PeopleSoft Thinks Smaller

Vendor targets midmarket; base prices will be lower

By Tom Stein with Marianne Kolbasuk McGee

eopleSoft Inc. is about to make a belated but distinct entry into the middle market. On Oct. 6, the client-server software vendor will unveil its strategy for selling its human resources, financials, and manufacturing applications to companies with $300 million or less in revenue.

The midmarket is important to future growth, but PeopleSoft is playing catch-up with SAP, Baan, and Oracle, who announced midmarket strategies as early as nine months ago. SAP, for instance, says about 50% of its installed base ha s revenue below $500 million. In contrast, PeopleSoft says only 15% of its current customers are below $500 million in sales.

Unlike its competitors, PeopleSoft plans to create a separate sales force for the midmarket. But the company may not have had a choice. "PeopleSoft is late to the game, so most of the established regional resellers have signed exclusive agreements with Baan and SAP," says Harry Tse, an analyst at the Yankee Group Inc.

A big challenge for PeopleSoft will be maintaining its high level of service and support. But, says Bill Ashworth, director of IS for credit-card company Advanta Corp. in Horsham, Pa., "it will come down to how cost-competitive it can be."

PeopleSoft and its partners plan to offer fixed-price, fixed-time implementations to midmarket customers. Company officials say the base price of PeopleSoft applications will be considerably lower than what a large company would pay.

The company also plans to form alliances with several outsourcing firms, says Row Hen son, PeopleSoft's VP of product strategy. That's because some smaller companies find it more cost-effective to outsource the operations of their human resources.

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