PeopleSoft Acquisition Impact Ripples throughout BI Market

From PeopleSoft’s thriving CRM practice to partnerships with several BI giants, Oracle’s triumph could prove disruptive on several fronts

As expected, Oracle Corp. succeeded in its takeover of PeopleSoft Inc. While the full impact of Oracle’s triumph will be felt most acutely by consumers of PeopleSoft’s human resources (HR) software and enterprise applications, there are several important BI ramifications associated with the merger. From a thriving CRM practice to partnerships with several BI giants, Oracle’s acquisition could prove disruptive on several fronts.

For starters, PeopleSoft has a respectable presence in the CRM space, thanks to its 1999 acquisition of CRM specialist Vantive. For 2003, market research firm International Data Corp. (IDC) found that PeopleSoft was the fifth largest CRM vendor in terms of revenue, trailing Siebel Systems, SAP America Inc., Oracle, and Amdocs in the large enterprise market segment.

Initially, many analysts felt that Oracle’s gambit could turn the CRM space upside down. When Oracle first announced its takeover bid, for example, there was speculation that PeopleSoft’s CRM practice could instantly catapult Oracle to number two in the CRM space, second only to Siebel. “If successful, Oracle will clearly own the number two market share,” said Kelly Spang Ferguson, then-principal CRM analyst with Current Analysis Inc, at the time.

Other analysts took a less sensationalistic view, noting that in terms of market share, Siebel and SAP are comfortably in front of Oracle, Amdocs, and PeopleSoft; all have market share in the single digits.

“Even if Oracle accomplished a seamless acquisition, the deal would not allow Oracle to overtake Siebel Systems or SAP in the CRM market,” wrote Gartner analysts Rob DeSisto and Michael Maoz in a research brief. For starters, DeSisto and Maoz noted, a combined Oracle and PeopleSoft would control 8.5 percent of the CRM market (based on 2002 numbers)—which was still smaller than the double-digit shares of both Siebel and SAP.

Pushing the Limits of CRM

Along with Siebel and SAP, PeopleSoft has been at the forefront of pushing industry-specific CRM solutions. The company has targeted the bread-and-butter markets—such as education and government agencies—that overwhelmingly consume its human resources software.

Last March, for example, PeopleSoft took the wraps off of its PeopleSoft Enterprise CRM for Higher Education, an offering designed to support the lifecycle phases—such as student recruitment, registration, retention, fundraising, and continuing education—that are common to most public and private colleges and universities. In addition, PeopleSoft announced Enterprise Revenue Management—a billing-and-revenue management system designed for insurers, financial institutions, and revenue-generating government agencies—along with Enterprise Wealth Management, a wealth management system.

At the time, PeopleSoft’s industry-specific offerings prompted one analyst to suggest that the company was expanding the definition of CRM beyond the relationships between products and vendors.

“PeopleSoft’s new offerings will only further the move toward expanding the central concept of what CRM is and what types of customers would benefit from the technology,” wrote Ian Jacobs, a principal analyst for CRM with Current Analysis Inc. “For example, instead of just traditional product vendors and their customers, PeopleSoft has begun applying CRM to revenue-collecting governmental agencies and their constituents.”

An Analytics Play

Notwithstanding its CRM credentials, PeopleSoft also has a stake in the analytics market. For years, it has marketed a data warehouse product (Enterprise Warehouse) that has been deployed extensively 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).

What’s more, PeopleSoft has also built analytics functionality into its CRM offering (see http://www.esj.com/business_intelligence/article.aspx?EditorialsID=7116). For example, when the company announced its Enterprise CRM 8.9 last May, it touted that product’s new analytics functionality—so much so, said Current Analysis’ Jacobs, that analytics “permeate every bit” of the Enterprise CRM suite. “PeopleSoft has made clear that it takes analytics very seriously,” he confirmed.

The revamped Enterprise CRM product ships with a new decision engine, dubbed PeopleSoft Prescriptive Analytics, which could diagnose potential issues and propose actions to remedy them. PeopleSoft also offers a variant of its Enterprise Warehouse—dubbed, appropriately enough, CRM Warehouse—for users of its CRM software. Analysts who’ve looked at the company’s software believe that it has an excellent CRM analytics story to tell.

“Numerous CRM vendors have attempted to tie predictive analytics to event triggers, particularly in call-center environments so that, for example, customer service agents are fed a scripted offer to prevent a cell phone customer at risk from churn from dropping a service,” Jacobs wrote. “But PeopleSoft has taken this idea and applied it to sales and marketing as well as support. This also shows that PeopleSoft has understood just how central analytics will be to the growth in adoption of CRM going forward.”

The BI Ties That Bind

The deal could also disrupt PeopleSoft’s partnerships with several prominent BI vendors, most especially Ascential Software Corp. and IBM Corp.

Last January, PeopleSoft notched an OEM licensing agreement with data integration specialist Ascential Software Corp. that allows it to license Ascential's ETL and data quality technologies for use with its enterprise performance management (EPM) products. PeopleSoft will also resell Ascential’s “Packaged Application Connection Kits” (PACK). The agreement replaced a long-standing arrangement with data integration powerhouse Informatica Corp.

PeopleSoft officials cited the need to bundle data-quality capabilities along with standard ETL functionality as one of the primary drivers of the deal. “We’ve seen the world of data integration evolve from what was primarily ETL to a broader set of requirements, we’ve seen customers working with more voluminous amounts of data, [and] we’ve seen customers become more interested in assuring the quality of their data and understanding source systems,” said Tobin Gilman, director of Enterprise Performance Management (EPM) product marketing for PeopleSoft, at the time.

Probably most imperiled, of course, is the partnership that PeopleSoft and IBM announced last September. To recap, the two companies agreed to spend $1 billion over five years integrating PeopleSoft's applications with Big Blue’s WebSphere Application Server.

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. In addition, the two companies also pledged to co-develop new technologies based on PeopleSoft’s application stack and WebSphere.

The problem, of course, is that Oracle already markets its own J2EE application server offering that—according to IDC’s 2003 numbers—trails both IBM and BEA Systems Inc. in market share. Of course, Oracle and IBM don’t just compete in the J2EE application server space—they’re also arch-competitors in the database market. What’s more, in the BI space, Big Blue positions its DB2 Universal Database—like WebSphere Application Server—as “middleware” of a sort, and has ratcheted up integration between WebSphere and DB2. Oracle officials haven’t commented publicly on any of the nuts-and-bolts aspects of the merger, but the database giant is likely to take a dim view of this arrangement.

Elsewhere in the BI arena, 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.