Craig Conway is trying to do nearly the impossible -- turn a big, high-tech
company around. As Pleasanton's PeopleSoft CEO, Conway has torn apart the
company Dave Duffield built in the last 18 months. Business Times contributing
writer Steve Ginsberg met with Conway last week to gauge PeopleSoft's progress.
Q: What have been the biggest obstacles and what stage is the turnaround in?
A: We are at base camp ready to summit. We faced three obstacles, one was the
market slowdown and backdraft for our kind of software because of Y2K. The
second factor was the retirement of Dave Duffield who was the icon of the
company. The third factor was a maturation of PeopleSoft's infrastructure, it
was breaking down. The company grew so quickly that policies and management team
could not support the growth.
Q: Where are you in the turnaround?
A. We are at base camp ready to summit. The company always has been a
fabulous brand, one of the strongest in high tech but we faced three obstacles.
One was the market slowdown and back draft for this kind of software because of
Y2K. The second factor was the retirement of Dave Duffield who was very
charismatic and the icon of the company. The third factor was a maturation of
its infrastructure a favorable way of saying the infrastructure was breaking
down. The company grew so quickly that the framework and process practices and
policies and management team could not support the growth.
It's been a marvelous reemergence for the company in a software space where
its hard to come back. We always maintained profitability every quarter and we
had cash in the bank but we came close to being unviable. Viability is the
killer in the software industry. When a company licenses enterprise software it
makes a 5 to 10 year decision. People weigh viability much more critically than
if they are buying a piece of equipment whose life cycle is 18 months.
We've had tough moments but the market seems to be vindicating Peoplesoft.
Q: Where is hard evidence of progress?
A: The main metric that customers look at is the stock price. When I joined
it was $12.80 and we traded recently as high as $35 a share. When I joined we
were breaking even and last quarter we posted 5 cents a share. The company's
revenue last quarter was higher then it has ever been in its history at $420
million.
Q: Isn't revenue growth the true barometer because you can always cut
expenses to prop up the bottom line?
A: That's true. When I joined people were worried about layoffs and extreme
expense cuts. I said you couldn't cut your way to viability.
Q: Where is the revenue growth coming from?
A: We've always been fortunate in having a balance between new and old
customers. Another metric is when a software company is getting a high
percentage of revenues from existing customers that can be a dangerous sign.
We always got 50 percent from our installed base and the rest from new
customers. We generated growth through expansion. We are best known for human
resources but last quarter our number one product line was customer
relationship management. Our acquisition of Vantive played a key role in the
growth of the company. Our financial applications and supply chain management
applications are also in the top two among our competitors. We are a
well-diversified company.
The areas of disproportionate growth was international and we have
concentrated more resources in international.
Q: Has the dot-com revolution hurt your ability to attract new blood?
A: For a year recruiting and retainment was the No. 1 issue because of
dot-com fascination. There was a traumatic period when the dot-coms were
raiding us. People were leaving here with a sense that money was just being
given away. It was if you walked into a Vegas casino and every slot machine
was paying off. Even if you weren't a gambler you grabbed that slot machine,
but this is business, and it is no less risky than Las Vegas. Today our
turnover rate is back to manageable and below the industry average.
Q: What is the market for ERP software?
A. The opportunity today is using technology as a competitive advantage to
increase revenue and this really should be thought of as combining customers,
suppliers employees into a collaborative network.
Q: What are the biggest priorities the next six months?
No. 1 is marketing execution, No. 2 is sales execution and No. 3 is the
next generation of innovation. The fourth is continuing to improve financial
management.
We live in a tough neighborhood with tough people all around us. Tom Siebel
and Larry Ellison are very aggressive seasoned business people and we can not
have a casual attitude to financial management.
Q: What is your employee count today?
A: It's around 7,500. We had dramatic expansion in last five months we
added almost 1,300 new employees as we grow we will add.
Q: Over the next 12 months how many more?
A: I would expect if the company grew 25 percent the employee count would
grow 10-20 percent. We will grow our employees a bit slower as we return
more profitability to the bottom line.
Q: That's a far cry from 430 layoffs in 1999.
A. That was a necessary step at that time. That was followed by a
traumatic period when the dot-coms were invading and raiding. There was a
period where the attraction to dot-coms was irrational People were leaving
here with a sense that money was just being given away. It was if you walked
into a Vegas casino and every slot machine appeared to be paying off. Even
if you weren't a gambler you grabbed that slot machine. This is business and
it is no less risky than Las Vegas. For a year we struggled with retention.
Recruiting and retainment was the number one issue.
Q: What is the turnover rate today?
A: It's back down to 15 percent and below the industry average. Our
historic average had been 4 to 5 percent. It's not tolerable now its
manageable.
Q: In terms of real estate what are your needs?
A: We just moved into three buildings next door and I'm told we will be
out of space in 18 months. It's on our long-term radar. We do have space in
Santa Clara through our Vantive acquisition, but it's likely if we expand it
will be here and around the world.
