PeopleSoft CEO Craig Conway well remembers September 9, 1999, the day he announced his turnaround strategy to his company's management team.

"That meeting took 13 hours," Conway recalls. "I said, there are three product and technology imperatives and three go-to-market imperatives." The market strategies were promoting in-house consulting, expanding internationally, and addressing the mid-sized company market. The vital technologies were a new architecture, CRM (customer relationship management), and supply-chain management.

"With the PeopleSoft 8 architecture, we nailed [the first technical imperative]," Conway says. "CRM? Siebel can hear our footsteps and we're going to be able to breathe on his neck soon. Supply chain is the third initiative—that we have to make at any cost."

Many may be surprised to hear that PeopleSoft considers supply chain critical to its business strategy. After all, analysts and corporate management often view PeopleSoft as a vendor of human resources or enterprise resource management (ERP) products. Even its name conjures up thoughts of groups of employees, not carefully coordinated streams of things.

"If you've got PeopleSoft and you're looking for supply chain, they are a contender," says Dave Boulanger, an analyst with AMR Research. "But are they top-of-the-line when you're looking for a supply-chain solution? Probably not."

Conway believes that the company has made strong progress in the supply-chain market, almost doubling its number of supply-chain customers, to about 1400, since he joined the company. The pro-duct itself has also become stronger, becoming a major contributor to the bottom line.

"It was the fastest growing product line of all the product lines last year," says Mike Frandsen, vice president and general manager for the supply-chain division. "We grew by about 70 percent last year, where the supply-chain market grew by about 40 percent, and the rest of the company was probably somewhere in that ball park. It is a significant contribution to PeopleSoft's revenues."

"But I would not dispute that we have longer to go as far as supply-chain perception," Conway adds. "The dilemma for me is that PeopleSoft is a company that has a role and a place and a destiny, and it's sometimes hard to get that across to the market."

One problem might be People-Soft's historic position regarding supply chain. "Before Craig [Conway], one of the things we struggled with was that the management wasn't sure we should be in that business or not," Frandsen says. "Three years ago some of our managers got in front of analysts and asked whether we should be in that business or not."

PeopleSoft also suffers from more tangible baggage from its past. "Notwithstanding 1400 customers and product capability that has closed the gap with other leaders, and talent like Mike Frandsen," Conway says, "I think the bruise or the skepticism about PeopleSoft in the category remains because of the Red Pepper misfire." Before Conway's tenure, PeopleSoft had announced with fanfare its acquisition of supply-chain vendor Red Pepper, then did little to advance its operations and marketing in that area.

Getting the perception of commitment to a product line is imperative if PeopleSoft wants to compete in the supply-chain market. "They're selling software to non-manufacturing kinds of companies," Boulanger says. "They're getting into enterprise performance management, partnering with contingent workforce companies. You could make the point, 'How relevant is the supply-chain product?' If they do have the product and are going in that direction, how much care, love, and feeding will it get over the long term?"

But Conway's mind harbors no doubts as to the importance of supply chain. "You can collaborate among participants in the business process [with supply chain]," Conway says. "If you believe that PeopleSoft's heart and soul are in that, and we're taking on Siebel and SAP and Oracle in many areas, you'd have to conclude that supply-chain management is near the hearts and lungs. It's as much of an imperative as HR was and is, as financial applications were and are, as customer relationship management was and is."

Despite the difficulties, PeopleSoft actually has some natural market strengths that could fuel its ambitions. One is the company's current market niches. "One of the places where they do sell is in the public sector," Boulanger says. "They could do very well there. [Their product is also] fairly good at real-time pricing, looking at supply and demand. If you're a products company and you want to know the impact of changing the distribution on the price of products and how they sell, it's a great fit."

The other major area is in the mid-sized product market, because competitors i2 and SAP "haven't been effective" there, Frandsen notes. "Historically, [they have been] a very consultative sale. When you start going after the mid market, that's a tough model." A sales arena that is off-putting to the biggest players might prove inviting to PeopleSoft.

"If it's a huge current to swim up with very few fish at the multibillion dollar manufacturing companies because of SAP's [and i2's] history, and because of their preoccupation with the big market they ignored [the mid-market], and the current is less, should PeopleSoft look at that market?" Conway asks. "I think the answer to that is yes. There may be a lot more warm water."

Certainly PeopleSoft—guided by Conway—has shown exceptional financial strength, even in the face of an economic climate that has battered many other software companies. The company's second quarter was the latest in a string that have bested Wall Street expectations; at the same time, many of PeopleSoft's competitors have been issuing earnings warnings. You could say that Conway and PeopleSoft have been enjoying a remarkable roll of sevens in the dice game that the software industry often resembles.

"That's what I would say to an analyst: Don't bet against me," Conway warns. "I've won battles I've thought were more difficult. I have faced a lot more serious problems."