J.D. Edwards & Company
J.D. Edwards & Company
Sales: $240.6 million
SICs: 7372 Prepackaged Software
J.D. Edwards& Company is a leading global designer of software for midrange computers. Its software is used by those involved with distribution, manufacturing, finances, human resources management, construction, public services, and other industries. In 1995 J.D. Edwards was supporting branch offices in Europe and Asia and shipping its software throughout the world. The company achieved consistent growth by researching and developing top-performing software applications.
The name J.D. Edwards was derived from the names of the company’s three founders: Jack Thompson, Dan Gregory, and Ed McVaney. Before forming J.D. Edwards on February 1, 1977, in Denver, Colorado, all three men were working at the accounting and consulting firm of Alexander Grant and Company (Grant Thornton& Co.). The three had been working as consultants and accountants for several years before deciding to quit and form their own company. Together they shared a wealth of top-level accounting and computer expertise that they hoped could be parlayed into a successful accounting software company. The partners’ main goal when they launched the venture was to produce standardized software applications that actually worked in a predictable and reliable way, making users more effective at their jobs.
Heading the group from the start was 36-year-old McVaney, whose wife had coined the J.D. Edwards name. He had earned his bachelor’s degree in mechanical engineering from the University of Nebraska in 1964 before receiving his masters degree in business administration in 1966 from Rutgers University in New Jersey. His first job after college was as an operations research engineer and an electronic data processor specialist in the Bell system, where he worked while he was earning his MBA. In 1966 he accepted a position as a consultant in manufacturing and electronic data processing for Peat, Marwick and Mitchell. He worked there until moving to Grant Thornton& Co. in 1970, where he became the partner in charge of data processing and consulting services. Among other skills, McVaney became intimately familiar with IBM’s midrange computers, which are smaller than mainframes but more powerful than personal computers.
McVaney, Gregory, and Thompson started out in a small office with a copy machine as their only piece of equipment. “The copy machine was my first big decision,” McVaney recalled in the June 10, 1992, Denver Post. “We decided to be bold and go for the $105 a month.” They borrowed $10,000 to cover the cost of the copier and other miscellaneous expenses, and set about designing software tailored to the accounting and financial tasks with which they were familiar. While McVaney handled much of the management and marketing, Jack Thompson acted as the company’s technical force. Meanwhile, Gregory wore a number of hats and eventually became known as the company’s premier firefighter and the creator of the training department.
J.D. Edwards started out designing software for IBM small and medium-sized computers, particularly the IBM 34 minicomputer. During its first year in business, the fledgling company generated about $200,000 in revenues. To add more technical expertise to their staff, the three partners merged with another tiny software firm. From the start, the founders agreed that a large portion of their cash flow should be reinvested in research and development. As a result, the company was able to produce a number of successful business applications during the late 1970s and early 1980s, and sales and profits steadily increased.
IBM eventually discontinued its 34 system, largely because of objections from dissatisfied users. It replaced it with the 36 and 38 systems. At the same time, competing midrange computer manufacturers like Sun Microsystems were jumping into the market with their own advanced machines. J.D. Edwards made a pivotal strategic decision to stick with IBM and gear all of its applications for the 36 and 38 systems. “The question [among software companies] was which way IBM would go with new technologies in the mid-range market,” McVaney said in the January 1990 Colorado Business. “At the time, what we did looked very chancy. We bet all our marbles that the 46-bit System 38... would be the winning technology, and we were right.” The System/38 became one of the dominant entries in its class and was a leading midrange platform for several years.
In betting on the System/38, J.D. Edwards redesigned every one of its applications in 1983 to be compatible with the System/38 platform. That meant that the company had to ensure that three million lines of code conformed to the standard. During that effort, Edward’s technical staff pioneered the’Clone’ method for software development and design. In essence, Edward’s Clone technique eliminated much of the labor involved with programming. Traditionally, Edwards and its competitors relied on programmers to write their new applications by taking several hours to compile each program line individually. One drawback of the conventional method was that each program or chunk of code bore the imprint of its writer. Under the system chunk of code bore the imprint of its writer. Under the system Edwards developed, 90 percent of a given program could be written with the aid of’the Clone,’ which was a computer-generated technique of standardizing code and eliminating quirks of individual programmers. The net result of the new software development method was that Edwards’ productivity doubled. Importantly, the consistency of the company’s applications increased and debugging became a much easier and faster task. Thus, the overall quality of Edward’s programs were enhanced. During the mid-1980s Edwards would use the Clone to develop an array of specialized programs for a broad range of industries and tasks. The company built up a strong position in the oil and gas industry, for example, but was also selling its innovative accounting and financial applications to industries ranging from publishing to construction.
