ERP merger outcome hard to pick: analyst

Gartner Australia analyst Kristian Steenstrup says the circumstances surrounding Oracle's bid for PeopleSoft are "extremely fluid", have yet to be fully announced and offer up a number of different scenarios.

Gartner Australia analyst Kristian Steenstrup (pictured) says the circumstances surrounding Oracle’s bid for PeopleSoft are “extremely fluid”, have yet to be fully announced and offer up a number of different scenarios.

The upshot is that “we don’t know what the outcome will be”, he says.

While he won’t comment on the likelihood of Oracle succeeding, he says the most notable consequence, should its bid succeed, is that Oracle will continue to support existing PeopleSoft customers but ultimately encourage upgrades to the Oracle e-business suite.

“It would facilitate that by offering fixed-price and simplified-method conversions, and would look to sell PeopleSoft product but not invest further in PeopleSoft product per se.”

When a software vendor attempts to acquire another, there are generally two reasons for it, Steenstrup says.

“They either acquire the product in order to add it to their own and support it through their existing sales channel, or else they seek to acquire the [other vendor’s] customer base and, in their own time, discard the product and migrate the customers to a single product line.”

Oracle’s bid for PeopleSoft is a case of the latter, whereas PeopleSoft’s bid for JD Edwards is a case of the former, he says.

“The Oracle approach says the benefits to customers is that by contracting the industry and putting more development into a smaller scope of product means you’re applying more effort to a smaller surface area of product.”

The PeopleSoft view is that doing so is bad for customers, because it reduces their choice, he says.

If Oracle’s bid fails, it will nonetheless have revealed a lot about the ERP market, Steenstrup says.

“Oracle has shown itself to want to acquire a company, as has PeopleSoft, and JD Edwards has shown itself to want to be acquired.”

While Gartner has predicted a 50% reduction in the number of ERP vendors by 2007, that doesn’t mean there’ll be a corresponding reduction in the number of applications.

“There are 4000 customers of JDE’s World around the world and they won’t go away. In software, unlike in a lot of other industries, products have a life outside their owner.”

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