While it’s difficult to engender sympathy for one of the most powerful technology companies in the industry, you’ve got to feel a bit of a twinge for IBM’s Software group at the moment. The Oracle/PeopleSoft saga places them in a rather awkward position. According to evidence submitted at trial, IBM views an Oracle takeover as a threat to its software business. Although such a conclusion is not exactly rocket science, viewing those words written on the virtual equivalent of IBM stationary was noteworthy in the least.
So you have to wonder, in the wake of IBM’s announcement of a huge strategic alliance with PeopleSoft, what will the company do to protect its investment of hundreds of millions of dollars in technical and marketing resources in the event that Oracle veers closer to its goal?
You might recall that five years ago, IBM made a smart decision to exit the applications business, an area it never understood. If you used computers in the 80s and had the misfortune to use IBM’s DisplayWrite word processor, which forced you to navigate three or four menus to simply move or copy a word or phrase, you’d understand what we mean.
Instead, IBM Software has focused on infrastructure. Consequently, application vendors can take advantage of IBM’s market clout with little fear of being undercut with competing IBM product. And if you look to today’s leaders in the software industry — Microsoft and IBM — a huge pillar of their success has been the ability to cultivate a huge ecosystem of third party solution providers.
So maybe you can appreciate the tug of war occuring at IBM Software. Why break from a strategy that’s delivered? On the other hand, they might not have a choice. PeopleSoft gives IBM their best shot at middleware for the ERP market, because SAP is already developing competing product. If PeopleSoft’s history, how do they replace all that potential business, not to mention accounting for all the money invested in the relationship?
In the past 24 hours since announcement of the PeopleSoft alliance, IBM has faced plenty of questioning about whether they’ll finally break down and buy PeopleSoft. And IBM will continue facing those questions unless DOJ wins an appeal or some other white knight comes to the rescue.