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Oracle lands its prey after 18-month PeopleSoft hunt

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25th Dec 2005
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After a weekend of soul-searching, directors of ERP software developer PeopleSoft agreed on Monday to recommend approval of a $10.3bn bid from arch rival Oracle.

The deal had been recommended to the board by PeopleSoft's transaction committee of independent directors. Under the terms of the agreement, Oracle will up its offer to $26.50 for each PeopleSoft share.

A majority of shareholders need to accept the terms by 28 December and when the deal is sealed, the two companies will drop all the outstanding law suits against each other.

"This has been a long, emotional struggle, and our employees have consistently performed well under the most challenging of circumstances," said Skip Battle, chairman of the PeopleSoft transaction committee in a press statement.

"The Board salutes our employees for their outstanding dedication to PeopleSoft and is grateful to our customers who have continued to buy our products and stand by us during these uncertain times."

Oracle chief executive officer Larry Ellison, who engaged in an acrimonious fued with former PeopleSoft CEO Craig Conway, tried to reassure PeopleSoft users in his public announcement.

"This merger works because we will have more customers, which increases our ability to invest more in applications development and support," Ellison said. "We intend to enhance PeopleSoft 8 and develop a PeopleSoft 9 and enhance a JD Edwards 5 and develop a JD Edwards 6. We intend to immediately extend and improve support for existing JD Edwards and PeopleSoft customers worldwide."

In early skirmishes during 2003, PeopleSoft highlighted the likelihood of Oracle abandoning its product range. Oracle tried to play down these fears in a range of brochures on its website.

The PeopleSoft Customer Commitment promised "to support PeopleSoft products just as if they are Oracle products". Oracle added that it would develop applications that combine the best features and functions of each company's product ranges. These future offerings would be tightly integrated with Oracle's database and e-business infrastructure.

"PeopleSoft customers will receive free module-for-module exchanges to the E-Business Suite product superset along with Oracle database licenses for the applications. Customers can stay on PeopleSoft applications or migrate to Oracle applications and infrastructure at their discretion.
Either way, it's entirely their choice and Oracle will support both options.

"We would not spend the significant amount of time and resources we have over the last year unless we really wanted you to be our customers. Our investment pays off only if we keep you happy."

To reinforce its claims on customer satisfaction, Oracle advised PeopleSoft users to ask customers who migrated when the company bought the Rdb database from Digital Equipment Corporation. "A decade later, we are still providing world-class support and enhancements to thousands of Rdb customers running mission-critical applications."

IT Zone comment
Oracle's sensitivity on the customer care issue is instructive. So obsessional has Larry Ellison's quest been for the past year and a half that PeopleSoft users understandably may feel they've become pawns in a Silicon Valley ego war.

For all Oracle's smooth brochures and mollifying words, the scale of integrating both PeopleSoft and its JD Edwards subsidiary into the Oracle applications empire is going to be a massive challenge. And though Sage has consistently contradicted the theory, IT Zone is always suspicious about developers who have to maintain multiple competing product families (ef Microsoft Business Solutions).

Make no mistake. This is a global power play on Oracle's part. In the top-end ERP sector, the fight is now between SAP and Oracle. And US anti-trust regulators would never have let the deal happen were it not for the existence of the German rival.

The scale and speed of consolidation in the business software industry is remarkable. The JBOPS who ruled the ERP market at the beginning of the century will shrink to just Oracle and SAP.

With Microsoft's intervention, the global mid-market is segmenting into the MBS, Systems Union and Sage camps (with Oracle and SAP both casting envious glances down market).

Local markets continue to support a lot of business software minnows, but if we're looking at serious global players at the entry level, it's now a race between Intuit, Sage and MYOB - with Microsoft Office coming up on the rails next year with its Small Business Accounting offering.

After all this M&A activity, front-page software stories like the Oracle-PeopleSoft saga will become rarer. In some ways, that will be a pity - but will give us more time to concentrate on what's happening to the applications themselves, rather than the companies that own them.

John Stokdyk

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