In-Depth
PeopleSoft Users Resigned to Oracle Takeover
Few users seem excited about PeopleSoft falling into Oracle’s hands—except those who use Oracle’s database software
From improbable to highly likely: That’s how experts are now handicapping Oracle Corp.’s chances of acquiring PeopleSoft Corp. From the database giant’s victory several weeks ago over a trust-busting Justice Department, to PeopleSoft CEO Craig Conway’s surprise dismissal nearly two weeks ago, some analysts suggest that Oracle’s acquisition of PeopleSoft has all the makings of a fait accompli—provided Larry Ellison still wants the company, that is.
PeopleSoft users seem to have reached a similar conclusion. Many have resigned themselves to the prospect of PeopleSoft changing hands—sooner or later. “It’s beginning to look possible, isn’t it?” deadpans Bryan deSilva, a senior project manager with PeopleSoft consultancy Improvisations Inc.
Among other dire indicators, deSilva cites the Justice Department’s expressed unwillingness to appeal Oracle’s recent legal victory, along with the database giant’s high stock price—and relatively flush coffers. “PeopleSoft’s stock is up, but that’s probably just … because of Mr. Duffield being back at the helm. I don’t think that will last and that the board will be coerced to remove some of the ‘poison pill’ tactics implemented by Mr. Conway.”
PeopleSoft’s Conway was forced out in large part because he lost the confidence of the PeopleSoft board. In this respect, says long-time industry watcher Rob Enderle, a principal with The Enderle Group, Dave Duffield—who founded and first headed up PeopleSoft in the 1980’s—brings a lot of credibility to the job of CEO. That being said, Enderle doesn’t believe that Duffield’s role necessarily translates into relief for PeopleSoft users.
“With Conway in place, it was a war to the death,” says Enderle. “Now you have two guys”—Duffield and Oracle CEO Larry Ellison—“who are invested in either of their companies and can now sit down and try to hash a way out of this that is mutually beneficial. So in the end, it might end up that they do change their minds and decide to let Oracle do it, but now it becomes a friendly takeover.”
Friendly from the perspective of investors, perhaps. Many PeopleSoft users, on the other hand, don’t seem all that excited about becoming Oracle-customers-by-acquisition.
Take Don Barclay, a PeopleSoft administrator with a U.S. federal government agency. Barclay says he didn’t accept the inevitability of an Oracle-owned PeopleSoft until last week—when the Justice Department indicated it wouldn’t appeal a district court’s ruling in its bid to prevent Oracle’s action.
“It is unfortunate that Oracle is in a position to take a perfectly good software product and just throw it away,” he says. “That is ultimately unfair to the many developers and customers that have devoted significant effort to learn and implement the software.”
Barclay says he’s directly compared Oracle’s technology offerings with those of PeopleSoft—and hasn’t been impressed. “Three years ago, we looked at PeopleSoft and Oracle Applications to replace our previous [human resources management system] and payroll system. We chose PeopleSoft since it was technically and functionally superior to the Oracle product,” he confirms. “We would not look forward to replacing our PeopleSoft application with either Oracle or SAP,” Barclay continues. “I think it is laughable that Oracle thinks they can offer scripts to "automatically convert" PeopleSoft users to their applications.”
PeopleSoft consultant deSilva, for his part, says he works with Oracle, PeopleSoft, and SAP and doesn’t own stock in any of them. Nevertheless, he thinks Oracle’s triumph would be a bad thing for both PeopleSoft’s customers and the ERP market as a whole.
“I work with SAP, Oracle, and PeopleSoft. They each offer quality to their customers in their own way. Given that there are no other large competitors in this market and that Oracle would surely kill PeopleSoft, everyone—except Larry—would suffer.”
DeSilva and other PeopleSoft watchers cite Ellison’s remarks in June of 2003 as proof that Oracle intends to close PeopleSoft. At the time, Oracle indicated it would stop selling PeopleSoft’s application stack to new customers, and also said it wouldn’t integrate PeopleSoft’s applications with its own. The implication, intended or not, was that PeopleSoft’s application software would whither and die.
According to Robert Kugel, a vice-president and research director with business intelligence consultancy Ventana Research, Ellison’s original comments so spooked PeopleSoft users that his company’s subsequent outreach efforts –which included several virtual “town hall meetings” last summer—did little to allay their fears. “Much of the animosity [among PeopleSoft users] really goes back to the first statements that Ellison made after announcing the deal, and I think we just have to remember that that’s why [PeopleSoft users] are almost completely against this,” he observes. “I think Oracle will have to pay attention to this very large business opportunity that they have called ‘keep the PeopleSoft installed-base happy.' But I’m skeptical that they will.”
