As it heads to court next week to try to stop Oracles hostile takeover of PeopleSoft, the U.S. Department of Justice lacks a “basic understanding” of whats happening in the market for HRM and FMS software, an industry lobbying group charged Friday.
The SIIA (Software & Information Industry Association)—of which Oracle Corp. has been a member for more than nine years—issued a report, here in PDF form, that outlines what it considers the DOJs mistaken assumptions about the market for human resource management and financial management services software.
Namely, the DOJ assumes that purchases of HRM and FMS software happen in isolation from other decisions when, in fact, competition occurs between vendors offering pieces of the enterprise “stack”—i.e, operating systems, databases, middleware software, applications and services, according to the SIIAs report.
The report lists companies that it considers representative of the different slices of this enterprise stack, all of them being part of a much richer competitive landscape than the DOJ has set forth in its market view.
The SIIA sees the stack as lining up this way: As systems integrators, it lists IBMs Global Services, BearingPoint Inc., Capgemini SA and Accenture.
In enterprise applications, it names Oracle; SAP AG; PeopleSoft Inc.; Siebel Systems Inc.; Lawson Software Inc.; The Sage Group PLC; SSA Global Technologies Inc.; AMS, now owned by CGI Group Inc.; SunGard SCT Inc.; and Microsoft Corp.s Business Solutions.
In the middleware space, the SIIA lists BEA Systems Inc.s WebLogic, IBM WebSphere, Oracle 9iAS, the Apache Software Foundation, JBoss Inc. and Microsofts .Net.
For databases, the group names Oracle, IBMs DB2 Universal Database, Sybase Inc., MySQL AB and Microsofts SQL Server.
In the server operating system space, it lists Hewlett-Packard Co.s HP-UX, IBM AIX, Linux, Sun Microsystems Inc.s Solaris and Windows Server 2003.
?”> In contrast, the DOJ will argue that, given a successful Oracle-PeopleSoft merger, the market for what its calling “high-function” software will shrink from three players down to two—SAP being the third leg in the stool.
In the SIIAs view of the market, customers rule. They “control virtually all of the information” about which software price produces ROI (return on investment), what sellers theyre bargaining with, what features they really need, and the importance of performance and architectural metrics.
These savvy customers call the shots to get the best deals they can, meaning that price discrimination and coordination is “difficult, if not impossible, and is a critical weakness of the DOJ analysis,” the report states.
Other factors being ignored by the DOJ, according to the SIIA, include systems integrators that have a vested interest in keeping software costs low so that their contract prices can stay competitive.
The SIIA also cites outsourcing as posing a competitive challenge to packaged software vendors, as players such as Automatic Data Processing Inc., FMR Corp.s Fidelity Investments, Hewitt Associates LLCs eCyborg and Ceridian Corp. trounce the likes of Oracle in bidding to provide HRM via services suites.
The DOJ is also underestimating Microsofts current and future weight in the market, according to the SIIA. The company in recent years has purchased enterprise applications companies Great Plains and Navision and has pledged that it will spend $10 billion on enterprise applications over the next five years.
Microsoft also has large HRM and FMS customers, including National Truck Leasing System, a $4 billion company, and Sunoco Inc.s Sunoco Products, a $2.6 billion company.
The SIIA is also unhappy with the terminology employed by the DOJ. The Justice Department has been using terms such as “enterprise customer” without fully defining what such a thing might be.
The agency has also been referring to “high-function” software—metrics of which the SIIA is “unaware,” according to the report.
PeopleSoft is not a member of the SIIA. The SIIAs report goes to pains to stress the nonpartisan nature of its report by averring that it has in the past advocated antitrust enforcement even when such advocacy would negatively impact members.
But the report fails to detail such cases, and calls on the subject had not been returned by the time this story went to press.