A parade of witnesses Wednesday said an Oracle buyout of PeopleSoft would leave them and market competition in a "sorry state."SAN FRANCISCO—At the ongoing trial here, the Department of Justice on Wednesday marched PeopleSoft customers and systems integrators into the witness box. The prosecutors hoped to demonstrate how the market for enterprise application software would lose its competitive vibrancy if Oracle was allowed to carry out its hostile buyout of PeopleSoft.
Leading off in the third day of the DOJ's antitrust trial against Oracle was Nancy Thomas, a senior executive at IBM Global Services who testified that her organization worked almost entirely with Oracle Corp., PeopleSoft Inc. and SAP AG to provide enterprise human resources management and financial management systems in client engagements.
IBM Global Services has between 150 and 200 employees dedicated to providing development, integration and deployment services for the software from each of these companies, Thomas testified.
She also said her group was not seeing large-scale deployments of other enterprise applications from competing companies such as Lawson Software Inc.
But Oracle attorney Greg Lindstrom, in his cross-examination of Thomas, showed that IBM Global Services was also working with a wider range of human resources, financial management and financial analysis software packages than just those by PeopleSoft, Oracle and SAP.
Besides Lawson, IBM Global Services has also worked with companies such as Cognos Inc., Hyperion Solutions Corp. Informatica Corp. and Business Objects SA. While Thomas agreed that was true, she said these were business intelligence or financial analysis point solutions that were either specified by clients or were part of a larger project involving SAP, PeopleSoft or Oracle.
Lindstrom also asked Thomas whether IBM's public opposition to the Oracle-PeopleSoft buyout, and the prospect that IBM would lose its lucrative PeopleSoft consulting business if the buyout goes through, had any influence on her view of PeopleSoft's importance in the enterprise software market.
Thomas replied that she wasn't aware of any public position IBM may have taken regarding the buyout nor had she considered what the implications of an Oracle buyout would be to IBM's consulting business.
On Tuesday at the trial, the DOJ presented its "Big Three" argument of the enterprise apps market and said the deal would leave it with only two players. Click here to read more.
The DOJ also presented a videotaped deposition by Paul Ciandrini, former senior vice president of North American application sales at Oracle, who testified about the sales negotiation process in competition with PeopleSoft.
His testimony focused on a sales competition to sell software to Hallmark Corp., which was won by Oracle in November 2003.
Ciandrini said the competition came down to prolonged and "painful" price negotiations after it was apparent that feature and function differentiation were no longer a factor in the talks.
It became apparent that PeopleSoft was prepared "to cut the price as a point of differentiation because they couldn't find any other points of differentiation," Ciandrini said. PeopleSoft sales executives "realized they were losing, and they cut the price to nothing," he said. Oracle kept pace with the cuts to win the deal.
Price quotes that started at about $2 million were cut to $1.2 million before Oracle won the Hallmark deal.
DOJ attorneys presented this testimony to show the moderating effect that an independent PeopleSoft would have on enterprise software prices—an effect that would disappear if the number of companies selling top-of-the-line enterprise resources software was reduced to two from the three companies currently competing.
Next Page: Verizon "would be very nervous" about an Oracle win.
Meanwhile, Verizon Communications Corp. was so alarmed by the news of Oracle's hostile bid for PeopleSoft that it decided to renew its licenses for SAP's human resources and payroll management software even though it was getting ready to complete a major project to run these applications entirely on PeopleSoft.
Laurette Bradley, Verizon's senior vice president of information technology, testified Wednesday that her company decided it needed the SAP licenses as a hedge against a successful Oracle bid.
Verizon, she said, "would be very nervous" if Oracle gained control of the PeopleSoft code, given Oracle's early public statements that it would migrate customers to Oracle applications rather than support the PeopleSoft applications.
Verizon was formed mainly through the merger of GTE and Bell Atlantic Corp. The former GTE organization currently runs PeopleSoft applications, and the Bell Atlantic group runs SAP. But in about two weeks, Verizon will switch over to running just PeopleSoft for human resources and payroll throughout the organization.
The company is still running SAP financial management applications but is considering a shift to PeopleSoft for this application as well, Bradley said. The decision to make the shift will depend in a large part on the results of the Oracle antitrust trial, she added.
Under cross-examination, Bradley said that even Oracle's more recent statements that it would support the PeopleSoft code for at least 10 years provide little comfort. "We would be in the sorry state of having to go to Oracle to see what they could offer us," she said.
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