Monday, December 13, 2004

fyi Oracle signs deal to buy PeopleSoft for $10.3B


Pointer to article:,10801,98213,00.html?source=NLT_AM_B&nid=98213

Kobielus commentary:
PeopleSoft and JD Edwards customers know now that the writing is on the wall. Though Oracle will continue to release enhancements to those product families for the next several years, and support them for a long time to come, the acquiring vendor almost always relegated the acquired products to legacy status. The principal exception is when the acquired products have strong functionality or brands that the acquirer can’t match. The Oracle brand is stellar and its apps are best-of-breed in many app categories. I sense that the PeopleSoft and JD Edwards brands will be allowed to decline gracefully over the next 5-10 years.

The principal loser in this deal is Microsoft. Over the next 3-5 years, its principal hope for competing with SAP and Oracle at the high end of the business application market lay in acquiring a major application vendor outright. Now that PeopleSoft is off the table, Microsoft will have to rely on its small-to-midsized business (SMB) applications, acquired through acquisitions (Great Plains, Solomon, Axapta, Navision) and also under internal development (“Project Green”). None of those products directly compete for the high-end market in which SAP and Oracle duke it out. And it’s highly unlikely that Microsoft will be able to gain inroads by positioning those products into the high-end market. SAP/Oracle app customers (ERP, CRM, SCM, etc.) typically upgrade or migrate only once every 10 years or so, but, more often than not, stick with their primary business app vendor for much longer.

Another loser is IBM. It lacks packaged business apps to compete in the enterprise or SMB markets. It had formed a “white knight” partnership recently with PeopleSoft to co-market IBM platforms, middleware, and tools with PeopleSoft apps. Apparently, that deal is now effectively defunct. I’d be very surprised if Oracle doesn’t push its own platforms, middleware, and tools aggressively to PeopleSoft and JD Edwards users. IBM doesn’t directly compete with SAP/Oracle in the ERP market, and, unless it acquires Lawson or some other second-tier player, it won’t be a viable competitor anytime soon.