Closing the first week of testimony in a no-jury trial that seeks to block Oracle Corp.s $7.7 billion takeover of competitor PeopleSoft Inc., U.S. District Court Judge Vaughn Walker on Thursday sought a clearer market definition, according to news reports.
Walker, presiding over the U.S. Department of Justices suit against Oracle in the U.S. District Court, Northern District of California, asked witnesses for a clearer definition between midmarket and enterprise software customer needs—a definition that goes to the heart of the case.
To substantiate its definition of the market, the Justice Department called to the stand several witnesses, including Richard Allen, former chief financial officer of J.D. Edwards & Co., which was acquired by PeopleSoft last summer—days before Oracle announced its hostile bid.
Allen spoke about JDEs failed attempts at retooling its midmarket software suite for the enterprise market, according to news reports.
Allens testimony is central to the Justice Departments allegations that a merger between Oracle, of Redwood Shores, Calif., and PeopleSoft, of Pleasanton, Calif., would reduce competition among tier one ERP (enterprise resource planning) providers from three players—Oracle, PeopleSoft and SAP AG—to two.
While Oracle defends its position that the enterprise market is indeed larger than the Justice Departments definition—and includes midmarket players such as Microsoft Corp. and Lawson Software Inc.—the Justice Department contends that it is too costly and difficult for midmarket vendors like JDE to scale its software to enterprise customers in time to fill any holes left by a combined Oracle and PeopleSoft.
The Justice Department also called to the stand systems integrator BearingPoint executive Keith Perry, who testified that both IBM and Microsoft have plans to offer enterprise ERP software, according to a Reuters news report.
Perrys testimony appears to run counter to the Justice Departments definition of the market. However, that could depend on a couple of things: first, the timing of those entrants. IBM and Microsoft would have to enter the enterprise software market within two years to affect competition, according to antitrust guidelines. Second, whether Perrys testimony is accurate—Microsoft claims it is focusing on the midmarket for the foreseeable future and IBM denies the claim.
“Weve been on record since 1999 saying we are not in the application business,” said John Riley, spokesman for IBM. “Weve said we are going to partner with application providers for that piece of the business, and thats what weve built our partner business on.”
Separately, Judge Walker will hold a conference call with attorneys representing Oracle and the Justice Department Friday to determine whether a Justice Department expert witness will be excluded from the trial.
Oracle filed a motion earlier to suppress expert witness testimony from Professor Marco Iansiti, whom the Justice Department tapped to discuss ERP software for human resources and financial management systems—key functional areas the Justice Department is focusing on—and the respective suites ability to meet the needs of enterprise companies.
Oracles attorneys argue that because Iansiti has a doctorate in physics rather than computer science or information technology, he is not qualified to testify. Oracle further contends that Iansitis academic research is not in the area of ERP—or even human resources and financial management—and that his methodology does not reflect any academic or professional discipline, according to court documents filed by the Justice Department.
The Justice Department countered Oracles arguments by pointing out that although Iansiti, a Harvard professor, does have a Ph.D. in physics from Harvard University, in his tenure at Harvard Business School he has developed and taught courses regarding technology—software and hardware development—and their relationship to effective operation and management of enterprises.
At the same time, according to the Justice Department, Iansiti teaches a Harvard MBA program and co-designed a Ph.D. program on IT and management. He has written books, done studies and published academic papers on IT and software development. The former vice president of products and strategy at Model M. Inc., Iansiti has also developed software that is used in conjunction with financial management ERP software, according to court documents.