In-Depth

IBM-PeopleSoft Accord Has Strong BI Ramifications

By aligning with middleware-rich IBM, PeopleSoft can talk up a strategy of its own to counter SAP’s NetWeaver and Siebel’s UAN initiatives

• By Stephen Swoyer
• 09/29/2004

When Oracle Corp. launched its multi-billion-dollar hostile takeover attempt of PeopleSoft Inc. last June, the BI implications of Oracle’s gambit were significant: The acquisition of PeopleSoft would catapult Oracle ahead of Siebel into the number two space in the CRM market. Given the historical dominance of CRM market-leader Siebel Systems Inc., number two isn’t a bad place to be.

Nearly 18 months later, PeopleSoft is once again making billion dollar headlines—thanks to a high-profile middleware agreement it inked last week with IBM Corp. PeopleSoft CEO Dan Conway, who’s distinguished himself for hyperbolic speech in an industry that also includes Oracle CEO Larry Ellison and Sun CEO Scott McNealy, described the accord as “the most ambitious, aggressive announcement from PeopleSoft and IBM ever.”

As with Oracle’s takeover gambit of last June, the BI implications of the PeopleSoft-IBM accord are significant, if not immediately obvious.

For starters, says Mike Schiff, a senior analyst with consultancy Current Analysis, there’s the fact that IBM has what might generously be termed an overly broad definition of middleware. Most folks understand the term “middleware” to describe just that—connective, translation, brokering, or integration software that’s dropped into a middle layer or tier between other applications. Big Blue understands middleware in this way, too, Schiff says—but includes things like Web application servers and even its DB2 database in the middleware stack.

Not surprisingly, then, the accord calls for a healthy dose of IBM’s WebSphere Application Server technologies—specifically, for both Big Blue and PeopleSoft to spend a combined $1 billion over five years integrating PeopleSoft's applications with WebSphere. The agreement also calls for further collaboration between the two companies to co-develop new technologies based on PeopleSoft’s application stack and WebSphere.

Under the terms of the agreement, PeopleSoft’s customers will get WebSphere Portal, WebSphere Business Integration, WebSphere Application Server, and WebSphere Application Developer with the purchase of PeopleSoft applications. What’s more, PeopleSoft and IBM will jointly market the combined product set, which should dramatically improve PeopleSoft’s sales effort.

The Middleware’s the Thing

IBM has tightly coupled its WebSphere development efforts with those of other middleware offerings, such as DB2.

For example, Big Blue has tightened the links between WebSphere and the new version 8.2 release of DB2 UDB, such that its forthcoming DB2 Information Integrator product—an enterprise information integration (EII) tool—will exploit tooling in DB2 8.2 to integrate with IBM’s WebSphere Business Integration product. As a result, IBM officials say, DB2 Information Integrator will have near-real-time access to PeopleSoft, SAP, and Siebel application data.

IBM and PeopleSoft have a long history of collaboration, including partnerships in the CRM realm, says Ian Jacobs, a CRM analyst with Current Analysis. Jacobs says that Big Blue was critical in helping PeopleSoft gain early traction in the market, and was the lead partner in several days where PeopleSoft was able to take large volume call centers and run them with Web-based clients—back, Jacobs notes, when such deals were extremely unusual.

Some industry watchers believe PeopleSoft was under competitive pressure to notch a deal, thanks to moves from SAP and Siebel, and as a result of a time and attention-sapping monkey—in the form of Oracle—on its back.

By partnering with middleware-rich IBM, write Gartner analysts Lee Geishecker, Jeff Comport, and David Mitchell Smith, PeopleSoft can talk up a strategy of its own to counter SAP’s NetWeaver and Siebel’s Universal Application Network integration initiatives.

“By aligning with IBM, PeopleSoft delivers the benefits of functionally rich middleware and avoids the daunting task of building its own stack in competition with the deeper pockets of megavendors Microsoft, Oracle and SAP, which offer an infrastructure stack plus applications,” they write. “PeopleSoft also sets a technology strategy and vision for adaptive business processes using [service-oriented business applications], composite applications and integration.”

Not surprisingly, this has ramifications in the CRM space as well. “As vendors adopt a more business-process-centric approach to product development, CRM applications increasingly need more than just hooks into other applications,” notes Current Analysis’ Jacobs, who cites one of PeopleSoft’s own favorite examples—the order-to-cash process—which involves marketing and sales force automation, supply chain, and financials before ending up back in the CRM realm with customer support.

“Using WebSphere as the glue to create such adaptable processes, and doing so without added cost to PeopleSoft customers, will eventually make PeopleSoft a more attractive choice, especially for existing WebSphere users,” he writes. “Even existing .NET users that are also PeopleSoft customers are likely to welcome the deal as part of an ‘anything-but-Oracle’ mindset that seemed to have gripped the attendees of the PeopleSoft confab” where the announcement took place, Jacobs adds.

Similarly, IBM and PeopleSoft have pledged to collaborate to develop solutions for specific vertical markets that extend across a number of application boundaries. For the telecommunications industry, for example, the two companies plan to create customer profitability management and customer loyalty and retention-process-based solutions, Jacobs notes. “While these solutions will obviously incorporate key slabs of CRM technology, they will also pull in pieces of financial management and other PeopleSoft applications,” he points out. “Such solutions will be important for PeopleSoft to prove the value of adaptable business processes and to demonstrate how its CRM applications are more flexible than standalone CRM suites from the likes of Siebel.”

At the same time, Jacobs and other industry watchers note that the IBM-PeopleSoft announcement was woefully short on specifics. What’s more, notes Jacobs, both companies confirmed that the accord is non-exclusive. “While PeopleSoft is unlikely to run out and strike a similar deal with Microsoft to create .NET versions of its applications, IBM already has a deal—and an extremely close relationship—with PeopleSoft’s adversary Siebel,” he points out. “[I]n the CRM realm, Siebel has been the go-to partner of choice and PeopleSoft will need to compete for mind share within IBM’s sales force and services groups.”

Gartner’s Geishecker, Comport, and Smith also expressed confusion. “[PeopleSoft] has yet to clarify how deeply it intends to embed the IBM technology into … [its] core products,” they write, noting that PeopleSoft could cobble together a mixed stack of PeopleTools, PeopleSoft application server—which is based on WebLogic from BEA Systems Inc.—EnterpriseOne (which PeopleSoft acquired from J.D. Edwards) and WebSphere. “This approach would benefit customers seeking continuity, but new customers would likely encounter greater complexity when implementing the joint solution.”

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