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    SAP Sees Opportunity in Oracle-PeopleSoft Merger

    By
    Matthew Broersma
    -
    December 13, 2004
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      SAP AG has benefited from the market uncertainty created by the long battle between Oracle Corp. and Peoplesoft Inc. Now that the battle is over, the dominant business applications maker doesnt see the good times ending.

      /zimages/6/28571.gifClick here for the details on the Oracle-PeopleSoft merger agreement.

      “The era of uncertainty is far from over,” said Bill Wohl, SAPs vice president for product marketing, in a telephone interview. He said plenty of questions still remain around how former JD Edwards customers will be supported, how the integration of the two companies will proceed and what the long-term plan will be. “All of those questions and uncertainties bode well for SAP, which looks increasingly like a safe harbor in a stormy sea. … Were dealing with customer requirements, while the others are focusing on legal battles and now mergers and acquisitions.”

      SAP, based in Walldorf, Germany, is the biggest business applications player, accounting for 39 percent of the market, compared with 25 percent for PeopleSoft and Oracle together. During the 18 months since Oracle launched its PeopleSoft takeover bid, SAPs market share increased in all its key markets around the world, Wohl said—an increase analysts attribute to the Oracle-PeopleSoft turmoil. In a research note earlier this year Gartner warned that enterprises in the midst of implementing packaged applications face additional risks when their vendors are acquired.

      The turmoil will continue for at least another 12 to 18 months while the two companies complete the merger process, Wohl predicted. “You cant minimize the amount of work here to bring the two together. We believe this is a market opportunity for us—its been that way all along, and it continues today,” he said.

      He said that even once they complete their integration, Oracle and PeopleSoft will only be “a modest competitor.”

      /zimages/6/28571.gifAccording to its president, Oracle has a clear idea of how its going to slice up PeopleSoft to retain the choicest assets and send the rest to the corporate rendering yard. Click here to read more.

      Ex-PeopleSoft CEO Craig Conway once likened the process of adopting SAP software to “pouring concrete,” but sales increases are the best answer to such criticisms, Wohl said. “At the small and midsized business level, where flexibility and openness are most required, as well as at the enterprise level, SAP has solutions that are meeting those requirements,” he said. “Customers are speaking with their wallets.”

      Philip Carnelley, research director with U.K. analyst firm Ovum Ltd., agreed that it will be some time before the merger results in a serious competitor to SAP, but he said the combined company should ultimately increase competition. “A stronger, equivalent competitor to SAP… will also be good for the industry and future buyers. SAP really was having things all its own way,” Carnelley wrote in a research note.

      He said the deal should mean some certainty for PeopleSoft customers. “At least now theyll get some certainty, even if they dont like the outcome, which now seems rather better than they feared,” he wrote. IBM, one of PeopleSofts closest partners and the customer for its largest-ever installation, will be one of the biggest losers from the deal, Carnelley wrote.

      Microsoft Corp., which once considered acquiring SAP, said it “remained neutral” toward Oracle-PeopleSoft as it has done throughout the process. The software giant said it remains focused on its existing business applications strategy for small and midsize businesses. “Microsoft has no position concerning todays Oracle announcement,” the company said in a statement.

      /zimages/6/28571.gifCheck out eWEEK.coms for the latest news, reviews and analysis about productivity and business solutions.

      Matthew Broersma

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