McVaney and fellow managers seemed to have made the right decision in focusing on the IBM System/38 in 1983: Sales growth was, indeed, brisk. However, IBM began to lose its edge in the midrange computer segment in the mid-1990s. At the time, the personal computer market was taking off and IBM was scrambling to assert itself both in that segment and in its traditional mainframe business. Meanwhile, it lagged in midrange technology, and competitors began chipping away at IBM’s market share. To keep up with the competition, IBM started working on a next-generation System/38 called the AS400.
J.D. Edwards, like many other software companies, started investing early to have software ready for the AS400 when it was finally introduced. To the dismay of Edwards’ staff, IBM almost decided to cede its market share in the midrange market and simply eliminate the entire AS400 project. As late as 1985, by which time Edwards’ had dumped a whopping $23 million into AS400-related research and development, IBM was weighing its options. Disaster loomed. Fortunately for Edwards, IBM decided to complete the development of the AS400. As a result, by the time IBM introduced the technology a few years later, Edwards was among the companies most prepared to take advantage of the new market.
Even before the AS400 was introduced, J.D. Edwards was ringing up big profits from its cutting-edge applications for the System/38. By 1984 the firm was employing 60 people. Sales shot up 63 percent in that year before leaping another 50 percent in 1985, by which time J.D. Edward’s work force had more than doubled to 130. “We are now in the position of having clients beating down our door,” said Edwards’s marketing manager Howie Miller in the March 24, 1986, Rocky Mountain Business Journal. To keep up with spiraling demand, Edwards expanded its sales offices to include nine cities by late 1986. Its revenue base made it one of the four top companies in the midrange applications industry. Edwards was gaining on those competitors, though, and its widely diversified client base gave it a strong edge against any downturns that might affect an individual market.
Edwards posted big gains throughout the late 1980s. New applications for the System/38 drove growth until 1988, when the AS400 was finally introduced. Edwards was able to hit the ground running when sales of the AS400 started taking off. Importantly, McVaney was surprised to find huge growth opportunities overseas. J.D. Edwards had dabbled with cross-border sales in the mid-1980s and found a willing market. In 1988, therefore, McVaney launched an aggressive international expansion program. Sales, particularly in Europe, exploded. By 1990 international sales were generating roughly 20 percent of the company’s $77 million revenue base—a rise from just $38 million in 1989. Edwards opened an office in Belgium to serve Europe, a branch in Florida as its Latin America headquarters, and another office in Singapore to serve Asia.
Another big growth area for Edwards beginning in the late 1980s was the manufacturing industry. Although the company served a wide array of markets, it had postponed entering the giant manufacturing sector, which was considered among the largest (and most competitive) arenas in the midrange application market. Success in that industry helped the company to more than double sales in 1990 before pushing revenues to a lofty $130 million in 1991. Going into 1992, Edwards was the largest producers of IBM midrange software in the world and the 30th largest software designer in the entire United States. By then, its work force had swelled to an army of more than 1,000, only about half of which were employed at the company’s Denver headquarters. What’s more, the company had attained its status virtually debt free and without ever having gone public. Amazingly, the company had grown at an average rate of 60 percent a year since its inception in 1977.
Besides focusing on the IBM lines, part of the key to Edwards’s success in the late 1980s and early 1990s was its research and marketing strategies. The company continued to direct a high 22 percent of its revenue stream into research and development of new products. In addition, rather than chasing after the really big fish, Edwards focused on what McVaney referred to as “the middle American business community.” That group basically encompassed companies with $50 million or more in sales, which generally were still too small to have their own software development departments; Edwards customer base did, however, include General Motors, Kodak, and other large corporations. As the number of clients increased, so did the number of industries and specific applications. By the early 1990s J.D. Edwards was developing software solutions for industries ranging from health care, real estate, and government to food service, air travel, and finance. Most of the applications addressed various accounting, payroll, purchasing, and project-management tasks.
Among the biggest surprises for McVaney and fellow executives was the amount of international demand for Edwards’s applications. By 1992 a full 32 percent of the company’s sales were coming from overseas, and that percentage was quickly climbing. “People ask me if I envisioned we would have gotten this big, and I answer’yes,’ “McVaney said in the June 10, 1992, Denver Post. “But international sales have been astounding. That’s humbling to me.” By 1992 Edwards was selling its software packages translated into Dutch, Danish, Portuguese, Japanese, and Arabic, among other languages, and the company had opened offices in London, Brussels, France, Germany, and Australia. Other offices were scheduled to open in Asia and South America, as intimated above, as well as in other European countries.
