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PeopleSoft wants a chain reaction

PeopleSoft see dollar signs. Entering into a new partnership with Intrepid Systems, the software maker hopes that catering to retailers's needs will increase its overall business.

PeopleSoft (PSFT) next week will announce a partnership with the little-known Alameda, California-based technology company to bring a range of business applications to department stores and other retail outlets.

PeopleSoft, which makes business applications used by some of the world's largest corporations, will contribute its stable of human resources, financial, and manufacturing applications to the partnership. Intrepid Systems, a privately held company will bring applications developed to manage retail store merchandise and distribution. Bundled together, the applications will allow retail firms to computerize their operations to track changes in sensitive consumer-buying patterns, as well as keep an eye on stock levels.

The two companies will roll out the software in a gala event in New York City on January 13. PeopleSoft and Intrepid representatives today declined to offer details such as what the new products will be called, how much they will cost, and when they will ship.

Industry analysts, however, said the planned announcement is part of a trend to extend business applications, long used in the manufacturing and financial industries, to new market segments. PeopleSoft competes with SAP, Oracle, Baan and other vendors in the packaged software application market.

"This is a pretty smart move for PeopleSoft, particularly since they know SAP has been looking at this market," said Advanced Manufacturing Research analyst Bruce Richardson.

SAP already has a retail version of its R/3 system in use by about 200 retailers, mostly in Europe. Richardson said SAP is expected to unveil more retail tools in a trade show in Germany next month. Oracle is also eyeing the retail market with interest. And, SAP compatriot Baan has been toying with similar opportunities in the aerospace and automotive industries, according to analysts.

The software makers expect to attract retailers with the promise of cutting down on the volume and enormous costs of excess inventory while reducing chances of stockouts.

"Studies have shown that tens of billions of dollars in unused inventory is somewhere in the supply systems [at retailers in general]," at any given moment, Richardson said. He said automation will help collapse the time between when a product is manufactured and when it is sold.

The retail segment is considerably smaller than manufacturing concerns and financial institutions that have been main markets for applications software. However, companies like PeopleSoft see dollar signs. The software makers are betting that sales of applications software to major retailers will cause a chain reaction. Each sale made by the software makers to a major retail chain may put pressure on principal manufacturing partners to deploy the same software and wire their manufacturing operation into a unified supply chain.

Such pressure will grow as the Internet takes on a larger role in commerce--from business-to-business applications, such as contact between manufacturers and retailers, to business-to-consumer tools, such as online catalogue sales.

Bobby Cameron, an analyst with Forrester Research expects to see an increasing number of partnerships like the PeopleSoft-Intrepid deal. Such joint ventures have the potential to yield attractive combinations of core -application offerings along with tools addressing the needs each particular niche market.

"The game is afoot now," said Cameron. "And, it's a vertical game." In these new vertical market spaces, he added, "the successful strategies are frequently based on partnership"