Spin Off or Sell

By Dennis Callaghan  |  Posted 2004-11-01 Print this article Print

Up?"> John Matelski, deputy CIO and chief security officer for the city of Orlando, Fla., also a PeopleSoft EnterpriseOne customer, said the AS/400-based World product line developed by J.D. Edwards was a likely candidate for a spinoff to another company.

"It is obviously a DB2-based solution, and it may be something they would prefer to spin off," said Matelski. He and Pond both said, however, that World would bring in lucrative maintenance contracts to whoever bought the software.

"If Oracle pays $7.7 billion for PeopleSoft, they may be interested in spinning that product off for cash," Pond said.

To be sure, the transition to PeopleSoft has been a rocky one for former J.D. Edwards customers. PeopleSofts licensing and support contracts are different, with an emphasis on enterprise, rather than per-user licensing, Pond said. But he said PeopleSoft, so far, hasnt forced his company to change.

Pond is president of Quest, the independent user group for PeopleSofts EnterpriseOne and World customers. PeopleSoft, however, has not supported the organization, which enjoyed a much closer relationship with J.D. Edwards, according to Pond.

Pond said he hasnt gotten any indication from Oracle that it would treat Quest differently, although Oracle Executive Vice President Chuck Phillips did speak at a Quest conference in March, during which he promised Oracles support for all PeopleSoft applications, in the same way that Oracle continues to support the Rdb database product it acquired from Digital Equipment Corp. in 1994.

Joshua Greenbaum, principal of Enterprise Applications Consulting, in Berkeley, Calif., said Oracle would likely want to keep the former J.D. Edwards customer base, with the hope of upselling those users to its database and application server technologies.

"They could find a partner who will do the maintenance of the product line in the iSeries [World] family; thats easy enough to do," said Greenbaum. "In the meantime, they continue to own the customer base; they continue to upsell to them. Theyll have an inside track."

Matelski, whose PeopleSoft applications run on DB2, said he would expect incentives from Oracle to migrate to its database long before any acquired product lines would be eliminated.

"Though I would be amenable to migrating over to Oracle—it would be with a certain level of trepidation," Matelski said. "There are significant costs associated with the migration from DB2 to Oracle, and the associated licensing and maintenance costs would also be substantial. The pain and cost of converting from DB2 back to Oracle is not something that the city would look forward to."

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