Craig Conway, president and CEO of PeopleSoft Inc., had his hands full this summer fighting off a hostile takeover bid from Oracle Corp. and closing a deal to purchase J.D. Edwards & Co. In the meantime, developers working on the Pleasanton, Calif., companys TOE (total ownership experience) initiative readied ease-of-use enhancements to PeopleSofts enterprise applications. The company introduced those updates as well as an extended support plan at its PeopleSoft Connect user conference in Anaheim, Calif., this week. Conway discussed PeopleSofts past and future with eWEEK Senior Writer Dennis Callaghan at Connect.
Im told you dont want to talk about Oracle. Is their hostile takeover bid over in your mind?
Its been over since mid-July. Its yesterdays news. Theres nothing new to talk about. They say they continue to be interested in PeopleSoft. Well, I continue to be interested in playing in the NBA. But Im 5-foot-8 and 49 years old.
Oracle said that if it acquired PeopleSoft, it would support PeopleSoft applications longer than PeopleSoft currently does. It may be a cynical view, but theres speculation that your extension of support was in response to that challenge. What motivated PeopleSoft to extend its support?
I would say that is a cynical view, but I guess it doesnt really surprise me that people are saying that. The fact is weve always supported our products indefinitely. I dont know what you can do thats longer than indefinitely. We added another year of support for upgrade scripts because [PeopleSoft] 7.5 was at the end of its four-year period [of upgrade support] Dec. 31. If we discontinued the upgrade scripts for 7.5 thered be no way for customers to get to PeopleSoft 8. Upgrade scripts are a good way to get there. It had nothing to do with Oracle. … Our primary reason for doing this is that its good for customers. This is not Oracle reactive.
Could PeopleSofts TOE initiative actually reduce PeopleSofts services revenue and force you to increase your reliance on license revenues?
That could be an unintended consequence [of TOE]. Were not shifting our emphasis to selling more licenses; there will just be less investment needed week-in, week-out in running our software. I think if we dont do it, its like trying to stop the world or stop progress. Its what people want to do. They want enterprise applications that are extremely easy to implement and maintain. They want technology companies to do most of the heavy lifting. One of the implications may be that less professional services will be required, and I think thats a good thing.
Can software license revenues ever go up again?
Sure they can. Software licenses are capital expenditures. In tough economies, people cut back on capital expenditures. Theyre not immune from the pressure not to spend. … I think buying behavior is starting to return to normal. CIOs are signing purchase orders again without huge layers of oversight. Ive never before been in an environment where boards of directors had to approve CIOs purchases. But thats starting to change. CIOs are getting back control over projects and budgets like theyve always had.
You said in a conference call over the summer that your customers were threatening to replace their Oracle databases with IBM DB2 databases in retaliation for Oracles takeover bid. Has that happened?
Its not trivial to make a wholesale change like that, but some customers are doing it. Id be interested to see what DB2s license revenue numbers are. If DB2 has a 10 percent increase in license revenues [in the third quarter], then theres your answer.
Have you shifted your development efforts away from Oracles database since the takeover bid?
No, not at all. I have no ax to grind with the Oracle database. Its a great database, 40 to 45 percent of our customers are on the Oracle database. I believe that the stronger play for Oracle would have been to work with PeopleSoft so that [J.D. Edwards customers] could use the Oracle stack instead of the IBM Blue stack. J.D. Edwards runs on the IBM database, but we could have just as easily gone out with the J.D. Edwards product built on Oracle. We have at least a dozen PeopleSoft employees working at Oracle every day. They have people working at our offices in Pleasanton. Were co-dependent on each others success.
Will you extend Oracle database support then to the J.D. Edwards applications youve acquired?
Were spending 1,000 percent of our time on [integrating J.D. Edwards into PeopleSoft] at this point. Theres a problem getting around to it. But were not only interested in Oracle. At some point, I might call [Microsoft Corp. CEO] Steve Ballmer and see if hes interested in doing something. Those kinds of discussions are only good for the industry.
Isnt Microsoft emerging as a competitor to PeopleSoft applications?
Microsoft is making a foray into enterprise applications, but their applications start much lower than the J.D. Edwards average customer. Though of course, theyve indicated an appetite to move higher up the food chain. It amazes me that people call it the small-to-medium business market. Small and medium businesses are dramatically different markets. Thats like saying the national basketball and hockey league. The small business market is very large, and thats where Microsoft is playing right now. Thats not where we are [with the J.D. Edwards applications]. Now if you said, Do you anticipate Microsofts appetite to grow their applications business beyond the small business market?, absolutely I do.
.D. Edwards Support”>
PeopleSoft has indicated that it plans to support three distinct application product lines and code bases since acquiring J.D. Edwards. How long will this support continue? Do you plan to merge the code bases at some point?
It will continue forever. I dont know why people assumed, when we have separate product lines tuned and optimized for certain markets and both companies on their own were profitable, that we would merge our code bases. I dont understand that at all. When Ford bought Jaguar, they didnt merge their product lines into a single car. They still build and sell Jaguars. They just add Ford technology that can make them better. I dont know why people are saying that its a foregone conclusion that were going to merge our code bases. Its ridiculous.
Microsoft has two operating systems, NT and Windows. They serve different markets. Ones on the server, ones on the client. Theres no reason for them to merge the code bases into one. Toyota has a car division and a truck division. Its the same difference.
We are going to realize $200 million in cost synergies, so we ought to be able to improve our investments in all of our product lines.
Does PeopleSoft have any interest in building or acquiring its own application server?
Not at this time. We like to be agnostic in certain areas, and that tends to be a layer of the stack that customers want to have a choice in. Some of our competitors want to have the database, the application server, the Web server. That may be better for the vendor, but its not better for the customer. Look at Oracle, they dont support anything other than their own database. I think that the layers of the technology stack should be available for choice by the customers.
But couldnt you offer that choice and acquire an application server company or build your own technology in this area? Especially if SAP AG offers its own application server?
Were probably not going to extend into that area by acquisition, but I guess I would say never say never. As for SAP, at one time they had their own database. Theyve always tried to have a bit more of the stack than we have. There could be some good reasons for an enterprise application software company to get into that business. But I think thats a layer of the technology stack where there should be customer choices.
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