Long-time PeopleSoft consultant Gary Patrick is one such user. “Personally, I think PeopleSoft has a superior product. This is cut-throat competition at its worst,” says Patrick, who says he’s purchased stock in the embattled company to help demonstrate his support. Like many users, Patrick believes Oracle’s pursuit of PeopleSoft is prompted to some degree by animosity between Ellison and departed CEO Conway, who came to PeopleSoft via Oracle. “The pleasure of firing and humiliating former underling Craig Conway is one of [Ellison’s] main goals. Never mind the problems and expense that the acquisition and destruction of PeopleSoft will cause the customer base.”
It may sound like a stretch, but long-time industry watcher Enderle suggests there could be more than a little truth to this charge. “I do think a portion of this was to destroy Conway, because it was very personal between the two. If it extends beyond Conway and it’s to destroy PeopleSoft, however, then that’s what Larry’s going to do. If his goal really is to merge with the firm, this at least increases the probability that the merger would be friendly,” he says.
Of course, not all PeopleSoft customers oppose the deal. PeopleSoft shops that are also users of Oracle’s database software, in particular, seem at least intrigued by the possibility of an Oracle triumph.
Vagar Khan, a PeopleSoft administrator with a global insurance company based in the Atlantic Northeast, notes, “I personally would like Oracle to take over PeopleSoft. Looking at the bigger picture, it would be very beneficial as Oracle does have the most reliable, fastest database. Where do all the transactions go? [To the] database of course. So, Oracle can help PeopleSoft product[s] achieve this speed,” says Khan, who concedes that his “opinion could be a little biased as I have been working on Oracle products” which are his “primary strength.”
On the other hand, Rhonda Hudgins, a PeopleSoft administrator with a biotechnology company based in Rochester, NY, is decidedly downbeat about the prospect of an Oracle-owned PeopleSoft—even though her company also uses Oracle’s ERP and financial application software.
“I would like PeopleSoft to remain a separate company. The software we use from PeopleSoft meets our requirements,” she says. “We have found that implementing Oracle upgrades are significantly challenging. We have had a much better experience with PeopleSoft support.”
Hudgins suggests that Oracle application support is more involved than PeopleSoft support: “At [my company] five people support our Oracle applications. Because of the ease of use of PeopleSoft I am the only person in our company dedicated to it.”
Conway will be Missed, But Duffield Brings Founder’s Credibility
For the record, Hudgins and other PeopleSoft users we spoke with seem largely sympathetic to departed CEO Conway, whom they perceive as having fought a good fight against an unwanted takeover attempt. “Individually, I have no complaint about how PeopleSoft was run during Mr. Conway's tenure, and I agree with his position in opposing the Oracle takeover,” she asserts.
Another PeopleSoft user, who spoke on condition of anonymity, was more explicit: “He did a great job of making sure that PeopleSoft grew under his leadership and the number of installations increased,” he says. “He did a great job of fending of Oracle advances as much as he could. I respect him for that. He stood by his company instead of cashing out.”
Even joint PeopleSoft and Oracle user Khan, who says he would welcome an Oracle takeover, concedes that Conway “was doing [a] great job at handling Oracle's takeover.”
Of course, many users believe that the ascent of Duffield—much like the return of Steve Jobs to Apple in the late 1990s—can spark a resurgence of PeopleSoft. “Overall I approved of the job Mr. Conway did. However, I do believe that the culture of PeopleSoft, which was part of the Duffield magic, changed for the worse during his tenure,” comments deSilva. “Many long-term employees have left because of this change, and others aren't as satisfied [or] happy as they once were with the company and it's internal policies.”
PeopleSoft consultant Patrick echoes deSilva’s optimism, reasoning that former CEO Duffield “can rally the troops.”
As industry-watcher Enderle points out, however, Duffield’s return as CEO is by no means an indication that PeopleSoft isn’t still up for grabs. Ian Jacobs, a principal CRM analyst with consultancy Current Analysis Inc., makes this point even more starkly.
“Although PeopleSoft is clearly Duffield’s baby, he should be seen as a force of moderation,” says Jacobs, who points out that one of Duffield’s major responsibilities is to boost the value of PeopleSoft’s stock. This forces Oracle to raise its offer, to be sure, but also results in increased profits for investors should Oracle go ahead with a buy-out.
“If PeopleSoft has to be bought, the company’s board and its investors want the best deal possible, and having Duffield as top dog rather than Conway will make such a deal more likely,” Jacobs concludes. “These moves should not be taken as a signal that PeopleSoft is ready to concede, but rather that Duffield gives PeopleSoft significantly more leeway no matter what the company decides to do about Oracle.”