Craig Owes Larry a Big Thank-You

 
 
By Lisa Vaas  |  Posted 2003-11-26
 
 
 

Craig Owes Larry a Big Thank-You


This Thanksgiving, PeopleSoft customers across the land should bow their heads and remember Larry Ellison, Jeff Henley and Chuck Phillips in their prayers. Why? Think about it: Who has been kinder to PeopleSoft over the past year? Who has paid more focused attention to the king of Human Resources software? Who has lit a hotter fire under PeopleSoft CEO Craig Conways butt, spurring him and his team to spin a fast J.D. Edwards product integration plan and coming up with a Customer Assurance Program that has PeopleSoft users tucking themselves in at night feeling warm, loved and well-taken-care-of? Nobody, Im telling you, simply nobody.

I know what youre thinking, and youre right. Its true, Oracles big brass have been a tad harsh in their wooing. Oracles Chief Financial Officer Henley on Monday majorly dissed the CAP (Customer Assurance Program), a program that would refund customers between two and five times their license fee if PeopleSoft is acquired and the acquiring company discontinues support of PeopleSofts e-business software. Henley, in a conference call to financial analysts and the press, reiterated Oracles commitment to swallowing PeopleSoft (demonstrating that pitbulls are considered merely cuddly in Oracles home base of Redwood Shores). Henley went on to say that the CAP, rather than being a balm and a comfort to PeopleSoft users in these uncertain times, is actually a $156 million hatchet hovering over their necks.

"PeopleSoft has said it committed itself to approximately $156 million in refunds. Our concerns start with revenue recognition, since [their CAP] can be triggered without an acquisition. It could be an obligation to PeopleSoft," Henley said. "We believe they have a revenue recognition problem."

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A "revenue recognition problem?" As in, PeopleSoft is in denial about its revenues because the company itself has engineered a refund program that could spell out its own doom? As in, the bedrock of PeopleSofts financially successful recent quarters is really quicksand, because a program it created may, hypothetically, in spite of PeopleSofts careful tinkering and rejiggering of it, turn around and bite it to death?

Right. PeopleSofts in denial. As opposed to Oracle, which is still sticking to its low offering price of $19.50 per share, even while Oracle was selling at $21.6 per share on Tuesday. Now, lets see: Which one of the two companies is it that needs to stretch out on the shrinks couch to discuss their delusional state of denial?

Next page: Analysts say Oracle helped PeopleSoft to get its act in order.

Analysts say Oracle takeover


is helping PeopleSoft">

Delusions aside, its plain to see that Oracles sustained takeover attempt has helped PeopleSoft to do some fancy footwork. Carl Lehmann, vice president of enterprise application strategies at Meta Group, said that if it werent for Oracle, PeopleSofts acquisition of J.D. Edwards would be taking far more time. Another positive outcome of the takeover attempt has been the forging of a closer bond between PeopleSoft and its customers&#151similar to any group of people who suddenly find themselves attacked by hoards of Visigoths.

"I think [Oracles takeover attempt] has helped PeopleSoft," Lehmann said. It forced them to do a real lot of stuff really fast, like complete the acquisition of J.D. Edwards, get their costs in line and cozy up real close to their customers. They put a lot more energy into that than if Oracle hadnt done this. It was like, All hands on deck, and then they came up with the CAP."

Of course, when most acquisitions occur, theres a lot of work to do, and theres a lot of time that passes while that work gets done, Lehmann pointed out. The time involved in mopping up an acquisition can cause confusion amongst shareholders and customers. If a company doesnt want that confusion to hit, if it doesnt want sales cycles to stretch out to forever, if it doesnt want its stock price to dip, it has to do things fast. An acquiring company has to complete the transaction post-haste, with all conditions agreed to by all parties, Lehmann said.

Thats why an acquiring company has to create a crystal-clear message about where its going with the acquired company. "An acquiring company has to communicate all that as rapidly and articulately as possible," Lehmann said. "If you do all that, you negate any sales delays from your prospect list, and you negate any hesitancy from your shareholder base. Most companies attempt to do that, particularly with a big deal, but Oracle made PeopleSoft do that faster than anything."

