Oracle Exec: Support But No Upgrades For PeopleSoft Products

Jeffrey Henley, Oracle's acting CFO and chairman, said his company will support PeopleSoft products if it's allowed to acquire its rival, but won't provide any costly or timely upgrades. He also said during a pretaped hearing that was played Monday for the court during the Oracle antitrust trial that there's still a market perception that PeopleSoft's human-resources technology is better than Oracle's.

Clearly not accustomed to being grilled on Oracle's technology on a granular level, and the size of Oracle's customers, Henley offered a series of rambling answers before a Justice Department attorney asked about Oracle's support plans for PeopleSoft products after a merger.

"We'll continue to support the (PeopleSoft) products for 10 years. We'd try to improve the products, but we would not invest large amounts of time in a brand new version," Henley said. "In the spirit that we want the PeopleSoft customers to be happy. If they're not massive (requests) that require a brand new release, we'll certainly try to do that," He said Oracle will honor written contracts PeopleSoft has issued to customers, including providing `"minor enhancements" to the product.

Henley also said PeopleSoft doesn't offer any technology, or modules that Oracle lacks. And he said that in the ERP software arena, Oracle is "certainly equal to or better" than PeopleSoft--but that a market perception remains that PeopleSoft is superior in human-resources technology. "There's a market perception in many people's minds--they think PeopleSoft's HR (software) is better," Henley said.

Oracle attorney Daniel Wall told InformationWeek later Monday that Henley wasn't implying that this perception by the industry is the reason Oracle is purchasing PeopleSoft. "The crux (of the matter) is that size matters. The bigger you are, the more customization you can do, the more maintenance you can spin off, the better the company,'' Wall said.

Following Henley's taped testimony, the government called Professor Randall "Preston" McAfee, of California Institute of Technology, who also served as an expert witness in the Federal Trade Commission's case against Enron.

McAfee determined that an Oracle-PeopleSoft merger would result in significantly increased pricing for customers, based largely on his research of Request for Discount Forms filled out by Oracle sales representatives and previously submitted to executives in search of sometimes steep discounts in order to land new large customer accounts. McAfee was able to cite a number of cases in which the salesperson indicated serious pressure coming from PeopleSoft as his reasoning for the discount request.

One case study he cited stated: "We're in a head-to-head battle with PeopleSoft. Craig Conway (PeopleSoft's CEO) is calling in to the account to try to delay decision past 5-31, and have gotten ultra-aggressive on the price and discount to win the business." Another discount form was filled in by a salesperson trying to land an account with Hallmark Cards and describing himself as being in an "extremely competitive situation against PeopleSoft. PeopleSoft is in at less than 1 million in license fees and lower yearly support. Craig Conway is all over this account with meetings and calls."

During his cross-examination of McAfee, Wall again tried to bring into question the credibility of the government's witness and cast doubt over the witness's methodology of the research, which predicted that in most cases Oracle's average product pricing will increase by 20% and could rise by as much as 30%.

Wall displayed a number of documents McAfee had previously submitted to support the fact that fierce competition by PeopleSoft drove discounts by Oracle in human-resourced management and financial-management software. He tried to show that in some cases, the request for a discount was not based on software fulfillment alone, but also supported Oracle's attempt to sell other programs and consulting services.

In one example, Wall pointed out that the discount form submitted for potential customer GAF, a $1.4 billion manufacturer, applied not only to human-resources management and financial-management software, but to a number of other software programs as well. Wall also cited Hallmark Cards as an example of a customer to whom Oracle was offering heavy discounts of its the product because of PeopleSoft, according to the government; however, Wall maintained, the salesperson cited this potential contract as an "ice-breaker" and a deal which that have the potential to generate a lot of future opportunities. He pointed out these discounts were applicable to the implementation services as well as products. "So this incentive (or discount) has nothing to do with whether PeopleSoft is there," Wall stated.

Wall also cited a bidding process surrounding customer Greyhound, noting that the government's documentation didn't include details on Lawson Software and its role in the bidding process. "Your simulation model concludes complete information—this is not complete information, is it?"

Wall asked McAfee, who answered that the information appeared not to be complete in this case. Oracle CEO Larry Ellison spoke briefly in a taped interview with the Justice Department at the end of the day. He said PeopleSoft is his first choice and Siebel Systems Inc. his second choice for an acquisition that would make Oracle more competitive with SAP and Microsoft. "The larger we are, the more money we can spend on engineering," Ellison said. He added that he is interested in PeopleSoft for its strong engineering team and large customer base.