Seeing Through the Fog
maximizing the return from your PeopleSoft investment in a post-merger world
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 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.
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’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.
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.
Noblestar Systems Inc