PeopleSoft Inc.’s effort to migrate former J.D. Edwards & Co. customers to a new license and maintenance pricing model has some users bristling, especially those saying they face substantially higher costs.
During a public forum in Denver at the Quest Global Conference 2004 last month, a half-dozen or so users of EnterpriseOne software raised questions around PeopleSoft’s attempt to move them from their J. D. Edwards’ licenses to a new enterprise licensing scheme. During the discussion, users complained that they don’t fully understand how the pricing works, their sales representatives don’t appear to be empowered to negotiate with them, and they will be penalized if they don’t migrate to the enterprise model right away.
A lack of clarity about pricing issues from PeopleSoft was perhaps the biggest issue, according to customers at the event, many of whom expressed frustrations with the company.
PeopleSoft officials didn’t return a reporter’s phone calls seeking comment on the users’ concerns.
It has been a frustrating “struggle” to get information about pricing and the contract fusion program aimed at moving J.D. Edwards users to PeopleSoft’s pricing methodology, said moderator Fredrick Pond, director of information services at Schnitzer Steel Industries Inc. His company has a number of lines of business, including self-service auto-wrecking, and runs EnterpriseOne financials.
Schnitzer Steel has been approached about the new scheme, which would be based on the size of his organization, but it has not yet adopted the model, Pond said. “I have no ROI for this,” he said.
“At this point, if I did adopt the proposal they have currently given me, my annual maintenance charges would rise about 25 per cent for the same use of the system … I have today,” Pond said.
He also said that PeopleSoft annually reviews its customers’ financials and will raise the price of its software if revenue grows at more than 10 per cent. He also said the bill never decreases, either, even if a division of the company is sold off or if the market sours. Because his business is cyclical, the pricing change isn’t a good idea at this time, he said.
From what Pond said he has learned from other customers, different sales representatives have made different approaches for negotiation. “I can’t figure out any rhyme or reason to it,” he said. Some users who remain on the old pricing plan face a 10 per cent-per-quarter cost increase, making it cheaper for those who migrate quickly. That, said Pond, amounts to a “forced march.”
The Weitz Co. in Des Moines, Iowa, faced a 30 per cent increase in costs to “fix a problem that doesn’t exist,” said CIO Mark Federle. Once the construction firm hit US$1 billion in revenue, PeopleSoft’s approach was “great, you’ve reached US$1 billion and now we can charge you this amount of money.” The 10 per cent quarterly increase that holdouts will be charged was a “hard message,” according to Federle, who said that approach “has the strong potential of creating a bad feeling.”
Despite those concerns, he said he expects PeopleSoft to soften its approach.
A representative of one company who asked not to be named said during a brief presentation that PeopleSoft “was difficult to do business with.” The company is migrating to EnterpriseOne CRM and other software — a process that also means moving to a Unix platform from the AS/400 — and it adopted the new enterprise license scheme.
Among the difficulties the company faced during the licensing negotiations was a constant turnover in the PeopleSoft sales force — and with each change, information about the license changed. The company couldn’t get answers quickly, the customer said, and PeopleSoft sales staff had to constantly go back to headquarters for direction.
The result was a “take it or leave it” negotiation style focused on making quarterly revenue, the customer said, and not “on long-term relationships. … It’s very hard for us to figure out where the benefit is to us right now.”
During negotiations with PeopleSoft over the past year, the contract language discussed was customer “unfriendly,” said Michael Hanf, vice-president of finance at MWH Global Inc., a Broomfield, Colo.-based environmental engineering and power facilities construction firm and EnterpriseOne customer.
There was no right of appeal in the wording and that “puts you in a defensive posture,” Hanf said. For MWH Global, the fusion model didn’t make sense, since it would cause a “significant fee for us,” he said.
Hanf said he wanted a better understanding of PeopleSoft’s pricing. The pricing issues have “caused a moderate amount of angst,” he said.
