PeopleSoft Customers Waiting Out Oracle Bid

Nervous users of PeopleSoft Inc. enterprise software are making contingency plans in case their major IT vendor is taken over by rival Oracle Corp.

Nervous users of PeopleSoft Inc. enterprise software are making contingency plans in case their major IT vendor is taken over by rival Oracle Corp. At the same time, Oracle is readying plans to make it easier for IT departments to move from PeopleSoft to Oracle applications.

Two weeks after Oracle, of Redwood Shores, Calif., made its unsolicited bid for PeopleSoft, events last week did not make the outcome of the offer any clearer. Oracle last week upped its cash offer for PeopleSoft stock to $19.50 per share, raising the total value of the deal from $5.1 billion to $6.3 billion. PeopleSofts board then recommended that shareholders reject the revised offer.

Both companies have sued each other—PeopleSoft alleging that Oracles offer was intended only to undercut PeopleSofts business, with Oracle countering that PeopleSofts board had breached its fiduciary responsibility by not seriously considering Oracles initial bid.

Meanwhile, PeopleSoft, of Pleasanton, Calif., raced to speed up its purchase of J.D. Edwards & Co., whose software could help PeopleSoft compete better against Oracle. PeopleSoft last week changed the mix of stock and cash in its J.D. Edwards deal, with the result that PeopleSoft is no longer required to get shareholder approval. It also raised the value of that deal to $1.75 billion.

Mike Rocha, executive vice president of Oracle Support Services, said that with 80 percent of PeopleSoft users on the Oracle database, his company already has expertise supporting PeopleSoft software. Oracle will extend support for an older but still popular version, PeopleSoft 7, beyond the current sunset date at the end of the year, Rocha said.

While Oracle has said it wouldnt upgrade PeopleSoft applications, Rocha said that Oracle would bring some PeopleSoft technology into Oracles E-Business Suite.

"We will take PeopleSoft developers and tools and figure out how to take some of the best PeopleSoft ideas into the Oracle suite so there is a reason [for PeopleSoft users] to migrate" to E-Business Suite, Rocha said. "We are after the customers, and we want to make them happy. Forcing migration to Oracle isnt going to make them happy."

Bob Cerny, president of the Distributors and Manufacturers User Group, an independent organization of manufacturing companies that is agitating against the Oracle-PeopleSoft combination, said the migration from PeopleSoft to Oracle applications is not trivial.

"It depends on how many pieces or modules a company owns," said Cerny, in Oakbrook, Ill. "If theyre only putting in HR, its less. But if its integrated with financials, distribution and manufacturing, its easily millions of dollars. What value would a company get out of it?"

Such a migration could easily take six months or more and is complicated by the fact that Oracle and PeopleSoft software products are built on different architectures, according to Mike Cole, president of Applied Business Systems Inc., a consulting company that specializes in human resources and financials software.

"Just consider converting an oil tanker to a cruise ship," said Cole, also in Pleasanton. "The whole structure [of the two companies software] is totally different. They use completely different software tools. Nothing is similar. Its a major project."

Faced with a decision to switch off PeopleSoft, CIOs should match up their companies business needs with the software they are considering migrating to, Cole said. This would show how much of the software they would need to modify to meet their business practices and which of their business practices they would have to change to fit the software.

One upset PeopleSoft customer, the state of Connecticut, sued Oracle last week, saying the acquisition would violate antitrust laws and potentially cost the state millions of dollars if Connecticut had to migrate to another enterprise software package.

Some customers are keeping the PeopleSoft faith. George Muller, vice president and CIO of Imperial Sugar Co., said that his enterprise will continue to upgrade its PeopleSoft Financials from Version 7.5.2 to 8.4.

"We just havent been focused on all the noise thats been going on in the marketplace," said Muller, in Sugar Land, Texas. "What might be, what could be, what potentially might happen. Every day you hear a different twist. You cant run a business on what might happen."