PeopleSoft: Dominant or Distracted?

PeopleSoft's acquisition of J.D. Edwards and the subsequent hostile bid from Oracle could redraw the enterprise software landscape. Or it could give technology executives a reason to put off a purchase.

Arlyn Richards doesnt want a spate of proposed enterprise software mergers to become an implementation headache for him.

Richards, manager of information systems at Gallatin Steel based in Ghent, Ky., is a two-year J.D. Edwards customer and hopes PeopleSoft doesnt absorb his OneWorld suite, leaving him with what effectively will be another integration job. Gallatin, a midmarket company with $450 million in annual sales, isnt a PeopleSoft customer.

"Our desire is to standardize and not have to upgrade for a while," says Richards.

Richards, like other J.D. Edwards and PeopleSoft customers, is hanging tight watching a merger soap opera unfold. On Friday, Oracle launched a $5.1 billion takeover bid for PeopleSoft, which just days earlier said it would acquire J.D. Edwards to create a combined company with $2.8 billion in revenue and 13,130 employees.

If Oracle CEO Larry Ellison gets his way, hell acquire PeopleSoft and integrate its software with Oracles e-business suite. Once Oracle acquires PeopleSoft, it will "review whether, and on what terms" it will support the J.D. Edwards deal. For its part, J.D. Edwards says it has a definitive agreement with PeopleSoft. Thats a lot of uncertainty for technology executives buying enterprise software from PeopleSoft or J.D. Edwards. Its unclear what effect all the proposed wheeling and dealing will have on software spending. Will PeopleSoft customers chafe at becoming assimilated into an Oracle suite? And if Oracles bid fails, PeopleSoft may still have a tough time cross-pollinating between large enterprises and midsized company markets. According to SoundView Technology analyst James Mendelson, Oracle is in a no-lose situation. If Oracle wins its bid, itll pick up PeopleSoft for a decent price and bolster its applications business.
"If Oracle can buy PeopleSoft at a reasonable price, they substantially increase their market share and eliminate a competitor," Mendelson says. If Oracle isnt successful with its bid, itll still be able to cause confusion among PeopleSoft customers and potentially gain business. While the saga plays out, technology executives may hold off before buying from either PeopleSoft or J.D. Edwards, analysts say. The logic: Its better to see how the saga plays out before committing money. "On the margin, this deal may benefit SAP," says W.R. Hambrecht analyst Rich Petersen. According to AMR Research, here are some steps technology executives should take amid the merger talk:

Negotiate: Customers can sometimes squeeze price concessions from vendors, who dont want to lose customers before merging.

Be wary: Dont purchase software that doesnt have a large installed customer base—the product could be cut later.

Gauge commitment: Ask your vendor for a commitment to support existing technology for a specified time.

Watch support: Keep eyes open: Product plans and support can change as early as 90 to 120 days after a merger announcement.