|
Seeing
Through the Fog
maximizing the return from your PeopleSoft investment in
a post-merger world
Introduction
It has been a grueling 18 months for PeopleSoft’s
customers, staff and partners. As the dust settles on the
acquisition by Oracle and the roadmap for the combined organization
becomes clearer, we’ll look at how there is an opportunity
for customers to come out of this process stronger and better
positioned for the future; but it will take effort, focus
and inevitably investment.
Latest News Analysis
News about the acquisition has slowed at last, a little
bit at least. For the first month or so after Oracle finally
announced they had secured a deal with PeopleSoft’s
board to acquire the Pleasanton based company, the media
subjected us to rapid-fire news, analysis, speculation and
sometimes downright guesswork in order to follow the quickly
developing story. Now that we can be a little more analytical
and systematic, it occurs to us that, whilst this was an
audacious move by Larry Ellison and his team at Oracle,
there is little to be surprised about. Many of us have been
through the process of being involved in a merger; acquisition
or having suppliers (or ‘Partners’ as they like
to think of themselves) bought or collapse.
Many of us will
have invested heavily in these companies at either a corporate
and / or professional level. Like many of those sudden changes
in the Software or Systems industry, there is some blood
spilled. One of the first opportunities for customers results
from the ‘feeding frenzy’ that comes from the
prospect of losing their supplier. That is especially true
when a supplier is acquired and its users specifically did
NOT choose the purchasing company in the fairly recent past.
The fact that the incoming competitors also lost out in
the previous competition seldom does anything to quell their
enthusiasm.
Hence we have aggressive marketing by SAP and
Microsoft to try and convince PeopleSoft customers that
they should contemplate a dramatic change in direction;
many of the smaller players marketing their best-of-breed
or focused vertical credentials; and even some proposing
a return to custom built software. There are undoubtedly
merits in each of the above options in some specific examples
but it seems that the message of integration, of commoditization
of the most common business function logic and the (relative)
stability of a few majors players will continue to hold
the majority of the market.
Then there were two…
However, if we have learnt one thing from this saga it is
that there is no certainty in the software industry. The
market rules and the market can be viciously self-interested.
Further consolidations are inevitable, especially amongst
the smaller providers. When you are (relatively) small it
becomes harder to fight the larger companies as they grow,
especially if business applications are only one of a range
of services they are offering to a client. But it is also
a truism that the market for new business applications license
sales has shrunk considerably since the heady days where
it supported over 400 companies. Now less than 1/10 of that
number tout their solutions. Smaller players may see this
as a loosening of the stranglehold that the big companies
have had and we can expect some well-focused, aggressive
sales effort from them.
The
Big Players and their approach SAP
SAP starts the (new) race out in front, from a global perspective
but with a new, larger competitor. Oracle, has the, not
inconsiderable, task of undertaking a big corporate merger
(larger than it has ever seen in its history); continuing
support of three product lines while developing a seemingly
redesigned solution being positioned to take on all comers.
Meanwhile SAP continues to aggressively market itself and
its product. It has undertaken a big recruiting campaign
for sales staff and has bought TomorrowNow, a provider of
PeopleSoft support. The primary focus of this purchase does
not appear to be to target some of the precious review stream
resulting from support (although they won’t be sending
it back!). SAP plans to offer customers time and opportunity
to transfer to their own product. Or rather their own products…
As with all the ‘big players’ the market for
business applications running on the web has spread to a
number of levels in the technology stack. SAP has been promoting
the use if it’s Netserver product as a way to interface
between the main application and the outside world.
Microsoft
Microsoft has been successfully developing market share
in the PeopleSoft market space on a couple of fronts for
some years now. SQL*Server is widely recognized as an industrial
strength database and steadily addressing it earlier reputation
for poor scalability. Microsoft and their Intel partners
have been successfully promoting their advantage in Total
Cost of Ownership (TCO) but as with their database, they
have begun with the small and mid-size enterprise market
(SME) where the message has more resonance. On the application
front, the purchase of Great Plains and Axapta showed a
clear desire to enter the ‘industrial strength’
solutions. But once again these solutions seem more suited
to the SME market and that alone will not do much to get
Microsoft where it wants to be. Microsoft has also undertaken
an aggressive marketing campaign to woo PeopleSoft users
away from the fold with discounted licensing and migration
plans.
IBM
Big Blue’s position appeared to be fairly solid last
year when they announced the partnership with PeopleSoft.
Part of that presentation was a graphic showing all levels
of the technology stack running on IBM software (including,
by the way, IBM e-server hardware.) Recently they have begun
to spin their message slightly differently, highlighting
their open systems, interoperability credentials and pouring
scorn on the suggestion that the “stack wars”
are where the battleground will be. IBM is quick to emphasize
IBM Global Services ability to work with many different
vendors.
