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Experts consider Oracle, PeopleSoft acquisitions from all angles

Five CRM experts offer their opinions about the consequences of Oracle's recent bid to buy PeopleSoft.

Last week's acquisition announcement drama provided one of the most interesting and exciting chapters in the pages of the CRM history books. First, PeopleSoft Inc. announced its intention to buy J.D. Edwards & Co. in a stock deal worth $1.7 billion. CRM users had about four days to ponder the ramifications of that acquisition before Oracle Corp. added more fuel to the fire by announcing its bid to buy PeopleSoft. Of course, the CRM market has seen plenty of acquisitions in recent years, but never any of this magnitude. This flurry of surprising announcements leaves a lot of questions to be answered. For one, what does it all mean for the future of CRM? That's the question we posed to the experts of


By Bob Thompson, president, CustomerThink Corp.

My quick reaction is that these moves mean PeopleSoft admits it can't really penetrate the midmarket, so buying a company who can is the next best thing. And Oracle's takeover bid means it has low confidence in succeeding in the apps business, so buying a company that has 'apps DNA' is the next best thing.

And perhaps they both realize that, aside from Siebel, the real competitor is SAP, which is building real momentum in CRM and has a huge customer base already. A more interesting question is: What will Siebel do? The CRM software leader could end up the leader of an industry that just got bought by the ERP industry.

By Chris Selland, managing director of Reservoir Partners

While we're certainly not surprised that consolidation is occurring in enterprise software (we've been saying it for quite some time now), the announcement that Oracle wants to buy PeopleSoft is indeed a shocker. Why?

a) Oracle gains next to nothing from a product standpoint -- even if J.D. Edwards gets thrown in the deal (although they apparently wouldn't). Oracle already has everything PeopleSoft has. Except, perhaps, momentum.

b) Oracle rarely, if ever, pays up for acquisitions. Granted, the premium is small, but the price tag is still quite large.

There are two potential reasons for this deal:

1) Oracle is playing defense -- a PeopleSoft-JDE combination would clearly put Oracle in the No. 4 position, behind Siebel, SAP and PeopleSoft (although we'd argue they're there already), substantially devaluing their application business.

2) Oracle is bluffing -- wouldn't put this past them -- and they're more interested in screwing up PeopleSoft's deal with J.D. Edwards than actually following through with their own. If they refuse to increase their bid, given the small premium it's highly doubtful this deal goes through.

In any event, if this deal does go through, it's a Hail Mary pass for Oracle, which has floundered in the applications market for years -- particularly since Ray Lane's departure. No doubt Chuck Phillips (the former Morgan Stanley enterprise software analyst who joined the company last month) had something to do with this -- perhaps finally convincing Oracle's senior management that apps, not infrastructure (databases), is the future.


By Paul Greenberg, president of the 56 Group LLC and author of CRM at the Speed of Light

While I might not love the shark-like approach that Oracle is taking, they are doing something that makes good sense for themselves. This is a smart move by Oracle to both eliminate a major competitor, to grab a highly talented development force and to get applications that work well and that have a reputation for being far less bug-ridden than Oracle's. They are planning on offering a free license migration to Oracle from PeopleSoft and were talking about taking the crÈme de la crÈme of developers from PeopleSoft and merging them with their developers -- so even though they are claiming they will let the PeopleSoft base alone, it seems to be a path to eliminating PeopleSoft and keeping the best features that it has to offer, though I can't say that for sure.

Even if the deal doesn't happen, Larry Ellison pulled off a masterstroke in sowing doubt about PeopleSoft at a time when PeopleSoft's revenues were shaky and their reputation was deteriorating. The move, real or not, will impact PeopleSoft, regardless of acquisition success or failure.

What is sad is that, while it is a politically sharp move for Oracle and [a] damaging move for PeopleSoft, it is a lot more than a chess game for PeopleSoft customers, who can easily be hurt in the bargain. They now have to wait out this check, check, checkmate attempt by Oracle to see if PeopleSoft products are going to be there in a few years. Additionally, should the move succeed, even with free license transfers to Oracle, the cost of migration will be high because the cost of migration of major applications is always high. Customers will get hurt.


By Michael Lowenstein, CPCM, managing director at Customer Retention Associates

Many of those observing changes in the CRM software marketplace aren't particularly surprised by the J.D. Edwards-PeopleSoft-Oracle saga unfolding last week. There's a great deal at stake, especially in the CRM midmarket. While J.D. Edwards and PeopleSoft were collegially working to craft an efficient and beneficial combo for a non-overlapping base of customers, Ellison, the ever-lurking and watchful croc, decided that this was the opportune time to make his move to snatch a good share of the market. The fact that this share is bought rather than earned only serves to underscore the attrition and consolidation taking place throughout the market.

Consistent with the reputation he's created over the years, Ellison provides very little software customer sensitivity in either his offer or his statements, and the swiftness of Oracle's action sends a strong message to the marketplace. Share, even dominance, can be grabbed and held like so many chips in a poker game. Size and money frequently win out in poker, and Oracle has both. Ellison has the chips. He doesn't need to bluff. All he has to do is wait for the right time to strike. That's what he decided to do this week.

SAP and Siebel, though large enough and safe enough, at least for the moment, need to make an extra effort in demonstrating value for all of their constituents. Will that guarantee their independence over the long run? Watch and see. As Herod said to his oldest and dearest friend, Claudius, in I, Claudius, " no one."


By Paul Sweeney, president of the Sweeney Group Inc.

The CRM landscape has changed dramatically in the last couple of years, and vendors are having a difficult time differentiating their products and turning a profit. The PeopleSoft-J.D. Edwards and Oracle-PeopleSoft actions will likely prove to be the tip of a contentious iceberg for the CRM industry. Everyone's trying to survive, and only a few will ultimately make it safely back to port. This should be a signal to CRM end users to construct vendor exit strategies and contingency plans aimed at mitigating the risks of these corporate actions.

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