Oracle Strikes Back

Company's play for PeopleSoft has broader BI ramifications

It’s not like Oracle Corp. to get upstaged by one of its competitors, so when PeopleSoft Inc. last week announced a plan to acquire J.D. Edwards & Company—resulting in a combined entity potentially large enough to displace the database giant from its No. 2 position in the enterprise applications market—it was a good bet that Oracle would respond.

They did. On Friday Oracle announced a $5.1 billion take-over bid of PeopleSoft. To say that it was a surprise is an understatement. To say that it’s hostile is a given. Just ask PeopleSoft CEO Craig Conway, who described the attempt as “atrociously bad behavior from a company with a history of atrociously bad behavior.”

If it succeeds in its takeover attempt, Oracle will stop selling PeopleSoft’s application stack to new customers. The database giant also disclosed that it has no plans to integrate PeopleSoft’s products with its own e-Business Suite. Oracle has, however, pledged to provide service and support to PeopleSoft’s existing customers—beyond, it claims, PeopleSoft’s existing support roadmap—but it will not release new versions of PeopleSoft’s application software. In time, Oracle will presumably attempt to move PeopleSoft’s installed base over to its own software.

According to AMR Research Inc., the combined Oracle-PeopleSoft would control 27 percent of the ERP market. Oracle would still trail market leader SAP, which controls 36 percent of the ERP market.

BI Ramifications

PeopleSoft established its reputation as a purveyor of human resources (HR) software, a market segment in which it continues to lead competitors, such as Oracle and SAP. Not surprisingly, analysts agree, the most immediate fall-out from Oracle’s takeover bid will be felt in the enterprise applications space.

But an Oracle takeover of PeopleSoft could prove disruptive in other areas. For example, thanks to a 1999 acquisition of customer relationship management (CRM) specialist Vantive, PeopleSoft has developed a respected CRM business, trailing Siebel Systems, SAP America Inc., and Oracle, in the large enterprise market segment.

If Oracle succeeds in its take-over bid, however, it will displace SAP as the No. 2 vendor in the CRM space: “If successful, Oracle will clearly own the number two market share,” confirms Kelly Spang Ferguson, principal CRM analyst with market research firm Current Analysis Inc. Ferguson expects that with a combined installed base of 18,000 customers, Oracle would be able to more effectively challenge SAP in other markets.

PeopleSoft is also a business intelligence (BI) analytics player, albeit one with a limited market presence. It markets a data warehouse product (Enterprise Warehouse 8.8) that is largely deployed within its own installed base. Enterprise Warehouse consists of multiple components, including an operational data store, a data warehouse, and several function-specific data marts, such as CRM Warehouse, Enterprise Service Automation Warehouse, Financials Warehouse, Human Resources Warehouse, and Supply Chain Warehouse.

Mike Schiff, a principal with data warehousing consultancy MAS Strategies, describes Enterprise Warehouse as “PeopleSoft’s best kept secret”—unknown, even, to many of its own customers. “It’s there but nobody knows about it. That says a lot about how PeopleSoft has marketed it, because no matter what people think of SAP’s Business Warehouse, everybody at least knows that they have a data warehouse,” he points out.

More recently, PeopleSoft has sought to position itself as a major player in the emerging market for what research firm Gartner Inc. calls corporate performance management (CPM)—in PeopleSoft’s product lexicon, Enterprise Performance Management (EPM)—which Gartner describes as “the methodologies, metrics, processes, and systems used to monitor and manage” business performance across an enterprise. In this respect, PeopleSoft markets a series of EPM applications, collectively called PeopleSoft EPM 8.8, which are designed to provide real-time monitoring and analysis of business performance. PeopleSoft offers EPM applications for a variety of different vertical markets, including manufacturing, health care, and communications. It is unclear at this point if Oracle will attempt to enrich its applications portfolio with products or technologies borrowed from PeopleSoft’s EPM applications stack.

PeopleSoft enjoys partnerships with leading BI vendors—such as Business Objects SA and Cognos Inc.—that have developed BI and reporting solutions that can be deployed against Enterprise Warehouse and the company’s EPM applications. In addition, as a Business Objects VAR, PeopleSoft also resells that company’s WebIntelligence Web-based query, reporting and analysis product.

BI heavyweight SAS Institute Inc., for its part, markets an adapter (SAS/Access Interface to PeopleSoft) that allows its data mining and analytic tools to exploit PeopleSoft’s enterprise applications stack. Finally, PeopleSoft has also bundled Informatica Corp.’s PowerMart as an extraction, transformation and loading (ETL) tool for use with its warehouse products.

A Disruptive Gambit

The upshot: if Oracle’s hostile takeover attempt is successful, PeopleSoft’s small installed base of analytic users, along with the more significant share of its customers that have deployed its CRM solutions, have great cause for concern.

Oracle has said that it will eventually try to move PeopleSoft’s customer base to its own application and analytic stacks, which are, of course, anchored by the Oracle database. For a very small percentage of customers, this could be a relatively painless and potentially beneficial development. For other customers—especially shops that exploit PeopleSoft’s analytics, or, more probably, have built applications based on its CRM stack—an Oracle takeover could be decidedly unpleasant and potentially disruptive.

Another casualty of a successful Oracle takeover would be PeopleSoft’s platform-agnostic position with respect to the underlying database—a comportment that will undoubtedly change with Oracle at the controls. PeopleSoft currently supports six relational database products, including Sybase, Microsoft, IBM and Oracle.

Current Analysis’ Schiff points out that while Oracle has always championed openness and competition with other vendors, it has drawn the line with its own database product. “Oracle defines openness by the number of partners that use its database, but then Oracle is also not afraid to aggressively compete with its partners. Oracle wants to own all of the account,” he argues.

Should its rakish takeover bid succeed, Oracle has said it will resell PeopleSoft applications only to that company’s existing customers. In this regard, it’s a good bet that Oracle will no longer bundle Informatica’s PowerMart as the ETL tool of choice for use with PeopleSoft’s Warehouse products. Oracle sells its own ETL tool called Oracle Warehouse Builder.

Vendors such as Business Objects, Cognos, and SAS would probably stop offering BI and analytic solutions that support PeopleSoft’s application stack—largely because Oracle will no longer be selling that company’s products to new customers. “It’s not going to help their BI partners, for the most part, because the BI partners need the products to be sold in the first place,” says Schiff.

About the Author

Stephen Swoyer is a Nashville, TN-based freelance journalist who writes about technology.