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The debate over whether Oracle (Nasdaq: ORCL) will prevail in its attempt to acquire PeopleSoft is over. Mario Monti, the European Union's competition commissioner, is expected to approve the merger before October 31. Mr. Monti has been approached by SAP (NYSE: SAP) and Emerson Electric, who both spoke in favor of the merger. With the European Union on board, Oracle has the legal momentum to make this merger happen.
The debate between supporters and detractors of each company is no longer important. What we should be talking about is what is forcing consolidation in the software industry. Oracle has been struggling to capture customers for its enterprise applications while at the same time selling applications innovative enough to deliver financial returns. That truth has just come to light in this latest quarter.
Getting beyond the petty rivalries surrounding this acquisition is critical to seeing the truth: Oracle needs PeopleSoft to survive.
Oracle at a Crossroads
Oracle is at a crossroads in its non-core businesses, and acquiring PeopleSoft brings much-needed expertise in areas where Oracle today is weak.
If you are anti-Oracle, at least give them credit for a great hire in Chuck Phillips, now the company's president, and for recognizing that its grip on enterprise software was slipping. Like any weakness, that one has finally come to light, maybe years after Oracle's leaders first saw it coming.
Oracle's leaders may have said they wanted to be the industry consolidators, but in fact IBM (NYSE: IBM) and Microsoft (Nasdaq: MSFT) were perfecting their own database technologies and stealing sales from Oracle's core business. Oracle the consolidator runs the risk of being Oracle the consolidated if it doesn't broaden its application footprint and deliver on the promises it has made as a suite vendor. Many of the components of Oracle suite applications only partially meet a need -- and some are a generation or two behind their best-of-breed competitors.
The Enterprise Landscape
When Oracle does complete the acquisition, here's a quick tour of what the enterprise software landscape will look like:
Bottom Line: Oracle must play the consolidator now or risk being the one consolidated out of the markets it helped create. They have no choice but to make the PeopleSoft acquisition work to survive long-term against IBM and Microsoft, as both of these much larger competitors start making significant inroads into the core database business.
Louis Columbus, a CRM Buyer columnist, is a former senior analyst with AMR Research and is founder of LWC Research, a firm specializing in CRM, sell-side e-commerce, sales
and product configuration and guided selling.
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