PeopleSoft, IBM Strike $1B Deal for Middleware

Executives call the 5-year deal the "most aggressive announcement in the industry" as PeopleSoft looks to counter rivals Oracle and SAP's integration strategies.

SAN FRANCISCO—PeopleSoft Inc. on Tuesday announced an expanded relationship with IBM that will effectively add a middleware infrastructure layer to PeopleSofts applications. Revealed at its PeopleSoft Connect user conference here, the deal is worth some $1 billion, executives said.

"It is the most ambitious, aggressive announcement from PeopleSoft and IBM, ever," said PeopleSofts CEO Craig Conway, during a press and analyst briefing at the event. "It may be the most aggressive announcement in the industry."

The agreement calls for both companies to spend a combined $1 billion over the next five years on integrating PeopleSofts applications with IBMs WebSphere middleware stack, and in co-developing new functionality that includes PeopleSoft applications and WebSphere.

/zimages/2/28571.gifRead more here about IBMs middleware strategy.

Some analysts here said the agreement is also the equivalent of PeopleSofts big older brother finally stepping into the fight that has PeopleSoft being pushed around by the bully on the block.

Insiders pointed to past speculation that IBM could be a "white knight" for PeopleSoft, acquiring the company with internal support before Oracle Corp. has the chance to make good on its $7.7 billion hostile takeover bid launched last year. That offer has recently been given the go-ahead from a federal court ruling that said the deal did not present significant antitrust issues.

/zimages/2/28571.gifBaselines Tom Steinert-Threlkeld says talk of IBM becoming PeopleSofts white knight is more than fairy tale.

While PeopleSoft and IBM officials at Connect denied that plans are on the table for an IBM merger with PeopleSoft, Tuesdays deep agreement only stands to broaden those suspicions.

/zimages/2/28571.gifTo read more about Conways comments on Oracle in his Tuesday keynote address, click here.

The agreement between PeopleSoft and IBM is also PeopleSofts answer to SAP AGs drum pounding over integration. The company this spring touted its SOA (service-oriented architecture) and composite applications, all enabled by its NetWeaver integration platform announced two years ago.

At the same time Oracle, of Redwood Shores, Calif., last year also announced it would open up its suite to integration with outside applications—a first for the database and applications provider.

/zimages/2/28571.gifPeopleSoft CEO Conway in May accused SAPs Henning Kagermann of lifting Conways "flexibility and adaptability" message from an earlier speech. Cat fight? Click here to read more.

The agreement calls for PeopleSoft, of Pleasanton, Calif., and IBM, of Armonk, New York, to combine development, implantation, marketing and sales forces. PeopleSoft will integrate IBMs WebSphere middleware stack and development tools into its applications. It is likely most of the work will comprise adding WebSphere to PeopleSofts Enterprise, or legacy software. Its two additional suites, Enterprise One and World, acquired from PeopleSofts acquisition of J.D. Edwards & Co. last year, was already well down the road with WebSphere.

J.D. Edwards and IBM struck a relationship several years ago whereby the former company would integrate IBMs WebSphere and DB2 database into its business applications.

IBMs WebSphere stack includes its namesake Portal, Business Integration platform, Application Server and Studio Application Developer.

As part of IBMs agreement with PeopleSoft, the companies will also put thousands of IBM infrastructure developers and PeopleSoft application developers to the task of delivering composite applications. These integrated, cross-functional software will be made up of PeopleSoft applications, IBMs middleware, third-party software and services, officials said.

The software will focus on business processes for specific vertical industries, with the first applications geared toward banking, financial markets, insurance and telecommunications. The processes will include customer profitability management, network life-cycle management and customer loyalty and retention. Later applications will include distribution channel management for the insurance industry, and integrated risk management for financial customers.

At the same time, PeopleSoft said it will provide what it calls the business process layer: the tools necessary to assemble composite applications including a process modeler, master data management, process integration, analytics and a process engine based on BPEL (Business Process Execution Language).

"The process modeler is a significant addition," said Rick Bergquist, PeopleSofts CTO. "It has a new look and feel, based on Eclipse, an open platform for building open source development environments spearheaded by IBM.

PeopleSoft plans to move all of its PeopleSoft Tools onto the Eclipse framework, according to Bergquist.

The process layer will also include an interactive services repository. Announced today, the software will let users drill down and get details of business process integration points.

"Over the next five year period every application will become a composite-enriched [application]," said Bergquist. "Composite apps are the future and were well on our way to delivering. … Every application will both produce and consume services that are out there."

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