J.D. Edwards sustained its stunning growth rate during 1993 and 1994. Sales grew to a fat $197 million in 1993 before bulging to $241 million during 1994. The company had maintained an average annual growth rate of about 54 percent since 1977. Evidencing its ongoing commitment to technological leadership, J.D. Edwards completed the development in 1994 of WorldVision, which was a PC-based software product designed to operate in the popular Windows software environment. The program was created to provide a more user-friendly, Windows-type environment for AS400 applications that would demand less training and make the applications easier to use. The company also released a new product geared for the emerging electronic commerce industry. J.D. Edward’s sales continued to surge in the first six months of 1995 as its work force ballooned to 1,800. The company, which was still privately owned and debt free in mid-1995, expected to employ 2,000 people worldwide by the end of the year.
Dowling, Mark, “J.D. Edwards Rises to Software Superstar on IBM’s Coattails,” Denver Business Journal, February 15, 1991, p. 3.
Hardman, Chris, “J.D. Edwards& Co. Sets Another Revenue Record for 1994,” Business Wire, January 24, 1995.
J.D. Edwards& Company: A Corporate History, Denver: J.D. Edwards& Company, 1995.
“J.D. Edwards& Company; Welcome to the Skunkworks of Software Brilliance,” Colorado Business, January 1990, p. 40.
Mullen, Frank, “J.D. Edwards Software Firm Has Avoided High-Tech Bust,” Rocky Mountain Business Journal, March 24, 1986, p. 19.
Murrel, Guy, “New Windowing Product from J.D. Edwards Marks Next Step on Client/Server Migration Path,” Business Wire, October 21, 1994.
Van Housen, Jon, “Edwards’ Founder Had Vision,” Denver Post, June 10, 1992, p. 1C.
J.D. Edwards & Company
J.D. EDWARDS & COMPANY
J.D. Edwards & Company develops, produces, and markets software applications packages for business. It develops applications that can be used in every aspect of business, including supply, finance, human resources, manufacturing, and planning, and by most business sectors, such as chemicals, automobiles, arts and entertainment, and energy. Its flagship products, OneWorld and WorldSoftware, incorporate tools for enterprise resource planning (ERP), supply chain planning, knowledge management, and process integration. Services related to its software, such as training and consulting make up about 50 percent of J.D. Edwards' business.
In its software packages, J.D. Edwards made "interoperability" a byword. Beginning in the middle 1990s, J.D. Edwards began creating software that included all the essential functions needed by a business and allowed those functions to work together smoothly. This idea grew into a strategy the firm termed "c-commerce," or collaborative commerce. The c-commerce software packages it developed, in particular OneWorld, were suites of component with a variety of applications that could be used across a company or an industry. Diverse applications which previously were incompatible could "interoperate" in J.D. Edwards software. It threw up bridgeheads across networks, be they intranets, extranets or the Internet. Departments within a company could exchange data; as could companies collaborating on projects. It no longer mattered that their applications or even their computer systems were different.
J.D. Edwards' c-commerce approach offered many benefits. Some 60 percent of Fortune 500 businesses depended on three or more technology platforms. Software like OneWorld helped integrate these systems. Individual firms could exchange data about common projects, products, and services across systems efficiently in real-time. In summer 2000 J.D. Edwards intensified its commitment to c-commerce adopting a best-of-breed strategy for its software line. The firm's enabled a customer to select the best applications packages regardless of who produced them, rather than purchasing every application bundled together in a monolithic package from a single vendor. J.D. Edwards' software was able to integrate the diverse software into a seamlessly functioning system. Best-of-breed offered firm's an additional advantage—if it decided to alter or replace an application, it could do so without replacing its entire software system.
The OneWorld Suite is the flagship of J.D. Edwards' product line. It is a Web-enabled collection of business applications, a set of integrated components that can be assembled and disassembled to best serve the needs of a particular company. Released in 1997, OneWorld was designed from the ground up as a comprehensive component software architecture. It was one of the very first such systems on the market. OneWorld's architecture is a hierarchy comprised of six levels of components. Each level is constructed from the pieces in the next lower level. OneWorld's power and versatility come from its ability to combine its nearly 45,000 components to carry out a broad variety of business functions.
OneWorld's first level is comprised of about 30,000 predefined data elements, which constitute the building blocks of the system. The low-level components identify and store the most basic information and perform very simple calculations on that information. OneWorld users can also define new data elements. The second level is made up of tables and so-called business views, which assemble data from the first level and organize it into tables. Functions, such as joining or filtering, are also performed on the tables at this level to prepare them for the third level, business functions. There are nearly 3,000 business functions, each one of three types: field, line, or master. The nuts-and-bolts work of business is first apparent at this level. Field business functions control particular data fields in the application—price, for example. Line business functions control specific lines in a business form, for example, the third line of an invoice. Master business functions are set up to handle larger composite entities such as an entire purchase order.
