What Analysts Have To Say About Oracle's Bid For PeopleSoftWhat Analysts Have To Say About Oracle's Bid For PeopleSoft

Here's the best of analysts' reactions to Oracle's hostile takeover bid for PeopleSoft on Friday.

AMR Research
John Bermudez, Nigel Montgomery, Jim Shepherd, Bruce Richardson, and Randy Weston of AMR Research released an analytical report on the deal Friday morning.

AMR Research points out that the $5.1 billion proposed deal should make SAP very happy. Larry Ellison's plan to eventually transfer all PeopleSoft customers to the Oracle platform puts all of PeopleSoft's customers "back in play", as the migration factor isn't nearly as painless as Ellison makes it sound.

Skepticism is warranted, AMR's report says. "It's a deal that has all the signs of a political move designed to derail PeopleSoft's plans to buy J.D. Edwards, moving it ahead of Oracle in the enterprise application race," it says, though acknowledging that Ellison stated nearly the opposite. "This is clearly a reaction to the J.D. Edwards acquisition and is an effort to either kill the deal or wound PeopleSoft and hurt it competitively in the short to mid-term."

A tactic PeopleSoft might want to try to fend off Oracle: pay cash instead of stock for J.D. Edwards. "This would take cash away from PeopleSoft, making it less attractive to Oracle stockholders," the report says. "It will be very difficult for Oracle to pull this off if PeopleSoft doesn't want to do it. This isn't like P&G buying a new brand of shampoo that it can immediately run through its channel. There are no hard assets here."

AMR's stance is that Oracle's bid was too low, but the company has nothing to lose in trying. If the deal goes through, Oracle will gain PeopleSoft's customers and products at a great price. If it doesn't, Oracle will have created enough mayhem to throw PeopleSoft's acquisition of J.D. Edwards off track and will have successfully distracted the media and investors. A word of caution to Oracle, however "Oracle will have a lot of work to do to persuade PeopleSoft users to stick around after the dust settles, particularly after showing them so much disdain during the bid."

Meta Group
On a conference call, Meta Group analysts each gave their opinion of the deal based on their areas of coverage Friday afternoon.

John Van Decker, senior program director covering Oracle, says for Oracle, this is an acquisition of customers. The company basically doubles in size, but there's a significant overlap in the functionality of all the products. Oracle customers stand to benefit in areas where PeopleSoft has built more in-depth products, like enterprise performance management and supply-chain management.

Ultimately, the deal will have the most impact on PeopleSoft customers. Oracle says it will continue to support PeopleSoft customers but wouldn't sell new PeopleSoft applications, and will eventually migrate PeopleSoft customers to the Oracle E-business Suite. "I think we know differently in terms of PeopleSoft migrations that this won't be as easy [as Oracle is saying]," Van Decker says.

The process, meanwhile, could close the door on innovation at these companies. "Most of Oracle's efforts will be focused on integration and moving PeopleSoft customers over," he says. "We're not going to see major upgrades to architecture and technology and this will present some opportunities for some of the best-of-breed vendors in areas like business-performance management, vendors like Hyperion."

Ron Hanscome, senior program director covering PeopleSoft, says that to date, about half of PeopleSoft's customer base has transitioned to PeopleSoft 8, and 25% more have upgrade projects under way. "Version 7 to Version 8 of PeopleSoft is complicated because of the technology changes," he says. "If you were to add tech change as well as vendor change, that is a considerable effort around migration."

Hanscome cautions PeopleSoft customers to look for case studies on what the upgrade to Oracle would cost. "We would strongly caution an amount of hesitancy about the ease of this migration," he says.

The future for PeopleSoft product lines isn't so bright, and customers might not be happy. Oracle has indicated that it would take the best of PeopleSoft resources and Oracle resources and make the next-generation suite of Enterprise Applications. That would mean the PeopleSoft 8 product line would go into maintenance mode. "Clearly, those making the effort of getting to the 8 platform today would now be facing a migration to the new Ebiz suite, so the impact is significant whether or not you're a 7 or 8 customer," says Hanscome.

Hanscome's advice to users: "We would advise customers undergoing upgrade projects to wait and asses the true intent and nature of the takeover bid before swinging into upgrade projects with full vigor."

Elizabeth Shahnam Roche, VP covering CRM, says that in terms of CRM functionality, there's significant overlap between Oracle and PeopleSoft. However, Oracle's functionality is less mature than PeopleSoft's, she says, and PeopleSoft's CRM components are more commercially viable. That's largely because PeopleSoft acquired Vantive and had been selling that product to new clients, while Oracle typically sells CRM to its installed base. Another differentiator: Oracle CRM is database driven, while PeopleSoft's is enterprise-apps driven.

However, as in all areas, a transition between the two vendors won't be as easy as proposed. "Exacerbating the problem here is that CRM is highly customized," says Shahnam Roche, who says there has yet to be an out-of-the-box CRM solution, though the vendors are getting closer with vertical market offerings. "There's no upgrade script that can be written to automate the upgrade of all these handcrafted components."

Adding to the complexity is that CRM isn't just a technology issue but also a business issue, so there are many other issues involved in an acquisition like this. Training of users is key, especially call-center agents, she says. "And what about salespeople? It's difficult enough to get them to adopt a tech and now you want to change it?"

Another question she asks is how customers will be affected if the company they do business with is going through a major CRM transition.

It's interesting to think of what it does to the CRM space. "If I'm Siebel, I'm jumping up and down right now because this is good news for the standalone CRM vendors," says Shahnam Roche. "It calls into question architecting CRM components around an enterprise backbone when the backbone players are consolidating."

Shahnam Roche's warning echoes her colleagues: "Any PeopleSoft customer considering any CRM upgrade really should take a step back and re-evaluate alternatives so you can get a sense of whether your enterprise architecture will be going through a change."

Frost & Sullivan
Andrew Ball, industry analyst for enterprise applications at Frost & Sullivan, says it's inconceivable that PeopleSoft would agree to Oracle's bid, citing the low bid offer and the general arrogance of Larry Ellison in presenting the deal. "Oracle's description of its willingness to offer customers of PeopleSoft 7 a free upgrade to move to Oracle's E-business suite will send a shudder down the spine of everyone at PeopleSoft," Ball says. "Although Oracle says it's interested in the J.D. Edwards deal, in reality Oracle is asking shareholders to choose between its vision and the vision of PeopleSoft's management team."

On Ellison's argument that consolidation in the enterprise applications industry is inevitable, Ball says that this deal would be taking things too far. "SAP isn't dominant in the critical North American enterprise-application market and Microsoft is focusing only on small- and medium-sized enterprises," he writes.

Ball's final note: "The only lasting consequence may be the addition of an extra edge to the competition between Oracle and PeopleSoft."