Customers say they're happy that Oracle has finally hammered out a deal with PeopleSoft. But they say Oracle will have to do a lot more to win their confidence.Customers on Monday expressed relief more than dismay that Oracle Corp. had finally reached a definitive buyout agreement with PeopleSoft Inc., giving them hope that they will get reliable information about future product support.
PeopleSoft's fate was of particular concern to users of ERP (enterprise resource planning) software from J.D. Edwards & Co., which PeopleSoft acquired in June 2003 just before Oracle launched its offer to buy out PeopleSoft.
"All in all, I am happy the battle is over, and now I would like to know definitively what we are looking at long term from a product perspective," said Brighton, Colo.-based Alan VanNice, application manager for Adams County, Colo., which still runs J.D. Edwards ERP applications.
He noted that Oracle's story on PeopleSoft product support has changed dramatically since the company first announced that it wanted to buy PeopleSoft at an initial price of $16 per share at a total cost of $5 billion.
Oracle had to repeatedly raise the price before it could announce Monday that the two companies had reached agreement on a buyout for $26.50 per share, at a total cost of $10.3 billion.
Oracle executives initially said current versions of PeopleSoft and J.D. Edwards ERP software would be supported for as many as 10 years but not enhanced. VanNice recalled attending a customer briefing in which an Oracle executive said the company would set up a conversion center in Austin, Texas, to help customers migrate to Oracle applications.
Click here to read about why Wall Street is giving a thumbs-up to the Oracle-PeopleSoft deal.
VanNice on Monday cited news reports indicating that Oracle would release PeopleSoft 9 and J.D. Edwards upgrades over the next two years before it starts to work on a converged Oracle and PeopleSoft product that Oracle CEO Larry Ellison called "PeopleSoft 10."
VanNice said he still has a lot of questions about what the ultimate fate will be for J.D. Edwards and PeopleSoft applications. "Will we all migrate to Oracle applications one day?"
He also asked whether Oracle understands the "poor perception" that PeopleSoft customers have about the Oracle applications.
"In my opinion, Oracle has an uphill battle to turn happy PeopleSoft customers into happy Oracle customers," VanNice said. But he said he is prepared to keep an open mind. "I am ready to learn more. I hope they don't drag their feet anymore."
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Michael Osmonde, an IT systems analyst with Crane & Co. Inc., a Dalton, Mass., manufacturer of high-grade paper for stationery and U.S. currency, said he was surprised that Oracle's pursuit was so prolonged.
"When it was announced 18 months ago, I figured that it was just a matter of time before it happened anyway," Osmonde said. "Then I thought, if that's the case, should they be fighting it as hard as they did?" Osmonde said that while he understood the company was trying to get the best deal for shareholders and customers, it did keep customers in doubt for 18 months.
"It's good that it is finally that the deal will actually go through," so customers can find out what kind of product support they actually will get, he said. Whether it's good for the overall ERP marketplace remains to be seen, Osmonde added.
"If it turns out that [Oracle] won't enhance it a lot, ... then we will have to evaluate the situation and do what is best for the company," he said.
"Right now, I think we are pretty much in a holding pattern. The reputation that Oracle has [in terms of the quality of its own applications and its third-party product support] is not the greatest," he said, adding that Crane & Co. is "waiting to see" what Oracle does with the J.D. Edwards/PeopleSoft World ERP software it uses.
Whatever the new products and enhancements the merged companies introduce, customers are going to take their time about making significant changes to their ERP software installations, said Tony Baer, principal analyst at onStrategies, a software industry research group based in New York.
Click here to read about why SAP AG believes that the buyout gives it an opportunity to win over PeopleSoft customers who are not happy about the upgrade uncertainties.
"Switching an ERP system is not a trivial process—you are talking about the core business processes of your company," Baer said. Enterprises "are not going to chance it unless there is a sound business reason for doing do," regardless of the upgrade plans of the merged Oracle-PeopleSoft organization.
Nor does Baer expect to see a mass migration to SAP or some other competing product as a result of the merger. Customers typically feel that they spent so much time and money installing their ERP system that they don't want to repeat the process unless it is a business necessity, he said.
From Oracle's latest public statement, it looks like PeopleSoft customers will be able to go through two upgrade cycles before they face a decision on whether to move to a new product, Baer said.
"If the upgrade process is bumpy, then you might see some churn or some migration to SAP," he said. "But you are not going to see churn because some people don't like Larry Ellison," he said. The decision will be strictly business, not emotional, he said.
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