Business Technology: Nagging Questions Cloud Oracle's Vision
The Oracle antitrust trial offers some extraordinary peeks into the workings of major software players, Bob Evans says. Will customers perceive the proposed value of PeopleSoft-enhanced Oracle apps or will they respond by chosing other options?
Whether you like Oracle or not, whether you want them to acquire PeopleSoft or not, whether you believe in capitalism or not, I think you have to like the clarity of this statement made last week by Oracle president Safra Catz in its antitrust trial with the Justice Department: "We want to sell them more products. We don't want to give them any reason to move to SAP or some other vendor." (For the most comprehensive and timely coverage anywhere of the trial and Oracle's related attempt to acquire PeopleSoft, check out our groundbreaking Oracle PeopleSoft Insider.
Last week's proceedings also revealed great, unblinking precision in the numbers shown on a chart compiled last year by Catz and Oracle CEO Larry Ellison showing how many of PeopleSoft's employees would be laid off within one year of the completion of the proposed acquisition: 437 sales reps, all gone; 1,080 other sales and marketing staff, all gone; 740 of 865 general and administration staff, gone; and 1,370 of the company's 2,370 R&D team, gone.
That would leave 125 folks from the G&A team, and 1,000 from R&D. Among the responsibilities those developers will undertake: maintain PeopleSoft products until customers migrate to Oracle, and create future Oracle products incorporating PeopleSoft features. And whereas PeopleSoft's apps now run on multiple database systems and application servers, this proposed future assimilated product line wouldn't--it would run only with Oracle databases and app servers. Ergo, the clarity of Catz's statement regarding Oracle and PeopleSoft customers and Oracle's strategy relative to PeopleSoft: "We want to sell them more products. We don't want to give them any reason to move to SAP or some other vendor."
This is, from Oracle's perspective, a perfectly reasonable and defensible strategy--who could argue with a company's desire to retain its customers and give them everything they need so that none of that revenue trickles out to competitors? Of course, love and attraction in this imperfect world of ours have their limits, and some highly competitive sales material put together by Oracle before the courtship and unearthed for the trial reveals some bare-knuckle approaches (slide 8 in PDF file) to convincing customers that PeopleSoft is at best inferior: "PeopleSoft likes to talk about being the only 'pure' Internet solution. This is strange as it is built using a totally proprietary development tool called 'PeopleTools.' Remember, outside of PeopleSoft customers, NO ONE uses PeopleTools for development. There are NO CUSTOMERS of PeopleTools only--ZERO, NADA, NONE.... Because PeopleSoft uses only HTML and some very basic Java script they have a weak user interface. It's especially weak for people who use the applications a lot, the group we refer to as 'professional users.' PeopleSoft has created an application... [that] is hopeless for the power or professional user (the core or applications users)." I guess there's truth to the bromide that we always hurt the ones we love, with more evidence of that coming from 100-slide document created by Oracle late in 2002 and now a part of the court record under its original title, "Attack PeopleSoft."
It was a strange and unsettling experience last week to hear Commission members, witnesses, and even some 9/11 family members nonchalantly describing the inability to shoot down four airliners carrying a total of 261 passengers and crew as a regrettable "failure." One 9/11 relative described Norad's failure to shoot American 77 out of the sky as "emotionally devastating."
-- June 22 Wall Street Journal column by Debra Burlingame, sister of Charles F. Burlingame, pilot of American Airlines Flight 77, which was crashed into the Pentagon on Sept. 11, 2001
If Oracle can swallow such horrors, though, and should the acquisition go through, much will depend on which path Oracle takes in executing its stated desire to box-out competitors. Oracle will do very nicely if the box-out comes about because Oracle convinces and then demonstrates to customers that they can get everything they need from Oracle, and thereby have no need "to move to SAP or some other vendor." But Oracle will stumble badly if the restricted customer flexibility arising from the only-on-Oracle-databases-and-app-servers strategy outweighs the new value and advantages offered by the assimilated product lines. Because one of the things enterprise customers find most unforgivable in IT vendors are strategies and policies that limit flexibility, that box the customer into a corner, and that limit choices. So should the acquisition go through, look for this to be the most-pressing issue for Oracle to address, and the single largest factor in the ultimate determination of whether the acquisition has been a success.
Even if Oracle can execute perfectly on that daunting task, it will then face intense competition from SAP in a contest that will pit SAP's open-to-all strategy against Oracle's only-on-Oracle plan. Which approach will provide more value in helping make customers more nimble and opportunistic? Which choice will make them better able to react almost instantaneously to shifts in customer demand? Which will allow businesses to spend less time and energy on maintaining and fixing and patching and integrating and managing their software, and more on optimizing business processes and enhancing customer intimacy and establishing world-class standards for speed, quality, and responsiveness? Which company will offer the more-flexible range of licensing and subscription fees, predicated on emerging needs of customers as opposed to traditional software-company business models?
And speaking of SAP, a confidential Microsoft internal memo written immediately after Oracle announced its intention to acquire PeopleSoft offers the following sense of urgency: "We should think proactively in determining our fate, as no doubt the folks in Armonk are doing." The memo's sender is listed as one "Cindy Bates," and the recipients are most of Microsoft's top execs: Steve Ballmer, Bill Gates, Doug Burgum, Paul Flessner, Eric Rudder, and Richard Emerson. The memo from "Cindy Bates" then uses a secret code to refer to major software players and what might happen in a chain-reaction sequence following the Oracle bid for PeopleSoft, but fear not--I have cracked the code and will share it here with you: Pegasus=PeopleSoft, Oracle=Ophiuchus, SAP=Sagittarius, and Mensa=you know who. The memo has some juicy parts blocked out (techie legal term is "redacted") but is still intriguing. However, the really deep stuff comes right after the memo in a long section called "Opportunity Review Material" that's nothing less than Microsoft's internal analysis of an acquisition of SAP--some truly eye-opening material in there.
Well, from a couple of paragraphs above, there are lots of questions for all of us to consider, but let me add one more to the mix: What are your views on this acquisition: pro or con, and why? Send me your thoughts and I'll pick an entry whose author will win a complementary registration to the InformationWeek Fall Conference Sept. 19-22 .
To discuss this column with other readers, please visit Bob Evans's forum on the Listening Post.
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