DOJ, Michigan Arent Necessarily Hypocrites

By Lisa Vaas  |  Posted 2004-04-12

DOJ, Michigan Arent Necessarily Hypocrites

I was tickled pink to read last week that the U.S. Justice Department and the state of Michigan were enterprise-sized hypocrites.

Heres a recap of the news: Both of these governmental bodies are suing Oracle Corp. for antitrust violations in its pursuit to take over PeopleSoft Inc. (As are a slew of other states, the roster for which keeps growing, not to mention the European Commissions inquiry into the matter.)

As most of us know, the crux of their argument is that the ERP (enterprise resource planning) software market essentially consists only of the three big boys: SAP AG, Oracle and PeopleSoft. If the market shrinks to two, the sky will fall as all choice evaporates and technology innovation stagnates, their argument goes.

Ohio, Michigan and Connecticut all have filed to join the antitrust suit against Oracle, saying theyre trying to protect taxpayers. Click here to read more.

The hypocritical part came in when the state of Michigan recently chose Lawson Software Inc. for its ERP needs, while the DOJ hooked up with AMS for its ERP implementation.

Two nonprofits devoted to business competition, ACT (the Association for Competitive Technology) and the American Shareholders Association, came out last week and demanded that Michigan and the DOJ immediately drop their lawsuit against Oracle.

After all, the groups said, if the market for ERP products were really all that constricted by the Oracle-PeopleSoft-SAP trio, why then could these bodies turn to Lawson and AMS? Why, indeed, dont the DOJ and states such as Michigan admit that the ERP market is broader than they would have us believe?

Click here to read about ACTs charges of hypocrisy.

Such a story is fun because, on first read, it makes huge bureaucracies look clueless. Ah-ha, we say; the left hand doesnt know what the right hand is doing. Such a story makes the DOJ and the state of Michigan appear to have disparate departments that never confer with each other. You can just imagine a roomful of DOJ lawyers in suits, blinking at the unlikely idea of actually talking to those geeky guys down in the basement of the DOJs hallowed halls, where dwell the neer-consulted inhabitants of the IT department.

The problem with that picture is that its just not true. The hypocrisy charge certainly wont hold water. Nice try, but the argument isnt going to get the DOJ et al off of Oracles back.

Next page: Why the hypocrisy charge is full of holes.

Holes in Hypocrisy Claim

To my knowledge, Gartner analyst Lee Geishecker was the first one quoted in the media to point out the reasons why the hypocrisy charge is full of holes. The DOJs case focuses on one subset of the ERP market: enterprise customers who need the highest levels of support and software capabilities. Outside of that subset exist myriad other subsets with very distinct needs for their ERP software, including, most notably, the public sector.

That made sense to me, so I bounced the argument off of Daniel Clifton, executive director of the American Shareholders Association. He scoffed at the notion of the DOJ not being a significant buyer that needs substantial support and sophisticated features from an ERP implementation.

The U.S. government is a huge and significant buyer of this type of networking service, he said, and whether you get into a legal definition of whether the ERP software at the heart of the Oracle suit is for Fortune 500 enterprises alone or whether the government is included, the DOJs purchase of AMS software clearly spells out the lesson that there is competition in the market that goes above and beyond what the DOJ claims.

For his part, ACT President Jonathan Zuck just laughed at the notion that the public sector would be ruled out of the picture when it comes to slicing and dicing the customer base for ERP software. The DOJ has been slicing and dicing the market so finely to make sure that there are only three players; the next thing you know, the suit will be about the needs of salesmen who wear neckties on Tuesdays, he told me.

I mean, cmon, ERP is ERP, he said. How different can government needs possibly be when compared with the commercial sector? Different enough so that these huge government organizations dont count when it comes to determining what exactly is the market for large ERP implementations?

Well, thats a very good question. To answer it, I decided to chat with AMS officials to ask them what, if anything, about the government market would make its preferred software unsuitable for the commercial sector. Vice versa, too: What makes commercial software such as products from SAP-Oracle-PeopleSoft unsuitable for the government market, if anything?

Next page: The nature of government ERP.

Government ERP Uniqueness

The questions, however, will strike anybody who works in government IT as hopelessly naive. A whopping zero percent of AMS ERP software sales revenue came from nongovernment sales. To spell out the obvious, that means that AMS is nowhere, no-how a competitor in the same commercial market as SAP-Oracle-PeopleSoft.

That "we make no ERP software sales money whatsoever from the commercial market" percentage is based on the fact that AMS software isnt just customized for the government sector; its built from the ground up for the government because the government is so vastly different from the commercial sector in its software needs.

Catherine Morales, vice president of AMS Public Sector Group, said the budgeting process through Congress and the federal government that determines how funds are allocated has absolutely no parallel in the commercial sector. That process, she said, determines types of requirements and roles around financial management that are vastly different from commercial-sector roles and requirements. Indeed, the uniqueness of government work is why AMS employs an army of government-certified accountants.

AMS has competed in the government marketplace for more than 20 years. In the past five years alone, the company has done 20 implementations, the most recent of which were the Library of Congress and the Defense Advanced Research Projects Agency (DARPA).

Sixty government organizations have implemented the companys ERP software. Although AMS does offer IT consulting for nongovernment sectors, it does not serve the commercial marketplace for ERP software at all.

Dont get me wrong. Ive written about the DOJs definition of the ERP market before, and I believe now what I believed then: Its unacceptably narrow.

But if youre going to point to software such as that from AMS as being a viable competitor for commercial-sector giants such as Oracle or PeopleSoft or SAP, youre not going to be able to concoct a convincing argument.

Is Lawson Software a convincing competitor in the ERP commercial sector? More so than AMS, thats for sure. Its retail customers include L.L. Bean, Safeway, McDonalds and Target. In addition, it counts healthcare and, yes, public-sector companies as its customers.

Scrutinizing the state of Michigans choice of Lawson Software could yield a better argument for hypocrisy and for a broader definition of the ERP market. Whether such a scrutiny will get Oracle out from under the antitrust screws is another question entirely, and to hear the answer, well have to stay tuned to the court trial when it starts up in June.

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

Editors Note: This story was updated to remove a misinterpretation of AMS revenue stream.

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