PeopleSoft Fires Conway, Brings Back Founder

There’s never a dull moment at ERP application powerhouse PeopleSoft. In a surprise move last Friday morning, the board of directors of the company announced that they had lost confidence in Craig Conway, the company’s president and CEO, and had summarily dismissed him, while re-appointing founder and chairman of the board, Dave Duffield, as CEO, effectively immediately.

On a conference call with Wall Street analysts on Friday morning, members of the board, Duffield, and his new management team said they were not going to answer questions about the $7.7 billion all-cash hostile takeover by rival Oracle, which did little to dissuade anyone from thinking that Conway’s departure had to do with the way he was handling the 15-month battle with Oracle. The timing certainly was not auspicious. Conway got the boot just as the Department of Justice said it would not appeal the decision of United States District Court Judge Vaughn Walker, of the Northern District of California in San Francisco, who ruled three weeks ago that Oracle could proceed with its takeover and that the injunction against the acquisition sought by the Justice Department on antitrust grounds would not be granted.

Skip Battle, a member of PeopleSoft’s board of directors, tried to explain why Conway was let go, but he did not get into any concrete details. “There is no smoking gun. There are no accounting irregularities. It is a matter of the board losing confidence in Craig,” he said. “There has been no position that the board has taken that was at odds with Craig’s position with respect to Oracle.” Exactly what the nature of the loss of confidence was related to is unclear, but Conway’s departure may have more to do with technology than with the Oracle battle.

Duffield founded PeopleSoft, his third software company, in 1987, focusing on human resources software and creating what many have said was one of the best software companies in the world to work for. Having made HR software a focus–an area that other ERP vendors did not focus on–Duffield expanded PeopleSoft into a full-blown ERP software firm just in time to ride up the ERP bubble (driven by Y2K issues) in 1998 and early 1999. He also expanded platform support from proprietary VMS and mainframe systems and Unix boxes to cover Windows servers and even the AS/400. But by the summer of 1999, Duffield needed an executive with more operational experience and less of a connection to his 6,000 employees, to drastically cut costs, and he elevated Conway to the position of president and chief operating officer. (Ironically, Conway spent eight years in sales and marketing positions at Oracle in the late 1980s and early 1990s, and then moved on to be CEO at two smaller Silicon Valley software firms, before landing at PeopleSoft.) Conway jumped right in, cutting back on platform support (including ending support for the AS/400) and took over day-to-day management from Duffield. By September 1999, Conway was named as CEO, and he was essentially running PeopleSoft from that point forward, peaking perhaps with the $2 billion acquisition of J.D. Edwards last year.

The JDE acquisition might have made sense, in terms of the pursuit of raw size and customer installed base, but the addition of the JDE OneWorld and World software suites to the PeopleSoft Enterprise suite undoubtedly complicated what had been a much more simple technology story when all People sold was its own software. PeopleSoft has never used outside middleware to bolster its software before, but Conway inked a landmark deal with IBM during its Connect customer conference two weeks ago that will see PeopleSoft deploy its Enterprise software on IBM’s WebSphere middleware and DB2 database; JDE already had a similar deal covering its EnterpriseOne (formerly OneWorld) and World ERP suites. Adding a layer of IBM software to the PeopleSoft stack is inconsistent with the way PeopleSoft has coded to date. And this may be the smoking gun, if there is one. Duffield and other board members may not have liked the IBM deal, or they may not have had confidence that Conway could make it work.

What Duffield said on the call was that he was intent on making PeopleSoft a fun place to work again and that he wanted to focus on a technology roadmap for PeopleSoft products. “We need a little more in the way of vision and strategy,” he said. “I’m pretty good at that stuff.” He said that he was taking back the CEO role on a long-term basis and that he “can’t imagine a better team to work with.”

PeopleSoft board member Aneel Bhusri, a general partner at venture capitalist Greylock Management, has been named vice chairman of PeopleSoft. Bhusri worked at PeopleSoft from 1993 to 2002, and he was senior vice president of product strategy, marketing, and business development. The fact that Duffield and Bhusri were brought out of retirement does seem to back up the contention that, whatever confidence was lost on Conway, it had as much to do with technology as it did with the Oracle situation and the mood of employees who have suffered through a major merger under difficult circumstances. Clearly these two executives are thinking about how they might mount a technological counter-attack on Oracle specifically and on the $100 billion ERP market in general.

In addition to Duffield’s and Bhusri’s appointments, two of Conway’s lieutenants have been promoted. Kevin Parker, the company’s chief financial officer, will remain in that job and will take over as co-president, assuming day-to-day operations. Phil Willingham, who has run PeopleSoft’s Americas operations, was named the other co-president and will run PeopleSoft’s sales and support organizations and manage its business alliances.