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1/18/2005
05:08 PM
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Oracle Details 'Fusion' Plans For Oracle And PeopleSoft Apps

Oracle outlined an ambitious program to continue developing Oracle, PeopleSoft, and J.D. Edwards applications, as well as create a suite merging all three.

Oracle will merge its applications with those of PeopleSoft and J.D. Edwards into a single suite under what Oracle CEO Larry Ellison calls "Project Fusion," as well as continue to separately develop all three vendors' product sets.

In a three-hour Webcast Tuesday to Oracle and PeopleSoft employees, customers, and the press, Ellison and other Oracle executives outlined their plans for PeopleSoft and its product lines. Oracle acquired PeopleSoft earlier this month for $10.3 billion after a bitter 18-month takeover effort.

On Friday, Oracle said it will lay off 5,000 of the combined companies' employees--most of them PeopleSoft workers. Tuesday, Ellison said he doesn't expect that additional acquisition-related cuts will be necessary. Oracle will reveal the size of the financial charge it will take to cover the layoffs at a meeting with financial analysts in New York next week.

Ellison portrayed Oracle's efforts as setting the stage for a titanic battle with application rival SAP by saying Oracle now has the largest application customer base in North America. Ellison said Oracle's combined application set will be Java-based in contrast with SAP's applications that are based on a proprietary language, ABAP, and a proprietary set of application generation and deployment tools, NetWeaver.

"This merger gives us a real opportunity to move forward with standards-based development tools, standards-based security, a standards-based platform," Ellison said. "SAP is trying to go it alone. They're going to develop their applications with development tools on their application server."

Ellison claimed that the combined PeopleSoft and Oracle application market share, while not as big in revenue as SAP's share, is the market leader in the North American market and leads in a number of specific industries, although he didn't specify which ones. Charles Phillips, Oracle's president, said the combined company is the leading human resources application vendor, thanks to PeopleSoft's leading position in that market.

John Wookey, Oracle senior vice president, said the combined companies will form an Application Strategy Team to align future releases of PeopleSoft Enterprise, J.D. Edwards EnterpriseOne and World, and Oracle's own E-Business suite on a common platform. (PeopleSoft acquired JD. Edwards in 2003.) Wookey has overseen the integration of six earlier Oracle acquisitions.

Ellison said no other acquisitions are planned until the PeopleSoft integration is complete.

Individual Fusion applications capable of replacing either J. D. Edwards, PeopleSoft, or Oracle applications will become available in 2007. A suite of Fusion applications will be available in 2008.

In 2005, Oracle will continue the deployment of PeopleSoft Enterprise 8.9 applications. In 2006, it will release the next generation of PeopleSoft Enterprise 9.0 and J. D. Edwards 8.12. It also will release Version 12 of Oracle's own E-Business Suite in 2006 as well.

Juergen Rottler, executive vice president of Oracle support, reaffirmed support for PeopleSoft and J. D. Edwards applications through 2013. He said the combined Oracle/PeopleSoft support staff will number 6,000 worldwide, with 1,000 coming from PeopleSoft.

Rottler said that, initially, PeopleSoft application users would see no change in their support centers or the support personnel they're used to speaking with. Over time "there will be a gradual integration of the support organizations," he said. PeopleSoft operated six support centers; the combined company will operate 16.

"I'm absolute convinced you've got your hand on the throttle," said John Watkins, CIO of Fairchild Semiconductor, an Oracle customer and guest at the Oracle presentation. Watkins had expected it to take longer for an integration plan for the two companies and three product lines to emerge.

Asked how many PeopleSoft customers Oracle expected to retain, Ellison, in a question and answer session after the Webcast, said Oracle typically retains 95% of its application customers, as does PeopleSoft. The goal will be to continue that high retention rate, he said.

He acknowledged that there had been speculation in the press concerning losses of PeopleSoft customers once existing contracts run out. "I'm not sure these exits are going to occur as fast, as rapidly as some people think. General Motors has a lot invested in its PeopleSoft human-resources application. It has a lot of people trained in it. I'm not sure why [PeopleSoft customers] would change to another application," he said.

Ellison also said Oracle's partnership with IBM, particularly with its Global Services Division, was likely to grow stronger due to the merger. But its relationship with Microsoft will remain competitive even though Oracle will support PeopleSoft applications on Microsoft's SQL server database. All three are competitors in the database market, but IBM doesn't market its own applications. IBM's Global Services unit, however, is a frequent implementer of both PeopleSoft and Oracle applications, Ellison said. Microsoft has ambitions for the small and midsize business market for applications, a realm in which Oracle also wants to compete.

Ellison also downplayed the idea that merging PeopleSoft into Oracle will prove difficult because of what's seen as their vastly different cultures. Ellison noted that PeopleSoft was run from 1999 to 2004 by Craig Conway, a former Oracle sales executive whom Ellison called, "one of the most aggressive sales execs in the history of Oracle. So I don't think the cultures are all that different."

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