Oracle’s shock US$5.1bn bid earlier this month for its business software rival PeopleSoft has left many reeling. It seems that everybody expected consolidation in this space, but not this soon and not all together. The move was all the more surprising for its timing; mere days after PeopleSoft announced its own plans to acquire JD Edwards. However, Oracle has said that the JD Edwards buy will be subject to review once Oracle acquires PeopleSoft.
Since that hectic week, a raft of claim and counter-claim has followed; there’s no shortage of hostility around this takeover. There is a view abroad that suggests the counter-bid of sorts is simply a spoiling tactic on Oracle’s part — this is the line being put out by PeopleSoft CEO Craig Conway (ironically a former Oracle staffer), who is strongly opposed to the move. PeopleSoft and JD Edwards both launched separate legal actions against Oracle.
There’s plenty of aggression on all sides as each party tries to protect what it had to gain (or lose). But there may be more to all this posturing than simply grandstanding for the gallery.
Another way of looking at it is that Oracle at least appears to be pursuing a strategy that is consistent with previous utterances from the company. CEO Larry Ellison has for some time held the view that, for major software projects, best of breed is not the way forward. To his way of thinking, businesses that really care about how their time and money is spent would be better off buying a suite of software — from a single supplier — that works better together, with less integration headaches than having to tie together a range of best-in-class applications from a multitude of providers. It’s a controversial opinion that flies in the face of accepted practice; for a long time best of breed was part of conventional IT industry wisdom.
What’s more, there’s a huge slice of self-interest to Ellison’s argument: guess which vendor he’d like you to buy all your enterprise software from? But then, you’d expect that; this is not an industry renowned for its selflessness and altruism.
Oracle’s plans for PeopleSoft are also broadly consistent with this strategy: reading between the lines of Oracle’s bid statement, it has no plans to actively sell PeopleSoft products. Instead it appears that Oracle will try to cherry-pick the best features of PeopleSoft and amalgamate them into its own products.
Another more cynical, but no less valid, view is that Oracle’s own bid for the applications market has not been a roaring success. Analyst figures show that the good old database is still putting most of the bread on Oracle’s table. According to recent research from Forrester, application software now accounts for just 26pc of revenue. Some industry watchers see the PeopleSoft play as a bid to bolster these figures quickly. Oracle wouldn’t be the first company to try to buy market share — in fact, it’s practically a rite of passage for any IT firm worth its salt. It will also have the helpful effect of removing a rival.
At the time of writing it’s not clear what the outcome will be; Oracle’s bid is not certain to succeed (interestingly the company is making most of its arguments in favour of the acquisition to shareholders rather than to customers). If it doesn’t, then PeopleSoft and JD Edwards are likely to press ahead with their own plans to join forces.
Either way, what’s clear is that this sector is going to look very different very shortly. Another of the big business software players, Baan, was recently offloaded by former owner Invensys and is to be merged with SSA Global Technologies, a US enterprise software specialist.
A quick glance sideways shows that SAP is moving into the small and medium-sized enterprise space with its BusinessOne package (itself the result of an acquisition). This is designed to head off the advance of Microsoft into the enterprise space from the bottom up, via its business software division that comprises Great Plains and Navision.
Everyone is scrambling to reach the top spot; mergers and consolidation are the inevitable results. If I was an enterprise software user of any hue, large or small, I’d start asking serious questions about future product strategies. The IT industry is very fond of issuing advance statements, touted as ‘roadmaps’, which are aimed at reassuring users about the intended development plans for a particular product set.
Keep a close eye on product pronouncements from any and all of the above in the next while; with the landscape undergoing such seismic changes, a roadmap may not be worth the paper it’s written on.
By Gordon Smith
Pictured, Larry Ellison: Single suites work better?