Author: Yogi Schulz
The friendly acquisition of J.D. Edwards by PeopleSoft on 2 June 2003 triggered Oracle’s hostile takeover offer for PeopleSoft. Oracle’s Chairman, the ever-combative Larry Ellison and PeopleSoft’s Chairman Craig Conway have ratcheted up the temperature with inflammatory personal attacks. Since the Oracle offer, the lawsuits, counter suits, accusations and rebuttals have been flyingback and forth in full-page ads and in blistering press releases.
The stakes are high for all the combatants. If Oracle succeeds in grabbing PeopleSoft, Oracle wipes out a key rival and becomes a major competitive threat to German software giant SAP. SAP continues to dominate the multibillion-dollar business applicationssoftware market. PeopleSoft, having completed its merger with smaller software rival J.D. Edwards, now supplants Oracle as the No. 2 player in the ERP software market. In case there’s any doubt, Larry hates to be No. 3 in anything.
What are the implications of the PeopleSoft/J.D. Edwards/Oracle shootout for our businesses; especially if we’re customers of one or more of these software vendors already?
PeopleSoft sees the following benefits in its J.D. Edwards acquisition. First, PeopleSoft needs to grow if it is to meet the SAP competitive threat to its customer relationship management (CRM) software business. Second, PeopleSoft sees an opportunity to strengthen its software by adding J.D. Edwards’ manufacturing and distribution applications into its enterprise suite. Third, PeopleSoft sees potential to market its financial and CRM software to J.D. Edward’s customers.
To PeopleSoft customers, these objectives all produce functionality benefits. In the Oracle takeover scenario, these objectives will be pursued with Oracle software, forcing a costly migration on PeopleSoft customers.
J.D. Edwards Customers
J.D. Edwards customers will benefit from being acquired by either PeopleSoft or Oracle because they will have access to moresoftware options.
The merger creates risk of unwanted migrations for J.D. Edwards customers.
For existing Oracle customers, the benefits of a PeopleSoft acquisition lie in the future. If the PeopleSoft acquisition is successful, Oracle management will first be focused on keeping PeopleSoft customers happy and then on creating a migration path to Oracle software that will be appealing. These initiatives will cost time and money that provide little or no benefit to existing Oracle customers.
In the longer term, the PeopleSoft acquisition is likely to benefit both PeopleSoft and Oracle customers as the combined customer base provides the revenue needed to fund the R&D investments that will produce improved software. “As far as the technology’s future, PeopleSoft customers will have 5,000 to 6,000 [Oracle E-Business suite] developers work on their next generation of products. That’s simply something they wouldn’t have had on this other road,” Ellison said.
The unexpected winner in the turmoil and uncertainty the takeover battle is generating may be SAP and its customers. Michel Brisson, the President of SAP Canada, says that “SAP can already point to examples where customers have selected SAP because of turmoil on the takeover front.”
Brisson believes that current and prospective customers appreciate the high level of R&D investment SAP is making that its competitors can not match.
Disgruntled and annoyed PeopleSoft, J.D. Edwards and Oracle customers should be easy pickings for SAP salespeople.
The various merger or thwarted merger scenarios all create risk of slowed product development or forced migration to a different product for the current customers. The economies of scale benefits of these mergers are real but will take a few years to realize.