12.13.04
And Then There Were Two
Well, it finally happened. PeopleSoft accepted a slightly sweetened offer from Oracle on the eve of a trial to void the poison pill. Given PeopleSoft’s recent lackluster earnings, the 60% vote of shareholders to accept Oracle’s tender, and an unmistakable consolidation trend in the ERP market, resisting further would have become akin to fighting continental drift.With the deal about to become reality, don’t expect a mass migration of PeopleSoft refugees. As somebody characterized it for us, the ERP market moves at a glacial pace and for good reason. You don’t just swap ERP systems in and out like a pair of blades in a PC farm, the process is too costly and disruptive. For the most part, organizations are looking to add functions peripheral to ERP. There’s no reason to swap out the back office system unless you’re in a millennium upgrade, the end of a major infrastructure lease, or a change in corporate ownership. Oracle would have to behave like … err, Oracle to push PeopleSoft customers into SAP’s hands.
According to Oracle customers, co-president Charles Phillips has proven a long-needed voice of the customer inside the company. And although Phillips has been out front in the acquisition battle, his statements have lacked the false bravado of Ellison’s. And Oracle has backtracked on earlier pronouncements to pull the plug on PeopleSoft’s products and much of its sales and engineering organization (so the deal ends up about bulk, not productivity after all).
If Phillips can continue keeping Ellison’s posturings in check, and if Oracle’s sales force becomes kinder and gentler, Oracle should be able to retain PeopleSoft customers until the planned convergence of product lines, currently slated for 30 – 36 months in the future. (We still expect Oracle to spin off the JD Edwards part of the PeopleSoft business, with SSA Global the most eligible suitor.)
At that point, the customer decision is economic – if migrating to the converged Oracle/PeopleSoft product proves just as expensive as moving to something like SAP, Oracle would have its next fight on its hands.