How Well Will Oracle Manage PeopleSoft's Customer Relationships?

The 18-month drama that was Oracle's hostile takeover bid for PeopleSoft has come to a close, with Larry Ellison's software empire victorious. Facing a lack of investor confidence, PeopleSoft's board agreed to a $10.3 billion purchase of the company earlier this week. While the struggle between ideologies and executives may have ended, the excitement appears to be far from over--especially within the CRM product lines. "It's pretty clear CRM wasn't the driver of the deal," says Ian Jacobs, CRM principal analyst at Current Analysis. Yet CRM applications may pose some of the greatest challenges to Oracle as it attempts to integrate and rationalize the PeopleSoft product mix. "There are still people running Vantive [acquired by PeopleSoft] and YouCentric [acquired by J.D. Edwards, in turn acquired by PeopleSoft], so we're not talking about integrating two products, we're talking about integrating four, at some point, several years hence. Oracle's got a CRM mess ahead if it really plans on integrating all of these into a cohesive product set." Aside from the clear gains of eliminating a competitor, Oracle may be able to make a coordinated play for SMB accounts, now that it has gained a channel into smaller businesses through the J.D. Edwards resources PeopleSoft purchased last year. "Oracle has said it was going to go after the SME marketplace, but never really did much with it. PeopleSoft made a more serious play by buying J.D. Edwards," Jacobs says. Roger Harris, general manager of MSS Technologies, a PeopleSoft/J.D. Edwards integrator, is cautiously optimistic. "It's very positive to us that we're seeing Oracle very interested in the reseller channel again, even before this buyout," he says. "There is some nervousness out there in the marketplace [among customers].... We need a little bit of help saying these [PeopleSoft/J.D. Edwards] products are great, and we're going forward with them." Officially Oracle has done an about-face on the fate of PeopleSoft's product mix, which had been slated to be put in a drawer. Oracle has committed to full version upgrades of both the PeopleSoft and J.D. Edwards core product suites. "PeopleSoft 9 will be PeopleSoft technologies, but we will take some of the features you see there and move them to the Oracle product line," said Charles Phillips, Oracle president, on a conference call shortly after the acquisition was confirmed. "We want to make it as easy to migrate as possible." In the end, Oracle paid considerably more for PeopleSoft than it originally had planned, and instead of burying the product line in favor of its own, Oracle is committed to develop and support it for some time. The move is largely forced by PeopleSoft's aggressive contract insurance program, which promised more than 100 percent payback if the PeopleSoft product lines were terminated. "They're getting a company that's been somewhat damaged over the past year-and-a-half by the bid itself, and are forced to support it," says Donovan Gow, vice president of equity research at American Technology Research. "It would be a huge liability for Oracle [to pay the damages], and they want the maintenance stream that's coming off of PeopleSoft." Other questions include the future of a broad partnership announced between IBM and PeopleSoft--Phillips was officially hazy on the details of the arrangement and how Oracle would treat it, except to say that Oracle believes its application server technology is superior to IBM's. "IBM and Oracle are not great partners--they work together when they need to, and that's it," Jacobs says. "Hostile takeovers in the software industry didn't happen before... [at least] not on such a grand scale," Jacobs says. Siebel has often been considered a second choice to satisfy Oracle's acquisitive thirst. "If Oracle can succeed through sheer persistence, why not?" Related articles: PeopleSoft Warming To Oracle's Offer? PeopleSoft Says ''No'' Again

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