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Beyond PeopleSoft: Oracle's Grand Plan

By Lesley Hensell
Sep 8, 2003 4:01 AM PT

Rarely do dramas of soap-opera quality spring to life in the business world. But as Oracle pursues its hostile takeover bid for PeopleSoft, the companies' machinations and legal wrangling continue to provide all the tension, comic relief and plot twists of a well-performed Shakespeare play.

Beyond PeopleSoft: Oracle's Grand Plan

PeopleSoft claims that Oracle's intent all along has been to swallow its customer list and then discard its products, forcing clients to migrate to Oracle's software. Oracle counters that it intends to support both its own and PeopleSoft's product lines.

Amid the shouting, industry observers seem to have forgotten something: Details of a post-acquisition Oracle are being shunted aside. Rather than wallowing in what-ifs about the proposed takeover's legality and likelihood, customers of both companies should be asking a different question: What is Oracle's grand plan for the future?

Same Old, Same Old?

Oracle, of course, professes a calm and steady outlook and says it has no plans to torpedo PeopleSoft's product line. "It will be business as usual. We have no vision to change course in terms of our products or how we are moving the customer forward," Robb Eklund, vice president of CRM marketing at Oracle, told CRM Buyer.

"Everyone recognizes that enterprise software as a category is consolidating," Eklund said. "The companies that have a broader footprint for their solutions have a better ability to serve their customers. That's absolutely our focus at Oracle."

In fact, Oracle claims that in the future, it can support PeopleSoft's current software products better than PeopleSoft itself can.

"Our intention is to provide an even higher level of support for those customers going forward," Eklund said. "There is no intention to merge the products.... We would hope that eventually those [PeopleSoft] customers would consider [Oracle] E-business Suite, but that's not our intention."

Smoking Gun?

Although Oracle executives stringently deny any intention to discontinue PeopleSoft's software, a lawsuit filed by PeopleSoft quotes an e-mail from Safra Catz, an Oracle executive vice president, that seems to contradict the company's public statements.

"This is a really exciting opportunity for Oracle," Catz wrote. "Though we really won't be continuing their product line or combining operations, there will no doubt be challenges."

Publicly, Oracle has claimed it will both maintain and enhance the PeopleSoft 8 product line for at least 10 years.

However, even if Oracle continues to support PeopleSoft software, that does not mean it will be developed further, PeopleSoft spokesperson Steve Swasey told CRM Buyer.

"We add a couple dozen new modules to our product each year," Swasey said. "If you're just supporting the software, that means you're maintaining modules, fixing bugs and patching. It doesn't mean you're bringing new functionality to it. In some ways, software is just like a car -- if you don't put new tires on it, change out the wiper blades and add fluids, it's going to atrophy."

Looking for Justice

For now, the fate of the proposed acquisition rests with antitrust investigators at the U.S. Department of Justice, whose findings are expected in November.

Oracle faces an uphill battle to convince regulators that eliminating a major ERP rival will not result in an anticompetitive market. After all, aside from Oracle and PeopleSoft, only SAP holds significant market sway, along with Siebel in the CRM sector.

One question that may be addressed by the government is whether or not creation of a megacompany will limit future product innovation. PeopleSoft pointed out that its software runs on open standards, while Oracle software is compatible only with Oracle databases.

"This is not customer-friendly," Swasey said. "Customers would have to spend billions of dollars not only configuring new software, but would also have to get new databases."

Whither Innovation?

Oracle executives insist innovation will prosper with or without the acquisition. In fact, the company is touting its latest release as the next generation of CRM, enabling organizations to better align their entire enterprise around customer needs.

"The industry is at its worst when all we do is look at each other," John Wookey, senior vice president of CRM development at Oracle, told CRM Buyer. "The best innovation happens when we tie ourselves as close to our customers as possible."

Indeed, if the field of surviving vendors does not innovate fast enough, Wookey said, "then the customer will develop the solution themselves. That's why there is always the need for continual change and continuing investment."

At least one Oracle customer agrees that E-Business Suite provides superior integration capabilities between CRM and other ERP systems. Affina, which provides contact-center services for Fortune 1000 clients, recently installed Oracle's CRM solutions and is gradually adding other modules to its E-Business Suite implementation.

"We considered PeopleSoft, but we didn't see that CRM solution as being very well integrated into the overall PeopleSoft offering," Vic Burgess, vice president and general manager at Affina, told CRM Buyer. "Oracle had really integrated its offerings well and was strong on Web-enabled capabilities. Oracle was also the only vendor we saw stepping up to bat on both software and hosting services."

Battling for Customers

While Oracle and PeopleSoft continue to slug it out at the sales and legal levels, several key dates loom. Each company is hosting a major user group meeting in mid-September. Also, PeopleSoft likely will give some indication of its third-quarter earnings in the first few days of October, and the Department of Justice should announce its findings in November.

Where does all of this leave prospective and current customers?

"Companies would be wise to ignore both vendors' highly publicized posturing and legal sparring and make purchase decisions based on what applications provide the functionality and performance that meet business requirements and budgets," Aberdeen Group analysts David Alschuler and Tim Minahan wrote in a recent report. That seems like sound advice in an exceedingly uncertain period for enterprise software buyers.


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