Thanks to Oracle, PeopleSoft not only acquired J.D. Edwards relatively painlessly, it strengthened its ties to its customers and shareholders, making it a better company. Thats a far cry from the outcome that many industry insiders foresaw back when Oracle first launched its takeover in the spring. Back then, many conjectured that Oracle was launching the takeover in a cynical attempt to create fear, uncertainty and doubt, thereby causing PeopleSofts stock to plunge, hurting their sales and crippling an Oracle competitor.

If that was the intent, it backfired. "Good try, though," Lehmann said. "For a while there, it seemed smart, particularly [with Oracle] exposed to the small-to-medium business market and the applications market. It seemed like a good idea, but I dont think it worked."

The question is, why does Oracle keep making moves that do nothing but help PeopleSoft become stronger and closer to its customers, like Mondays analysts call with Henley? Betsy Burton, an analyst with Giga, said she views Mondays call as nothing but a reminder that the bids still on the table. "Thats what they accomplished with that call," she said. "Another press person asked me if they in fact accomplished that, and I said, Well, youre calling me."

Touche. But what about Oracles vow to stage a coup in PeopleSofts board of directors? The company plans to file an independent slate of board candidates in January. If its unsuccessful in its bid to acquire PeopleSoft through traditional means, it will force change at the board level and then get its planted directors to vote in the merger. The company is planning this in spite of the the fact that the DOJ hasnt made a decision in its investigation of the merger, while the European Commission extended its investigation into the potentially anti-competitive nature of the deal.

Click here for more information on the European Commissions investigation of the PeopleSoft-Oracle Takeover Bid.

Burton scoffed at the idea. "Its like saying a new political party is going to get a new president in," she said. "They have to convince stockholders to vote in a new board of directors, that theyre the right ones to do this job, etc. Oracle cant force these people into these positions."

Next page: What PeopleSoft customers think about Oracles botching of its takeover attempt.

PeopleSoft customers weigh in


on Oracles bungled takeover">

Meanwhile, as Oracle suits disparage a program set up to shield them, PeopleSoft customers dont seem very concerned about Craig Conways supposed struggle with financial honesty. Bobby Ho, an HR systems manager at Ricoh Electronics, in Tustin, Calif., said that PeopleSofts CAP&#151which the company recently strengthened&#151was a smart tactical perspective to fend off Oracle. "It gives the impression that PeopleSoft believes in its products and this deals not going to happen," Ho said.

Like Ho, many PeopleSoft customers are discounting the idea that the deal will go through. "Theyre moving on with potential purchases and implementations," Ho said. "Thats the feedback Im getting."

Ho agrees that Oracles takeover attempt has united PeopleSoft and its customers. Hes also impressed with PeopleSofts product integration of J.D. Edwards. "I think from a product perspective, PeopleSoft has really tried to come up with a solid plan to integrated J.D. Edwards," he said. "Now that they wouldnt have without Oracle, but its really tightened [the timeframe] now to get the products integrated and to integrate them into one software suite. Theyve made tremendous strides considering the complexity and timeframe."

Click here for some diametrically opposed thoughts on the Oracle-PeopleSoft saga.

Other PeopleSoft customers dont even bother to follow the news, fully assured that the merger wont happen. George Muller, vice president and chief information officer at Imperial Sugar Co., in Sugar Land, Texas, said that his opinion hasnt changed since this whole thing started. "I think that at some point in time, this is all going to blow over," he said. "This will be a distant memory. Were not letting this deter us from our projects."

As a matter of fact, just last Tuesday, Nov. 18, Imperial Sugar went live on PeopleSoft Financials 8.4. The project was implemented on time, on budget, and painlessly. "In my 25 years in the IT world, that upgrade had to be one of the smoothest, most error-free upgrades that Ive ever experienced or been associated with," Muller said. "We upgraded HR last year, to Version 8.3. That project was also on time and on budget, with a minimal amount of issues. And so my mantra is, Last year it was HR payroll, this year it was Financials, next year its Supply Chain. Well continue marching down that path and reaping the benefits of the investments weve made in that technology and in particular in PeopleSoft."

And when Oracle finally cries Uncle, and they finally give up the pursuit of PeopleSoft, Muller wants me to call him back. He wants to say, "I told you so."

So Craig, before you bite into the mashed potatoes, before your knife hits the bird, bow your head and say these words: "For all these blessings, we are forever grateful to you, Larry."

Are we counting our blessings before the wolfs stopped huffing and puffing? Let me know at lisa_vaas@comcast.net.

Database Center Editor Lisa Vaas has written about enterprise applications since 1997.

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