The Flies In The Ointment Of The Proposed Oracle-Peoplesoft Merger
So, too, it will be with Oracle's attempt to buy PeopleSoft for $5.1 billion,a deal that has huge implications for IBM, Hewlett-Packard, Dell Computer, Siebel Systems, BEA Systems, Microsoft, SAP, J.D. Edwards and, of course, all of their solution provider and integrator partners.
The most obvious issue is what would become of J.D. Edwards should Oracle consummate the deal with PeopleSoft. The company may no longer be a viable concern because management has signaled its intention to sell, putting in doubt the value of investing in J.D. Edwards applications.
Less obvious is the impact on IBM. J.D. Edwards is one of IBM's premier midrange partners. If J.D. Edwards becomes a lame duck in the market, a whole host of companies ranging from Microsoft to SAP to Best Software are going to try to convert a worried base of J.D. Edwards customers. And with that conversion comes the probability that those same customers will move away from the infrastructure underneath the J.D. Edwards systems, which happens to run on a lot of old AS/400 systems now known as IBM's iSeries systems.
Oracle's move to acquire PeopleSoft is a double stick in the eye for IBM because IBM also just reached a deal with PeopleSoft under which PeopleSoft would invest in deploying its applications on Linux running on IBM platforms. This was probably the deal that got Oracle Chairman and CEO Larry Ellison thinking about buying PeopleSoft, because it meant that a lot of PeopleSoft customers might abandon Oracle databases and middleware in favor of IBM offerings. In hindsight, J.D. Edwards may be just an incidental casualty in the war between Oracle and IBM.
Two other vendors watching this battle with great interest are Hewlett-Packard and Dell. Both probably have more to gain than lose should Oracle buy PeopleSoft because Oracle has reasons to steer customers away from IBM. Dell, in particular, has significantly strengthened its ties to Oracle in recent months.
On the polar opposite of that view are Siebel and BEA. Siebel now needs to combat the widely held perception that it's only a matter of time before it's acquired in this market of consolidation. BEA, meanwhile, must worry about PeopleSoft customers being pushed away from its application server technology. PeopleSoft's alliance with IBM has already hurt BEA, but a merger between Oracle and PeopleSoft would be a major hindrance to the company.
Somewhere in the middle of the spectrum are SAP and Microsoft. Neither company necessarily relishes the idea that Oracle could be a stronger player in the applications space, but at the same time the confusion in the market represents a short-term boon in terms of creating an opportunity to recruit PeopleSoft and J.D. Edwards customers.
All of the major public and hidden stakeholders in this drama have yet to make their full intentions known. But given what's at stake for everyone involved, this may turn out to be a much messier affair than was HP's merger with Compaq. And whatever finally does happen, the one unavoidable truth is that an Oracle acquisition would most certainly slow the current economic recovery in the IT space, which unfortunately may mean that solution providers ultimately will pay the highest price of all.
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