IBM, Verizon Feared Oracles PeopleSoft Buyout

 
 
By John Pallatto  |  Posted 2004-06-09 Email Print this article Print
 
 
 
 
 
 
 

A parade of witnesses—including IBM and Verizon—said an Oracle buyout of PeopleSoft would leave them and market competition in a "sorry state."

SAN FRANCISCO—At the ongoing trial here, the Department of Justice on Wednesday marched PeopleSoft customers and systems integrators into the witness box. The prosecutors hoped to demonstrate how the market for enterprise application software would lose its competitive vibrancy if Oracle was allowed to carry out its hostile buyout of PeopleSoft.

Leading off in the third day of the DOJs antitrust trial against Oracle was Nancy Thomas, a senior executive at IBM Global Services who testified that her organization worked almost entirely with Oracle Corp., PeopleSoft Inc. and SAP AG to provide enterprise human resources management and financial management systems in client engagements.

IBM Global Services has between 150 and 200 employees dedicated to providing development, integration and deployment services for the software from each of these companies, Thomas testified.
She also said her group was not seeing large-scale deployments of other enterprise applications from competing companies such as Lawson Software Inc.

But Oracle attorney Greg Lindstrom, in his cross-examination of Thomas, showed that IBM Global Services was also working with a wider range of human resources, financial management and financial analysis software packages than just those by PeopleSoft, Oracle and SAP.

Besides Lawson, IBM Global Services has also worked with companies such as Cognos Inc., Hyperion Solutions Corp. Informatica Corp. and Business Objects SA. While Thomas agreed that was true, she said these were business intelligence or financial analysis point solutions that were either specified by clients or were part of a larger project involving SAP, PeopleSoft or Oracle.

Lindstrom also asked Thomas whether IBMs public opposition to the Oracle-PeopleSoft buyout, and the prospect that IBM would lose its lucrative PeopleSoft consulting business if the buyout goes through, had any influence on her view of PeopleSofts importance in the enterprise software market. Thomas replied that she wasnt aware of any public position IBM may have taken regarding the buyout nor had she considered what the implications of an Oracle buyout would be to IBMs consulting business.

On Tuesday at the trial, the DOJ presented its "Big Three" argument of the enterprise apps market and said the deal would leave it with only two players. Click here to read more. The DOJ also presented a videotaped deposition by Paul Ciandrini, former senior vice president of North American application sales at Oracle, who testified about the sales negotiation process in competition with PeopleSoft.

His testimony focused on a sales competition to sell software to Hallmark Corp., which was won by Oracle in November 2003.

Ciandrini said the competition came down to prolonged and "painful" price negotiations after it was apparent that feature and function differentiation were no longer a factor in the talks.

It became apparent that PeopleSoft was prepared "to cut the price as a point of differentiation because they couldnt find any other points of differentiation," Ciandrini said. PeopleSoft sales executives "realized they were losing, and they cut the price to nothing," he said. Oracle kept pace with the cuts to win the deal. Price quotes that started at about $2 million were cut to $1.2 million before Oracle won the Hallmark deal.

DOJ attorneys presented this testimony to show the moderating effect that an independent PeopleSoft would have on enterprise software prices—an effect that would disappear if the number of companies selling top-of-the-line enterprise resources software was reduced to two from the three companies currently competing.

Next Page: Verizon "would be very nervous" about an Oracle win.



 
 
 
 
John Pallatto John Pallatto is eWEEK.com's Managing Editor News/West Coast. He directs eWEEK's news coverage in Silicon Valley and throughout the West Coast region. He has more than 35 years of experience as a professional journalist, which began as a report with the Hartford Courant daily newspaper in Connecticut. He was also a member of the founding staff of PC Week in March 1984. Pallatto was PC Week's West Coast bureau chief, a senior editor at Ziff Davis' Internet Computing magazine and the West Coast bureau chief at Internet World magazine.
 
 
 
 
 
 
 

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