Complex business functions, such as maintaining an accounting ledger, are performed in one of two modes, interactive and batch applications, at OneWorld's fourth level. The fifth level, OneWorld solutions, are programs that integrate all the lower-level business functions and application modes into complete, full-blown applications for different business activities, such as human resources, manufacturing, or finance. At the top-most level, OneWorld Vertical Market Suites, components are combined for the needs of specific industries, including energy, chemicals, engineering and construction, and public services.
OneWorld was designed to run on the Windows or UNIX operating systems, as well as on the IBM AS/400 platform, the system with which J.D. Edwards first made its name. A later version, OneWorld XE, included an "interoperability engine" that made it possible for users to integrate specific applications from different software or platforms, as well as from companies other than J.D. Edwards. A Hurwitz Group white paper on OneWorld called the package "a compelling choice for companies that recognize the importance of the technological and business cases for componentization."
J.D. Edwards was founded in 1977 by three employees at a Denver, Colorado accounting firm: Jack Thompson, Dan Gregory, and Ed McVaney. There was no J.D. Edwards—that was an amalgam of its founders' first names. The new company was set up to design business software for small and mediumsized computers. In the early 1980s it began specializing in software for IBM computers—first the IBM System/38, and in 1988 for the AS/400. WorldSoftware, a package of business applications introduced by J.D. Edwards in 1983, was the firm's leading product by the end of the 1980s. By 1992, the company was not only the world's largest producer of IBM midrange software, it was the 30th largest software company overall in the United States, averaging 15 percet annual growth for fifteen years running. By the early 1990s, 32 percent of J.D. Edwards' sales were overseas. More important, to achieve that astounding pattern of growth, it never needed to go public.
Edwards maintained its success through much of the 1990s. In 1996 it introduced OneWorld. Termed configurable network computing, OneWorld was the first shot in J.D. Edwards' c-commerce revolution. One year later, in August 1997, in the bull's rush for computer and Internet stocks, the firm launched a well-received stock offering. By the middle of the following year, the firm was worth nearly $1 billion and could boast an annual compound growth rate of 52 percent. As 1999 began, the ERP industry as a whole, and giants like SAP and Baan in particular, were reporting declines in profits; J.D. Edwards, however, nearly doubled its revenues. Flush with success, the company set its sights on overtaking the industry leader SAP within five years time.
In 1999, determined that its OneWorld package go head to head with high-end SAP and PeopleSoft offerings, J.D. Edwards moved all out into collaborative commerce. It acquired two companies, Premisys and Numetrix, whose technologies were essential to making OneWorld interoperable. However, the Year 2000 (Y2K) transition problem threw the entire ERP sector into a recession, and J.D. Edwards' fortunes took a major downturn in early 2000. In April CEO Doug Massingil left the company after less than a year and a half on the job, and was replaced by the man he had replaced, J.D. Edwards founder Ed McVaney. A month later the company announced that it would lay off around 13 percent of its workforce throughout the world, and its share price plunged from a high of $49 to a little over $10.
Struggling to recover, the firm announced OneWorld XPI—eXtended Process Integration. This best-of-breed software solution made it possible for J.D. Edwards' customers to incorporate diverse software applications into a single system that managed all operations and interconnected them. Technology licensed from Netfish Technologies and Active Software provided OneWorld XPI with its so-called interoperability engine. In January 2001, Edwards used the Internet for the first time to sell its systems directly to customers. Summer 2001 saw a chastened J.D. Edwards scaling back its ambitious plans to overtake SAP. The company refocused its attentions on the middle-sized companies that were always its bread and butter. In 2001, the company employed nearly 5,000 employees in 60 different offices throughout the world, and had approximately 6,000 customers in 113 countries.
Everitt, Lisa Greim, "JD Edwards & Co. Launches Direct Software Business." Denver Rocky Mountain News, January 6, 2000.
Howlett, Dennis, "JD Edwards Attempts To Change To Try And Take On SAP." Newswire (VNU), May 20, 1999.
"IBM, J.D. Edwards Strike Global e-Business Pact." Washington Technology, April 2, 2001.
"JD Edwards Extends Oneworld With E-Business Vision." Asia Computer Weekly, May 31, 1999.
Koh, Cindy, "New Strategy for JD Edwards." New Straits Times, June 29, 1998.
Manchester, Philip, "A Seamless Electronic Environment." Financial Times, June 7, 2000.
Mun, Leong Khay, "JD Edwards' Future Surrounds E-Commerce." Asia Computer Weekly, July 3, 2000.
Pardas, Aimie, "JD Edwards in C-commerce Strategy." New Straits Times-Computimes, (Malaysia), June 26, 2000.
Stones, Lesley, "Striking A Blow For Greybeards." Business Day, (South Africa), June 29, 2000.
Wild, Damian, "JD Edwards Targets Mid-Market." Accountancy Age, June 21, 2001.
SEE ALSO: Enterprise Resource Planning (ERP); Integration; PeopleSoft Inc.