Software // Enterprise Applications
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6/6/2003
10:24 PM
Bob Evans
Bob Evans
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Business Technology: Consolidations Will Change Industry's Face

Oracle's bid to acquire PeopleSoft for $16 a share would amount to a premium of 5.9% over PeopleSoft's closing price last Thursday of $15.11. Premium? Shoot, a few years ago in a deal like this, 5.9% was the take for the third-tier investment banker. But in our present world, where the newly reconfigured spatial coordinates tell us that flat is up, 5.9% might not be too shabby.

Flash Quiz: A multibillion-dollar software company lists the following product categories in its current ads: Financial Management, Analytics, Project Management, Human-Resource Management, Customer Relationship Management, Field-Service Management, Supply-Chain Management, Manufacturing, Retail Management, and E-Commerce. Which company is it? (A) J.D. Edwards; (B) Microsoft; (C) Oracle; (D) PeopleSoft; (E) SAP; (F) Siebel. The answer's at the bottom of this column.

Almost a year ago, at a day-long analysts' meeting at Oracle headquarters, CEO Larry Ellison said the enterprise-software market was headed for a massive consolidation because, simply, that is the nature of this business. He asked the audience a question along the lines of, "How many of you have the title, 'PC Software Industry Analyst?'" And he continued to make his point along these lines, which I am paraphrasing: None of you, right? And why is that? It's because there is no more PC software industry--there are only a handful or less of PC software companies that matter. And the same thing will happen in the enterprise-software space because only a few will have the size, financial strength, and technical capability to survive. PeopleSoft? I don't think they can make it--they're just not big enough. Siebel? Not big enough, and not broad enough. Microsoft? Yeah, they'll make it. (End of paraphrase.)

And I thought it was very interesting to see that in comments made late last week about the benefits Oracle hopes to gain from acquiring PeopleSoft, Ellison downplayed revenue from the sale of PeopleSoft apps, but instead seemed to focus more intently on support opportunities and enhanced features. "Although we will not be actively selling PeopleSoft products to new customers," Ellison said in a statement, "we will provide enhanced support for all PeopleSoft products. Furthermore, we will be incorporating the advanced features from the PeopleSoft products into future versions of the Oracle eBusiness Suite."

Enhanced support for PeopleSoft customers and advanced features for Oracle customers--those sound like the sorts of things that should make everyone happy. But customers on both sides will reserve their judgment until they hear about product-integration plans, licensing plans, compatibility programs, customer-service strategies and tactics, maintenance contracts, and more.

Those types of evaluations will probably become commonplace for customers over the next year as more acquisitions reshape the enterprise-apps market. As our Beth Bacheldor says in her news-analysis cover story in this week's issue ("Buyers' Market"), this is only the beginning.

P.S. Last week, I offered $10 million or an InformationWeek tchotchke to the writer of the best four-line poem describing the name for what real-time business delivers. Call me an old softy, but I couldn't decide between the two finalists, so they'll either split the $10M (if we have that in petty cash, it's as good as in the mail) or each will get an IW goody. Thanks to all who submitted!

I guess you'd want to go surmise
My goal is agile enterprise,
But, writing that's a real pain,
Instead, I am an eager chain!

-- Bob Fately

I've heard that companies must be agile
and leap and react and not be fragile
but what I'm sure they must command
is technology that is "on demand."

-- Evelyn M. Samore

Bob Evans,
Editor In Chief
bevans@cmp.com

(And here's the Flash Quiz answer: (B) Microsoft.)


To discuss this column with other readers, please visit Bob Evans's forum on the Listening Post.

To find out more about Bob Evans, please visit his page on the Listening Post.

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