Guild Companies

In a surprising yet completely logical move, J.D. Edwards last week announced that it will solve the integration woes of its current 6,500 customers and the hundreds of future customers it will add in coming months by standardizing absolutely and completely on IBM's middleware and database software for its J.D. Edwards 5 ERP, SCM, and CRM application suite. This marks the first time that a major application vendor has picked a single software stack and endorsed it as its own.

The JDE 5 application suite, you'll remember, is the kicker to the OneWorld suite that was announced in June and that includes SCM and CRM extensions, as well as collaboration and other features. Until now, JDE supported a wide variety of relational database management systems and middleware for its applications, including the Oracle8i and Oracle9i databases from Oracle and the SQL Server database from Microsoft and a number of different Web servers, Web application servers, and middleware. Integrating all of these components, testing them, and building best-practices implementation schemes for this piece-parts approach to building a software stack costs money and time, and JDE says that its customers have had enough of it, so it is doing something about it.

To that end, JDE 5 will run on top of Windows, Unix, and OS/400 operating systems, just like always, but now JDE 5 will be bundled on top of the appropriate flavor of IBM's DB2 database for a given platform and a collection of WebSphere middleware, including the WebSphere Application Server (which includes a variant of the open-source Apache Web server) and the WebSphere Portal Server (which has Tivoli security and Lotus collaboration tools embedded in it). The JDE 5 suite will include these tools by default and, interestingly, will include these items at a suite price that is lower than buying these programs in a piece-parts fashion, directly from IBM or through a channel partner, for these platforms. Companies that buy the JDE 5 suite and want to use other database or middleware software will have to pay extra for these programs, and they will have to pay for the IBM software stack even if they do not use it. This is about as strong an encouragement as JDE can give to its customers to use IBM's software when running its applications.

According to Steve Mills, general manager of IBM's Software Group, IBM's customer surveys indicate that integration costs account for as much as 40 percent of the total IT budget at companies, aside from regular hardware, software, and personnel costs, which is why IBM thinks that such a tight-knit relationship with a key application provider like JDE is an important deal. Whether or not other independent software vendors will follow suit and mimic this deal between IBM and JDE remains to be seen. "It is clearly a unique relationship today," said Mills at the announcement last week. "No other vendor has taken such steps, and this is leading-edge thinking."

About 4,000 of JDE's 6,500 customers use its RPG-based WorldSoftware suite, which only runs on IBM's OS/400 servers. These customers are long since used to relying on an IBM-only software stack: OS/400 plus DB2/400. A large portion of JDE's OneWorld customers runs on AIX, Solaris, or Windows NT/2000, and the IBM middleware and database solutions run on these platforms. A similar middleware software stack from Sun Microsystems does not have a database (Sun doesn't own one), and the Oracle database and middleware stack does not run on OS/400, so that is not really an option. And, of course, Microsoft's middleware and database stack runs only on Windows servers, so it is not much good to OS/400 or Unix shops. The IBM software stack was the only real option for JDE to pick. Other large application vendors--SAP, PeopleSoft, and Oracle, for instance--have much more diverse installed bases, so inking a similar deal with IBM is impractical without a bold change in direction for them. However, myriad midrange application suppliers, particularly those in the AIX and OS/400 markets, could do similar deals.

"This partnership will dramatically simplify the difficulties our customers face, and it will lower the total cost of ownership of the J.D. Edwards solution," said Bob Dutkowsky, who is chairman, president, and CEO of J.D. Edwards. Dutkowsky used to be a hot-shot in IBM's RS/6000 organization a few years back before moving to EMC in the late 1990s, so his preference for a deal with IBM is predictable, especially considering the True Blue background that JDE had before it tried to take on the Windows and Unix markets a few years ago. Dutkowsky thinks this deal will give JDE a competitive advantage over the other big and small application providers, and that it will also help bolster JDE's software license revenues. The latter point is certainly true, given the fact that JDE will be an OEM reseller of IBM's databases and middleware (Dutkowsky would not say how much money gets passed back to IBM or what the discount off IBM prices would be for the bundled IBM software). And the former point, that this will be a competitive advantage, could also pan out. Very large enterprises have traditionally gone with best-of-breed solutions and then integrated them, often at great cost. But small and midsize customers don't have the same luxurious budgets. For these customers, having an integrated solution that is cheaper to implement is far more important than buying best-of-breed applications.