Oracle
Oracle’s message is clear. They want to be the leading
business application vendor, replacing Germany’s SAP:
and soon. That’s the reason they invested $10.3bn
to buy their major US competitor. While their customer base
immediately increases by several thousand users, Oracle
can clearly not assume that these users will happily sit
within the Oracle fold ad infinitum without proper care
and a good business case to do so.
The messages from Redwood
Shores since the acquisition have played up the importance,
or at least the recognition, of those that align themselves
with PeopleSoft. Indeed one of the big surprises since the
deal was concluded is that the JD Edwards brand is openly
talked about and valued. It would also seem that Oracle
is determined to integrate the best of what they have in
the three product lines into something that will appease,
or at least address, the requirements of each. The appointment
of Jesper Andersen, ex-PeopleSoft VP for Product Strategy,
to head up Application Strategy says to us that this will
not just be a rewrite in Oracle Forms of the additional
functionality.
The fate of other senior PeopleSoft folks
seems to have been less favorable or clear to date. There
are many challenges ahead. The quoted roadmap looks to optimize
the new combined solution to run on Oracle technology. We
don’t believe there is a need to panic yet for those
on mainstream non-Oracle products although you need to be
ready to make a decision as we get nearer to 2008. Around
that time the Fusion product suite should start to come
together and there will inevitably be huge pressure to upgrade.
So – presuming that Oracle, Microsoft and IBM can
work together - users on these technologies should be ok
for another 3 years. Not that that is a reason not to do
due diligence on your options, because one day (and not
THAT far away) your decision point will come.
If you are
using some of the less popular infrastructure components,
the message may be somewhat different. Although there has
been no distinction on these officially, it seems to make
good business sense from Oracle’s perspective that
that the less popular components will be last in line for
the support resources. There is nothing definitive of course
but you should take this into account when doing your own
risk assessment.
Previous product strengths & weaknesses
If you do an analysis of the relative strengths of PeopleSoft
and Oracle, firstly in Industry verticals and then in specific
functional areas it becomes clear how complimentary the
different companies core offerings were. Oracle’s
strengths in Services, High-tech, Federal Government and
(large enterprise) Manufacturing complement almost perfectly
PeopleSoft’s sweet spots in Financials Services, State
and Local government, Telecommunications and the mid-market
presence from the JD Edwards products.
Similarly if you
look across the application module range: PeopleSoft’s
HCM heritage, strengths resulting from the acquisition of
Vantive’s CRM functionality and the JD Edwards mid
market presence complement the historical strength and presence
of Oracle in the Financials arena. Oracle have always played
a more active role is the infrastructure space, something
that has lead us to their current initiative to compete
for the complete technology stack.
A stabilized and self-focused
user may say that the fact that the newly combined company
is strong in all of its key verticals and has access to
leading functionality from across its product range is barely
relevant to them. And it may not directly be relevant to,
say, a Government contractor running PeopleSoft HR and Finance
that Oracle now has world class CRM and the intellectual
strength to implement into both mid market and full enterprise
Manufacturing environments. We would argue however that
in order to be stable, strong and visionary, companies need
the kind of breadth of offering and capabilities that the
combined strengths bring to Oracle.
The key of course is
in delivery, Oracle has to ensure that the hypothetical
Government Contractor mentioned above FEELS like they are
the most important of the customers. They also need to perceive
that the software tools they are using to implement their
business processes are a) reasonable value and b) allow
their organization to set their own agenda, rather than
having the software vendor force them into major, unsuitable
changes or expensive upgrades. So what is in it for the
customer? Bigger may not always be better but economies
of scale should work in the customers’ favor. In the
final analysis it will be down to the people delivering
to customers who will make the difference.
Oracle’s vision Most will have seen the Oracle announcements
of Project Fusion and the road map for getting there. To
summarize: Oracle has committed to support ‘PeopleSoft
products’ until 2013. The Enterprise product will
be supported through release 9.0 (“at least”),
Enterprise One will have release 8.11 released and then
8.12. Oracle’s e-Business Suite will have a version
12 released. In the meantime Project Fusion tools are being
developed and once application modules start to appear in
2007, it seems reasonable to assume that the pressure to
upgrade to Fusion will become higher profile. The upgrades
are planned to be ‘seamless’ from all the product
lines.
Incidentally, if that were to be true, we would question
the rational of taking up Oracle’s offer of a no license
fee upgrade to their e-Business suite product at this point.
Looking forward, the Project Fusion tools will be standards
based, HTML, DHTML and Java. Make no mistake though this
does not mean that they will not be proprietary however.
On the subject of acquisitions and mergers, PeopleSoft was
always the more active of the new partners in the field.
