Shoot the dog, miss the point

Craig Conway, flamboyant CEO of Californian enterprise resource planning vendor PeopleSoft, isn’t usually shy about slamming the opposition – as rival Oracle’s recent hostile takeover bid for PeopleSoft has emphasised.

In July, Conway, a former friend and protege of Oracle CEO Larry Ellison, described Oracle’s plans for PeopleSoft as, “Like me asking if I could buy your dog so I can go out back and shoot it.” Ellison went on the offensive: “If Craigy and Bear (reportedly Conway’s dog) were standing next to each other, and I had one bullet, trust me, it wouldn’t be for the dog,” he said.

But Conway’s opening address to analysts and press in New York in September was remarkable in its lack of jibes and digs at rivals – cursory mentions of Oracle were confined to the question and answer session.

Conway’s recent, more measured approach to corporate communications is due to two factors. First, PeopleSoft finally managed to acquire rival ERP vendor JD Edwards for $2bn in July after rushing the deal through.

Conway needs to convince the business community and customers that PeopleSoft can pull off the integration. Second, PeopleSoft has fought off the worst of the threat from Oracle’s hostile takeover bid.

Oracle’s bid, made after the JD Edwards acquisition was first tabled, was widely seen as a spoiling tactic to prevent PeopleSoft growing through acquisition and taking Oracle’s number-two position in the ERP market in the process. And as PeopleSoft’s share price rose above $19.50 – the per share offer made by Oracle – after the JD Edwards acquisition, it was a case of wait and see if Oracle will up its offer and convince the businesses and shareholders that it is serious about a takeover.

PeopleSoft’s customers have also had to wait and see. In Q1 2003, the company announced that several big contracts remained unsigned, with potential clients getting jittery about the takeover. Strong Q2 results helped allay fears, though, and Conway claims the positive response from its and JD Edwards’ customers has been overwhelming. “The JD Edwards acquisition is about growth, not consolidation,” Conway said in New York.

“It can be compared to Ford’s acquisition of Jaguar. Customers think the JD Edwards acquisition will be good for the company, just like Jag owners were excited about five-year warranties and lower prices.”

Despite Conway’s confidence, you have to question whether PeopleSoft’s customers, which include many UK finance directors, are clear about the positioning of their supplier, which will involve a rebranding of its products and possible pricing changes in 2004. Only time will tell.

Notably silent throughout the ERP debate over the past year has been market leader SAP, based in Walldorf, Germany. It has quietly sat on the sidelines watching its competitors fight it out. Many thought SAP could only benefit from its rivals’ squabble. However, SAP’s UK head of marketing and business development, Peter Robertshaw, says that the economy and corporate customers’ reluctance to spend megabucks on financial software has been the most influential factor on the industry.

“It (Oracle’s bid) has been a double-edge sword. It has created uncertainty at a time when people were already worried,” Robertshaw says.

There may be another twist in the ERP tale, however. Industry tittle-tattle points to a bigger threat to the status quo than bickering between former friends or the reawakening of the German giant. Microsoft, which recently spent billions on acquiring mid-market vendors Great Plains and Navision, is still sitting on $50bn cash and is coming under pressure to spend it.

Simon Edwards, MD of Microsoft Business Solutions, says that, although it is not policy to discuss acquisition strategy, MBS is big enough to make inroads into the ERP market already. “We’re done. We have bought the assets we need to build the solutions we want,” he says.

Microsoft’s strategy is to keep hammering away at mid-market companies – those with between 100 and 500 financial software users – and, through its Axapta software, start to offer ERP solutions to large mid-market companies and the divisions of the global giants.

So while PeopleSoft, Oracle and SAP try to get their houses in order, Microsoft can potentially throw dollars at picking up their business in the coming year.

Edwards can’t contain his glee. “Look out, we’re coming,” he says.