PeopleSoft to Change Fees For J.D. Edwards Products

Goal is to unify pricing model for ERP applications from both vendors

Starting early next year, PeopleSoft Inc. will unify the pricing models for its Enterprise software line and the EnterpriseOne line built around the applications it picked up through its August acquisition of J.D. Edwards & Co. -- a change that will alter the licensing structure J.D. Edwards customers are accustomed to.

After the J.D. Edwards acquisition, Pleasanton, Calif.-based PeopleSoft formed three product lines: Enterprise, a portfolio containing its traditional applications; EnterpriseOne, a rebranded suite of J.D. Edwards applications; and World, the portfolio for J.D. Edwards' legacy AS/400 World software. Rather than mingling code bases, PeopleSoft plans to indefinitely maintain the three brands.

Melding Models

PeopleSoft and J.D. Edwards had different pricing strategies, however. PeopleSoft uses what it calls a "value-based pricing" model, in which its software has no list prices. Fees are calculated based on a number of factors, including a customer's size, industry and annual revenue. The licenses usually cover an unlimited number of users. J.D. Edwards had a more traditional per-user licensing model for its applications and modules.

"We've been doing a lot of work to roll out a single pricing model next year. We're moving more toward the PeopleSoft model," said Les Wyatt, a former J.D. Edwards executive who now serves as general manager of PeopleSoft's EnterpriseOne line.

The change will affect only Enterprise and EnterpriseOne customers. World, for which additional licenses are sold almost entirely into the existing base of about 3,400 customers, will continue to be priced on a per-user basis. EnterpriseOne also has about 3,400 customers.

The change will affect EnterpriseOne customers as they license new modules from either the EnterpriseOne or Enterprise product lines. Maintenance fees for EnterpriseOne will also likely rise, Wyatt said, though he noted that J.D. Edwards had been raising its maintenance charges steadily throughout the past three years. Details of the pricing changes are still being worked out, he said.

"One of the things we don't want to do is move to a model that arbitrarily and dramatically increases our prices," Wyatt said. "Our users will be paying roughly the same amount."

Not Convinced

One EnterpriseOne customer said he's keeping a wary eye on PeopleSoft's licensing plans. Manufacturing company Consolidated Container Co. in Atlanta has about 400 employees in several facilities using EnterpriseOne applications. Vice President of IT Andrew Ziegele said PeopleSoft's sales team approached him last month about moving to a new licensing plan that would give him an unlimited number of user licenses.

But Ziegele has no pressing need for more user seats, and the cost of the proposed new plan was around $400,000. "That's pretty much like relicensing the whole thing," he said. "I'm concerned about the licensing. I can see why there's some confusion."

PeopleSoft indicated to Ziegele that any licensing changes to his contract would be optional, so he won't be forced into an expensive reinvestment to maintain his current software configuration. Ziegele is considering picking up several new modules, though, and said he isn't sure how expensive those additions would be.

PeopleSoft's pricing plans will be finalized and implemented in the first quarter of 2004, most likely in January, Wyatt said.

At the same time, PeopleSoft plans to unify its sales force with that of J.D. Edwards, which has remained separate since its acquisition. Sales executives will specialize by region and industry, but every sales employee will be able to sell every PeopleSoft product, Wyatt said.

Cowley writes for the IDG News Service.

Copyright © 2003 IDG Communications, Inc.

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