Xenakis on Technology

Oracle Plays Catch up with PeopleSoft

Written by John J. Xenakis for CFO.com, Apr 11, 2001.

Oracle's upgraded ERP system includes an HR component that's a strong competitor to PeopleSoft's.

Last year, when Oracle Corp. overhauled its enterprise resource planning software with Release 11i, it renamed the system the E- Business Suite to emphasize the degree to which the Web is now incorporated into the system.

But more important, the company revamped its Human Resources Management System (HRMS) module, and it's worthwhile to ask whether Oracle has finally caught up to PeopleSoft, the ERP industry's long-time leader in human resources systems.

Both systems have similar features, but they differ widely on their marketing and pricing policies for the two products.

Like many enterprise products, both Oracle HRMS 11i and PeopleSoft HRMS 8.0 are different from earlier versions. The client/server technology has been abandoned, and all functions are accessible through Web browsers. New functions, such as those that empower employees to design their benefits package online or automate the selection of candidates for new positions, are available because of the Web technology.

In fact, Oracle has performed studies of its customers that indicate that using Oracle HRMS 11i can save HR costs of 25 percent per employee with the new functionality, and there's every reason to believe that similar savings would be achieved with PeopleSoft HRMS 8.0.

Oracle HRMS has made an enormous difference to Kelly Staff Leasing, according to the general manager, Mike Butler. "Handling payroll and benefit functions was formerly very paper intensive," he says. "In the past, we received payroll input in several different ways -- faxed time cards, E-mailed spreadsheets, or calls to our computer from a modem line. These are being streamlined so that all the input comes in through a Web browser."

Although the payroll area was the one having the biggest impact, according to Butler, the benefits area also changed for the Troy, Mich., based temp agency and HR outsourcing firm.

"One of our key deliverables to our client is offering a comprehensive suite of benefits for their employees," he says. "With Oracle's advanced benefits module, employees can view their benefits, get live updates, and track new benefits interactively."

According to Butler, a great strength of 11i is its flexibility in adding or changing entire benefit programs, something that he has to do frequently because he has to support multiple corporate clients. In fact, he compares his situation to that of a company that has been formed from a number of mergers and acquisitions.

"It's not uncommon to see large companies that have many different systems that have to be integrated -- with different HR rules, benefits and vacation policies, and with different tax treatments in different statements. It's amazing how many different rules you have to administer, and this software can handle it."

In fact, integration within the Oracle ERP suite itself is one of the major strong points of the products, according to Jenni Lehman, an analyst at Stamford, Conn., based Gartner Inc.

"I give Oracle high scores in integrating HR types of data throughout the enterprise, not just in the HR department," says Lehman. "Every one of the vendors supports the HR department but every department has an HR element, and Oracle is much more aware of that, supporting that much more aggressively than the other vendors. And it goes will with their single application integration story: Oracle says that you should buy from just one vendor."

This single application message is highly engrained in Oracle, especially since it's unique among ERP vendors in that it also supplies the database software in addition to the ERP software.

"All our products can be purchased modularly," says Tony Cavanagh, Oracle's director for E-Business Suite marketing. "But our pitch is that it's better to truly wage a war on complexity, and to avoid managing multiple release dates and upgrades, and to get better functionality and integration in one suite, rather than trying to stitch different products together."

This is different from PeopleSoft's strategy, which frequently involves HRMS-only sales. "It's no secret that [other vendors] tend to bundle HRMS in with their larger ERP package offering, whether the organization gets HRMS whether they want it or not," says Julie Thomas, director of HRMS marketing. "PeopleSoft went to market as an HRMS vendor, so we've had a different strategy."

The different strategy focuses resources particularly on HRMS, and it shows, according to Gartner's Lehman.

"All of the products do the core functionality well, but PeopleSoft is still the one to beat," she says. According to Lehman, the overall design and flow of the PeopleSoft product, as well as the designs of the individual screens, are more intuitive and easy to use and provide easier collaboration among users than in the Oracle product. "Oracle has a great product, and they've done really well adding functionality, but they're still focused on the nuts and bolts. I still give PeopleSoft the edge in vision for how to manage human capital."

"We're becoming much more bottom line oriented and [PeopleSoft HRMS] is the best solution," says Michael Head, exec VP for human resources from Regions Financial Corp., a Birmingham, Alabama, banking firm. "It gives us more robust and seamless platform for management reporting, and more cost-effective controls."

Head is rolling out PeopleSoft HRMS to 110 managers heading up an organization of 17,000 employees. "We have a very decentralized management structure. We'll be rolling out time and labor systems throughout the company. The system will avoid performance reviews not being done, and handle staffing issues."

Head has outsourced his payroll and HR, and uses PeopleSoft through an application service provider, Oasis Software LLC of Brentwood, Tenn. PeopleSoft's license was slightly less than $400,000.

He decided on an ASP solution, paying Oasis $350 per month for each manager, a price which includes hosting the software and outsourcing all IT and payroll functions. Because of staff savings and infrastructure savings, Head expects the system to pay for itself in less than two years.

This highlights some of the major marketing and pricing differences between Oracle and PeopleSoft that the new releases have brought about.

The Internet has dramatically changed the functionality of both the Oracle and PeopleSoft HRMS software, but when Oracle's changes to its marketing and pricing have been more dramatic. The company is now using the Internet as a distribution channel for all its enterprise software. Anyone can go to Oracle's Web site and purchase as many licenses as desired for each of the HRMS modules.

There are seven Oracle HRMS modules in all: human resources, payroll, time management, advanced benefits, training and administration, self- service HR, and HR intelligence. Perpetual license prices range from $25 to $60 per module per user. The site gives prices for two or three year licenses as well. In keeping with Oracle's singlE-vendor message, the site also provides ASP prices, with Oracle acting as the hosting company.

It's hard to overstate what a big change this is. For years, the major ERP software players have refused to divulge software prices publicly, and used what they called "value pricing," which meant they charged the customer as much as they could get.

Oracle now believes that value pricing has had a negative effect on the company, according to Cavanagh. "If there's no rigidity in pricing, and there are lots of discounts, then you get a lot of ups and downs in revenues, just as the best time to buy a car is the last Sunday of the month," he says. "Larry [Ellison] reviewed the significant discounts and said it had to stop. We had to get better control over pricing in order to build significant business over the Web. So this is the result of our own E-business transformation."

PeopleSoft has not reached the same conclusion and will continue value pricing, according to HRMS marketing director Thomas.

"If we thought customers were pushing us to list prices on our Web site, I think PeopleSoft would do that," she says. "But buying software is complex, and sales cycles can be one month to six months or longer. Why not let customers rely on a salesperson to give them the information they need?"

(This is a modified version of an article that originally appeared on Apr 11, 2001 on CFO.com at this location. )