The takeover saga, which began on 6 June 2003 with a $5.1bn bid at $16 per share, was a bitter and protracted one. Oracle CEO Larry Ellison (pictured) and PeopleSoft’s Craig Conway waged a verbal war that was as much personal as it was about market consolidation. Meanwhile, barely veiled threats were released through the SEC, investment community and to the press on regular occurrences.
Ellison argued that Conway had spoken to him regarding a merger in 2002, but the proposed deal was not the right one at the time.
Oracle’s (then vice) president Chuck Phillips defended Oracle’s bid, countering claims that the deal was just a ruse to disrupt PeopleSoft’s acquisition of mid-market business software provider JD Edwards.
The US Department of Justice’s efforts to win an anti-trust case against Oracle failed, while the European Commission also deemed the takeover bid was not anti-competitive.
By February 2004, Ellison increased the bid for PeopleSoft to $9.4bn – at $26 a share, a 19% premium.
Finance directors found the enterprise applications marketplace in a state of flux: would the software vendors renegotiate already-costly software licensing deals? Would the latest versions of PeopleSoft and JD Edwards’ applications be the last before being forced onto potentially hybrid applications?
In fact, the conclusion of the deal was just a precursor to the real battle. Domination of FDs’ ‘hearts and minds’ had begun in earnest – but what options are FDs left with?
Oracle’s biggest rival, the German business software giant SAP, will provide technical support for PeopleSoft and JD Edwards clients if they choose to migrate to SAP. The deal, known as Safe Passage, would see potential customers’ PeopleSoft licenses exchanged for SAP’s enterprise software mySAP, while third-party maintenance business TomorrowNow would provide support for the incumbent technology.
AMR Research analyst Jim Shepherd says that this move is “particularly surprising” from the normally conservative SAP, “which rarely makes acquisitions or directly combative gestures”.
SAP is targeting the 2,000 companies that use both SAP and PeopleSoft applications. Global spokesman Markus Verner says: “The uncertainty among (Oracle and PeopleSoft customers) has not gone away. SAP is now a safe passage for the decision-makers in companies.”
Meanwhile, Microsoft Business Solutions is targetting disgruntled PeopleSoft and Oracle customers by offering a migration path to its own products, Navision and Axapta.
MBS partner group director Jon Hughes feels PeopleSoft customers’ concern with its acquisition has not eased following the resolution.
“Customers are asking what will happen following Oracle’s acquisition of PeopleSoft, and many customers are also concerned about the annual maintenance costs Oracle charge,” says Hughes.
Hughes claims that a number of PeopleSoft clients in the UK are showing “a degree of interest” in making the switch.
However, the most important aspects of the acquisition for FDs using Oracle and PeopleSoft products regarding licensing and software support have been explained. The launch of Oracle’s “Project Fusion” intends to tie up the loose ends – it will provide an IT platform based on a “shared data” model, which means combining the intellectual property of both companies into new products, from 2007.
Ellison promises to “enhance and support” the PeopleSoft product lines until at least 2013. For JD Edwards EnterpriseOne versions XE and 8 customers, support extends until February 2007.
“JD Edwards/PeopleSoft customers are pleased about the level of service we will give,” according to Phillips.
Despite going up against a major rival in the enterprise market, Phillips thinks that there is still plenty of competition to keep pricing “in check”.
“PeopleSoft customers are sanguine about the situation,” according to Ovum analyst Phillip Carnelly.
“PeopleSoft tends to be used by the largest corporations. They probably have Oracle or SAP on board at some point. If you have nearly all SAP you might look at their migration path. If you have largely Oracle – then we’ll wait and see. The main thing is that FDs don’t have to make immediate decisions.”
So with Oracle providing ample opportunity for PeopleSoft clients to decide upon their next step, and SAP and MBS providing much needed competition, FDs can view their medium-term IT strategy in a more stable environment.
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