Previous exercises for Oracle have been used to buy up Data
warehousing or OLAP functionality for the purpose of embedding
it within the Oracle architecture. On the application side,
the Datalogix Manufacturing software was acquired to strengthen
the product suite. Proprietary
One
acquisition, which Oracle was rumored to have wanted to
talk about the success of, was that of Rdb, a new beta release
of which was recently announced. Which is somewhat odd.
Despite having continued to develop the product (over 50%
of the product source code is claimed to be new or re-written
during Oracle’s tenure) they are on record saying
that the Oracle RDBMS will NEVER absorb its smaller relation.
Preliminary Survey Results – What the users
are thinking
Whilst it is still too early to suggest definitive results,
early returns from our survey of users suggests that there
has been something of a change in users’ attitudes.
Gone are the closely massed ranks of users wondering about
the gloom of the potential merger. A new realism, helped
by some favorable communications by the new owners has lightened
the mood considerably. Short-term, users are feeling quiet
confident and, even if their stated long-term worries come
to fruition, there is a pragmatic realization that there
is time and opportunity to look at this in the same way
your IT and Functional professionals look at any problem.
One perception, which does not seem to be going Oracle’s
way, is that of the perception on price. Users expect to
be asked to pay more, both for licenses and for ongoing
maintenance. When costs start increasing significantly,
thoughts wonder to what else users could be doing with the
funds, a danger which Oracle needs to address. One of the
big selling points of the integration of the architecture,
application and database is the efficiency that the close
coupling brings in making the best of each layer. Users
we spoke to were, at best, indifferent about the benefits
that it may bring. Maybe they have already addressed their
integration issues and know that it is possible, and increasingly
so in the modern architectures using SOAP and XML. What
they may not be recalling, however, is the integration costs.
Even if the technology works, the process of setting up,
testing and maintaining two-way interfaces between disparate
(and often changing) applications takes
time and money.
Where to now?
Hopefully this distillation of information has helped you
become more aware of some of the issues. It can be difficult
to keep abreast of the latest information and to this end
Noblestar has initiated our Oracle-PeopleSoft Merger News
Center. Here you will find a summary of many of the latest
articles relating to the merger together with comments on
how it relates to the unfolding story. The News Center can
be found at http://www.noblestar.com/we_do/pkg/newscentre.jsp
or from our home page at noblestar.com. Noblestar will also
continue to present, our ‘Seeing through the Fog’
seminars updating them with the latest developments. While
the merger is a serious and potentially very disruptive
development to your company’s plans, there is no need
to undertake sudden and drastic actions.
Any plans you do
make, and we believe it is imperative that you do begin
to plan your approach in the short to medium term, should
be made in a clear and calculated way, after due consideration
of the risk to your business that the merger brings. The
plans must also be closely targeted at addressing your company’s
objectives and should probably target the next 2-4 years.
One tactic that can be used to stabilize your current environment
for the next few years is to ensure that you are up to date
on your application, tools and software releases. According
to the risk assessment you may take the opportunity to convert
some software in the technology stack to more mainstream
products. The principle of ‘Safety in numbers’
can also be applied to involvement with your local User
Group.
We actively encourage you to open an interactive
dialogue with other users Proprietary in
your region, industry vertical or application interest areas.
Oracle has been swift to address the User Community through
these channels and you should make maximum use of them.
Another good source of information will be your Oracle Account
Manager; Oracle has been keen to emphasize a ‘no change’
approach to continuing to provide Account Management. Many
users we have spoken too have indicated that they would
like a change, for the better! This particularly applies
to the former JD Edwards customers who seem to have suffered
from somewhat of a ‘revolving door’ approach
to the management of their accounts.
Summary
It has been a grueling year and a half for everyone working
in PeopleSoft related areas. The situation, as it now appears,
offers many dangers to the unwary but opportunities to those
who are informed, methodical and focused on their organizations
objectives. Despite the macroeconomics of the software industry,
this is not about leaving the direction you choose to the
big players. The solution for your organization should be
under your initiative not that of the likes of Messrs Ellison,
Conway, Duffield or Gates.
About the author
Originating from London, Robert is a 27 year veteran of
the IT services industry, working in blue chip companies
in both the USA and Europe. The majority of his career has
been spent implementing Financials, Human Capital Management
and CRM solutions in a wide variety of verticals including
Financials Services, Energy, Telecommunications and Services.
His experience with PeopleSoft spans over 13 years, originating
with the first European release of the product and the earliest
HRMS implementation in the UK. For most of his career Robert
has actively fostered links with the user community and
has given seminars and presentations to various PeopleSoft
Users and Regional Groups. Today Robert leads Noblestar’s
PeopleSoft implementation and optimization capabilities
concentrating particularly in value added modules, ePerformance,
Revenue Management, EPM, collaborative applications, portal
and process and systems integration.
Robert
Young
Noblestar Systems Inc |
