PeopleSoft aims at smaller business

In a move to grow its customer base beyond the traditional high-end market, PeopleSoft (PSFT) next week will launch PeopleSoft Select, a new initiative aimed at medium-sized companies that the business software provider hopes will double its installed base.

PeopleSoft will deliver the new program with a new division, including sales, services, and a deployment organization targeting businesses with annual revenues of between $50 and $250 million with 200 to 1,000 employees, company officials said.

The company will also strike a series of deals with such major industry players as Microsoft, Hewlett-Packard, Compaq Computer, and Intel to support the middle-market initiative.

PeopleSoft will also set up PeopleSoft Select Implementation Centers in the U.S. and Canada to support companies migrating to PeopleSoft applications.

Analysts say the move is unique because the Pleasonton, California-based company has decided to provide its business software package through its own channel, and not to depend on VARs (value-added resellers) to sell the product.

Judy Hodges, an analyst with IDC, said that success in the middle market for PeopleSoft and its competitors will depend on how vendors manage relationships and address the requirements of the mid-market customer.

Company executives said they made their decision based on the requests of customers.

"The customer would like to deal directly with the vendor," said PeopleSoft's Sean Murphy, director of the company's middle market division. "The solution will suffer if this is not addressed."

The company is marketing PeopleSoft Select as a complete package that bundles hardware, software, and services with a fixed-bid, three- to six-month implementation, priced from $500,000.

The package is made up of PeopleSoft financial, distribution, human resources, or manufacturing applications, running on Microsoft's SQL Server database, on the Windows NT operating system on Intel-based hardware from Compaq or HP.

The company said the partnerships they made will also save the customer money, as well as simplify the selection and implementation process of the product.

As for this strong move into the middle market, analysts say PeopleSoft is not alone. In fact, all of its competitors, such as SAP,Baan, and Oracle, have either launched similar initiatives or are expected to soon.

"[PeopleSoft Select] will be a very interesting laboratory for the middle market," said Josh Greenbaum, an analyst with the Hurwitz Group. "There are a lot of players out there. SAP is looking to double their customer base overall by moving into the middle market."

Greenbaum said the success of the PeopleSoft move may ride on its decision to stay away from the VARs. "This will strengthen customer relations, while keeping down the cost for PeopleSoft. Its competitors have had problems with their varied channel partners," he said.

In the past, PeopleSoft has proven to be a customer-driven vendor, Hodges said. And with the PeopleSoft Select program, it will have a good opportunity to win share in the middle-market segment. "This definitely indicates they plan to infiltrate the market in a vigorous way. The direct approach could be a winning move for them," he added.

But the move into the middle market won't be entirely smooth. Hodges sees name recognition for PeopleSoft and its competitors as just one problem. "This direct-sales approach may help lessen that, though," he said.

PeopleSoft Select will be available next week in designated metropolitan areas throughout North America, and it will be extended to additional areas in 1998.