was well timed. The company can make some headway tomorrow when it talks to financial analysts about its 2Q00 earnings report, and it can reassure customers at its user conference, which is less than a month away.

Entire contents, Copyright © 2000 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.