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PeopleSoft, IBM Up Ante Against Microsoft

PeopleSoft is teaming with IBM in an attempt to gain channel and technology muscle as it takes on Microsoft in the midmarket.
PeopleSoft is teaming with IBM in an attempt to gain channel and technology muscle as it takes on Microsoft in the midmarket.

PeopleSoft said it is working with IBM to identify several hundred IBM partners it will bring on board in the US as part of a new channel offensive. As part of the deal, the two companies are working together to put PeopleSoft midmarket ERP turnkey solutions on Linux.

The PeopleSoft channel effort comes with Microsoft moving aggressively into the ERP segment with Microsoft Business Solutions applications. PeopleSoft, which embeds IBM middleware in its own midmarket software, maintains that its offerings are more robust in terms of vertical market functionality with lower total cost of ownership than the Microsoft Business solutions applications.

IBM, meanwhile, is stepping up its offensive to drive its middleware into the market with Linux against rival Microsoft's middleware and ERP solutions.

Les Wyatt, group vice president and general manager, PeopleSoft EnterpriseOne, said IBM and PeopleSoft are teaming up to nail down strict qualifications for the partners it brings on board. PeopleSoft is interested in partners who provide value-add in software and services rather than just selling hardware. "We are building out the qualification criteria and working with IBM to identify and engage with those partners. We want to get the right people in the program. This is going to be a quality program in place for the long haul."

PeopleSoft and IBM said they will leverage IBM's Small and Medium Business Advantage program to provide sales incentives, marketing tools and resources, training, and demonstration capabilities to its new channel partners. The effort will also include joint cooperative marketing to drive application software leads to the channel, and a joint advertising campaign to position and promote channel partners and the combined PeopleSoft and IBM solutions in local markets.

Evan Walters, president and CEO of Innovative Information Solutions, a Waterbury Conn. solution provider named one of eight PeopleSoft infrastructure partners in the U.S., said he is excited about the potential for PeopleSoft turnkey solutions in vertical markets. "This is a huge opportunity from my perspective," he said. "This is a limited channel. Not everybody has this expertise. We have been a PeopleSoft partner for six years and an IBM partner for 10 years."

Walters said he is awaiting more specific detail in terms of the costs associated with selling PeopleSoft midmarket applications. However, he said he has been impressed by PeopleSoft's commitment to go through the channel exclusively for any accounts with less than $100 million in annual sales.

Walters said he is particularly interested in combining the PeopleSoft application with IBM's I Series systems which he maintained offers midsized business without large staffs a much better value than a Microsoft or Oracle midmarket offering on industry standard servers.

"PeopleSoft is going after a whole new tier of the marketplace that has been relegated to Great Plains and Microsoft," he said. "These midsize companies can now look at PeopleSoft. Customers don't consider Microsoft and Great Plains as an enterprise solution. They are small point solutions. PeopleSoft has the potential to gain a whole new following for customers that didn't consider PeopleSoft because it was too expensive or too difficult to implement."

As for the impact of Oracle's continued hostile bid for PeopleSoft, Walters said that has become a non issue with most customers believing that Oracle has no possibility of acquiring PeopleSoft. "The dust has settled and people are coming out and looking at the PeopleSoft value proposition as it incorporates JD Edwards and they are pleased with what they see," he said.

PeopleSoft and IBM also announced a new vertical offering for second and third tier suppliers to automotive makers. The new IBM Automotive Solution offers PeopleSoft EnterpriseOne applications running on the IBM eServer xSeries, along with pre-integrated IBM middleware and industry-specific best practices from IBM consulting. The PeopleSoft IBM demand driven manufacturing solution builds on existing PeopleSoft Manufaturing solution, which is set to ship in June.

PeopleSoft also announced Enteprise CRM 8.9, base capability and 15 related modules including Prescriptive Analytics, Customer Portfolio Mangement, Partner Relationship Management. Actual delivery dates of the software were unclear.

David Siebert, group vice president and general manager of PeopleSoft World, said that the specific PeopleSoft vertical market turnkey applications such as the automotive solution combined with IBM hardware provides partners with a bigger and more profitable opportunity to grow their revenue than partnering with Microsoft in the midmarket. The total cost of ownership versus Microsoft Windows is much lower over a three to five year period, said Siebert. One factor in that lower total cost, he said, is higher reliability. "You don't need to reboot (PeopleSoft applications running on IBM hardware)," he said.

The PeopleSoft deal is just one piece of an IBM offensive against Microsoft. IBM is engaging Microsoft on many fronts, including on the desktop with IBM Workplace aimed against Microsoft Office, although IBMers are loathe to say so publicly. At last year's PeopleSoft Leadership Conference, PeopleSoft CEO Craig Conway announced the company's alliance with IBM over Linux and blasted industry dependence on Microsoft (see story.)

Asked repeatedly whether the new Workplace "editors" for spreadsheets, word processing and presentations represented a move against Redmond, IBM Software GM Steve Mills reiterated over and over that it was not. "It's about customer choice. It' s not an anti-Microsoft move," he said.

Ambuj Goyal, general manager of IBM's Lotus Software unit toed the company line as well, positioning the Workplace editors as possible adjuncts to Office applications.

But many see the richer Workplace clients as an escalation of IBM's attempt to eat away at Microsoft's desktop dominance. The company already offers free "editors" with its WebSphere portal. Over the past 18 months, IBM field sales people have told customers that they could spend $50,000 or so on the portal, get the freebie applications that would do 80 percent of what they need from Office, said solution providers. These sources say IBM sales reps have encouraged customers to use the portal-based editors as a weapon to negotiate better pricing with Microsoft on Office.

Now it appears that the rhetoric may be ratcheting up. Sources say IBM sales reps are advising large accounts to use Workplace and continue with their existing Office and to defer signing new Microsoft Software Assurance licenses. Many of these SAs are due for renewal at the end of June.

"The smarter IBM sales guys used the portal and thinner clients running in a browser as a stalking horse [against Office.] Now it's no longer a stalking horse, now [the message to customers] is take the money you save [on Office] and invest in Workplace because it's middleware you can continue to leverage Windows or whatever. The version of Office you already have is probably more than good enough. Take the money you'd save on licensing and spend it on things that really matter," said one source.

Industry watchers say IBM is probably wise to keep the competitive message muted in public. While IBM Software wants to entrench its middleware and server software (and now rich clients) throughout SMBs and enteprises, it also makes a lot of money off Windows implementations. IBM's hardware likewise runs a lot of Windows.

One other reason IBM is downplaying the Workplace vs. Office rivalry at least in public could be fear of head-to-head comparison, according to one long-time integrator who works with both vendors. "They don't want the product to be hard-core evaluated against Office. I don't think IBM wants it to stand side by side."