Oracle and PeopleSoft are already working on an integration plan following the surprise announcement that the database vendor would buy enterprise software applications company for US$10 billion. Oracle president Charles Phillips said he expects the deal to close by Dec. 30.
“This has been
a long time in coming,” Phillips, told journalists yesterday in a telephone conference. “It’s been a very strategic acquisition and I think a big event in the industry. We are excited about having a much larger installed base for applications. We’ve been thinking about this for 18 months and have a pretty solid plan. The two companies have been talking as of this morning. I’ll be going over there tomorrow. I’ll be hard at work.”
Phillips added Oracle is more interested in keeping PeopleSoft developers than its administrative employees. He refused to say how many of the 11,600 PeopleSoft employees would potentially be affected by the merger.
Phillips said Oracle is unaware of the status of PeopleSoft’s supposed new partnership with IBM Software Group to build SOA-compliant applications. He added Oracle is more interested in working with IBM’s Global Services division.
Oracle will continue to support PeopleSoft and J.D. Edwards resellers and is planning to evaluate the partner network in the coming months, said Phillips.
“There will definitely be a place for them,” he said, adding Oracle will maintain and enhance the two software makers’ product lines and will employ a similar strategy for its PeopleSoft World app suite for IBM Corp.’s iSeries platform. “You can count on the products continuing to evolve. Those resellers who’ve learned the product and feel comfortable working with it, they can continue to do that.”
In a conference call with analysts earlier this week, Oracle chief executive Larry Ellison confirmed PeopleSoft and J.D. Edwards development teams will stay on to develop an upgrade to PeopleSoft 8 and release PeopleSoft 9 and J.D. Edwards 6 sometime in the next couple of years. Ellison added that Oracle and PeopleSoft engineers will work together to develop a merged product, called PeopleSoft 10, which would likely be released in 30 to 36 months.
“Ideally we’d have resellers and partners who want to carry multiple products,” said Phillips, citing the company’s mid-market app, called Oracle eBusiness Suite Special Edition. “If (resellers) can only focus on one, we’d recommend the Special Edition. There will be plenty of opportunity for partners. There’s lots of products for them to sell.”
Determining a singular channel strategy is one of several key issues that will decide the outcome of the acquisition as a success or failure, according to a New York-based analyst firm.
“It’s something Oracle has to iron out right now, said Peter Russo, of Pierre Audoin Consultants. “They acquired PeopleSoft to get this great customer base; it’s highly profitable from PeopleSoft so I imagine they’ll want to keep a lot of things in place. The long term question is who’s strategy do they go with?”
In his report, titled “Oraclesoft: What opportunities and what issues face the new company?”, Russo said in the last couple of years Oracle has looked more to the channel to implement its applications while PeopleSoft has done the exact opposite.
“In order to attract more partners to push their software onto the market, Oracle has made it more attractive for partners to work with them,” said Russo.
Russo added that J.D. Edwards had a great channel system prior to being acquired by PeopleSoft last year. “(PeopleSoft) tried to bring J.D. Edwards in and develop more of PeopleSoft-like services organization,” he said.
Another potential hurdle facing Oracle is the lower-then-expected cross-selling revenue between PeopleSoft and J.D. Edwards, at 15 per cent of license revenues compared to an expected 36 per cent, according to the report. Russo also cited Oracle’s lack of industry-specific solutions, especially on the database side, as a possible drawback.
Once the deal is complete, Oracle’s revenue for application software products will still be half of that of market-leader SAP. For fiscal year 2003, Oracle and PeopleSoft combined revenue for application software products was US$2.8 million while SAP’s was US$5.2 million. Oracle, however, remains the second-largest software vendor with combined revenue of US$11.7 million for the same period.
A Montreal-based solution provider said the deal brings some much-needed closure to a prolonged period of uncertainty over the last 18 months.
“We’re pleased that the situation is finally resolved,” said Michael Etinson, president of Syntax.net, which partners with both PeopleSoft and SAP. “Uncertainty and business don’t mix very well. This provides some certainty around the outcome of the discussions and we can get on with doing business.”
Etinson said he is also glad to see that Oracle will continue to support upcoming enhancements and new releases of PeopleSoft and J.D. Edwards products.
“I’m happy for both ourselves and our customers that Oracle has taken a very firm position on supporting not only the PeopleSoft products but also the J.D. Edwards products,” he said. “That’s a very strong signal that once again provides some certainty in terms of customers who already have the software and customers who are considering acquiring it.”
Since PeopleSoft’s acquisition of J.D. Edwards, Etinson, who used to be a J.D. Edwards reseller, said “things have been good.”
“PeopleSoft is a great company,” he said. “They’re people that we’ve run into in our prior lives and in some cases we’ve met new people. I’ve had nothing but a great working relationship with them and I hope that it’ll be the same with Oracle.”