PeopleSoft Deal Still Alive and Kicking
PeopleSoft earlier this week issued a statement saying that it had been informed that the DOJ staff has advised senior staff to block the acquisition.
The departments final ruling is expected by March 2, according to PeopleSofts statement. Already, some experts are disagreeing with the DOJs findings to date. "I do not think a combination of Oracle and PeopleSoft would be anti-competitive," said Mike Dominy, senior analyst, business applications and commerce, for The Yankee Group, in Boston.
Thats a qualified comment, however, and assumes that Oracle would spin off some part of its business to maintain healthy competition in the marketplace, Dominy said. "If you look at the combined ERP [enterprise resource planning] assets of Oracle and PeopleSoft [with J.D. Edwards & Co., which PeopleSoft acquired last year and is currently integrating], then youre talking about a preconsolidated market between SAP [AG] and Oracle."
But, Dominy said, theres no good reason for Oracle to hang onto J.D. Edwardsparticularly since so many J.D. Edwards deployments run on top of IBM databases. "Sixty percent of [J.D. Edwards deployments] run on IBM databases, and Oracles not interested in that," he said. "If you spun off part or all of that to a company thats more IBM-centric, it wouldnt be tough for Oracle to agree to do."
The DOJs next step is to look at the facts and determine how competitive the market is, which will depend on how exactly the department defines that market. And, according to Dominy, many are now defining that market in an outdated fashion that doesnt reflect its ongoing evolution. "The core ERP market is really stagnant and flat at this point," he said. "If you look at revenues, anything from 75 percent to 85 percent of revenues come from maintenance. Its about having the biggest customer base as possible and selling bolt-on incremental applications that help companies move to the next level. For example, selling supply chain, CRM [customer relationship management] or portal applications."
The next battleground for the ERP market, however, will be beyond the edge of the enterprise, and will address the technical challenges of connecting, synchronizing and coordinating with the extended supply chain, Dominy said. That will entail delivering composite applications or integrated Web applications that deal with business processes that cross enterprise boundaries and work with external business partners.
Such a change is already manifest in initiatives such as IBMs On-Demand push, Microsoft Corp.s .Net strategy and even Oracles Grid Computing platform, Dominy said.
If the DOJ acknowledges this evolving state of the ERP market, its likely to offer qualified opposition to the merger that will give Oracle some wiggle room to change the current ownership structure of Oracle and PeopleSoft, Dominy said. "I really think theres room to make a deal between Oracle and PeopleSoft," he said. "Given where Oracle is, This is our final offer, etc., if they get wiggle room to take it to the next level, I think theyll sweeten the bid to make it so large, institutional investors in particular will say, This is good for our investors and good for us."