PeopleSoft Founder Duffield Readies New ERP Software

by Timothy Prickett Morgan

If you were the founder of one of the largest application software development firms in history, and if the CEO that you put in place several years ago so you could relax a little got into a hostile takeover situation with his former employer--which happened to be in the same application software business--and that former employer ended up acquiring your company and making you hopping mad and stinking rich at the same time, what would you do? That is the interesting question that PeopleSoft founder, Dave Duffield, has almost answered.

But Duffield is providing a few hints, and it looks like he is getting ready to take another run at the enterprise application market. He has launched a Web site called Dave's Next Move, and on that site he doesn't spell out exactly what his plans are, but he gives just enough information to whet the appetites of potential customers and to strike some fear into the hearts of the players in the ERP software market.

A comment on the home page of that site, which is attributed to Duffield, says: "I have teamed with some of the brightest minds in the industry to create the next generation of applications to meet the demands of today's extended enterprise. It's a new day. Stay tuned . . . " The site goes on to say that ERP software is too expensive to deploy and maintain, is complicated and difficult to use, and is built for back office functions and not intended to support the informational needs of business line managers. (Which is why you have to graft on customer relationship management, supply chain management, data warehousing, and data analytics modules to ERP suites.) The site declares: "Today's point solutions provide a stop gap but don't address the inflexibility of the monolithic ERP system. Today's extended enterprise needs a fundamentally different technology approach which facilitates customization as well as seamless integration with third-party solutions."

I don't think you would find any arguments to that assessment.

So Duffield has assembled a team of engineers and business managers to take what he calls a "revolutionary approach" and a "paradigm shift" in how ERP applications are created. These are well-worn phrases, particularly in the IT industry. And when Duffield claims that he will "tackle the traditional ERP markets in a non-traditional way," you might reply that you have heard this sort of talk before. You might have even heard it from Duffield, who is now founding his fourth application software company. Duffield got his electrical engineering and MBA degrees from Cornell University, and then went to work at IBM as a systems engineer and then a sales rep. He left IBM to co-found Information Associates, a software company focused on the education market, and made a much bigger splash when he founded Integral Systems in 1972. This is where Duffield found his niche, which is creating human resources and payroll software. Integral Systems made HR software specifically for mainframes and was the first ISV to support the DB2 database on the mainframe. Duffield left Integral, which is now owned by a holding company in Singapore, in 1987 to found PeopleSoft, which was eaten by Oracle this past January after a lengthy hostile takeover.

So what, exactly, is Duffield up to? He is not giving his company a name and he has not laid out its strategy, but it doesn't take a genius to figure out a couple of things about the software business. First, all of the major software players (and a lot of the small ones) have big installed bases with a mix of legacy and modern code. Second, the industry used to have a more even balance between software licensing sales and services. But since the Y2K crisis, vendors have relied increasingly on propping up their license sales with maintenance and customization services, which account for the bulk of their sales these days. Third, the complexity, high price, and disruptive nature of installing ERP software makes companies loathe to consider changing code and has significantly lengthened the sales cycle for ERP deals. Fourth, the advent of the open source/paid service model for software presents a compelling alternative.

So here is what I would do if I were Duffield: I would create an open source suite of basic ERP applications and let the community of users establish a meritocracy to add new features to the software, using a similar application development model like the open source Linux community has. I would probably not, if I were Duffield, use the GNU General Public License because of its viral nature (if you tweak it, you have to give it back to the community), and considering that in many respects a company is the tweaks that it puts into its ERP software, you cannot expect people to give such proprietary tweaks back to the community. But you could get a common code base and figure out how to isolate customizations from that code base and let people differentiate there. If Duffield's new company took this approach, he could just give the base code away, foster a community of users to add features, and wait for some companies to want support or customization services. It removes the whole licensing issue from the bargaining table. And if customers wanted to unplug the software, they could stop paying maintenance and their balance sheet would not take a hit for writing off an expensive ERP suite. ERP will still be technically disruptive, but it won't make the books look bad.

All Duffield will say about the future ERP software is that it will employ open source and Web services technologies, object-oriented programming techniques (probably Java but possibly C#), and XML. Duffield is looking for a user interface designer, an application developer, and a manager of application development if you have a sudden urge to work in the Walnut Creek, California, area.

Joining Duffield on this little adventure in ERP programming is Aneel Bhusri, who is being billed as a co-founder and chief vision officer. (I want a job like that.) Bhussri is a general partner at the venture capital firm Greylock Partners, and he has his electrical engineering degree from Brown University and his MBA from Stanford University. Most significantly, he was in charge of product strategy and business development at PeopleSoft from 1993 to 2004, when PeopleSoft expanded from HR software and took on the wider ERP market and competitors SAP and Oracle. Duffield has tapped Stan Swete to be vice president of products and technology at the new company. Swete, who has his industrial engineering and MBA from Stanford, spent ten years at ERP vendor ASK Computer Systems before spending ten years at PeopleSoft; was in charge of many of the ERP modules and the Internet interface of PeopleSoft 8. John Malatesta is chief architect, and he has his electrical engineering and computer science degrees from the University of California at Berkeley. He was a hot-shot programmer for 16 years before putting in 12 years at PeopleSoft. Most recently, he founded a company called NetYourWork, which was creating Web-based financial applications. Duffield has tapped Karen Beaman, the principle managing partner of The Jeitosa Group and a former sales executive from ADP who runs her own human capital management consultancy. It's hard to tell if she is the coach and Duffield and Bhusri are the quarterbacks or vice versa. But Beaman is in charge of strategy, and Duffield will be the CEO of the venture.

Duffield did not provide a name for the company and its products or a timeline for their delivery. So we'll just have to keep our ears to the ground.