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At PeopleSoft’s Connect 2004 user conference, CEO Craig Conway claimed that his company and IBM will jointly spend $1 billion in a development alliance to integrate PeopleSoft ERP (enterprise resource planning) applications with IBM’s WebSphere middleware.

John Pallatto, Enterprise Applications Center editor, interviewed Buell Duncan, IBM’s general manager of ISV and developer relations, about the significance of this alliance to both companies.

PeopleSoft has described this as the most significant enterprise applications alliance in the history of the two companies. What makes it so?

I think the sheer size and the impact of PeopleSoft’s business in the market as an application provider second only to SAP. And if you look at the breadth and depth of the commitment on PeopleSoft’s part, it makes this a very significant agreement in the market for both companies.

Read more here about the IBM-PeopleSoft deal.

Why is it is going to cost as much as $1 billion to integrate PeopleSoft applications with WebSphere? Is that really an accurate and fair estimate?

I believe that was an estimate that [PeopleSoft CEO] Craig Conway discussed in the press conference. So, I wouldn’t be in a position to give you an exact dollar amount. I would tell you that, put in the context of over the five years of the agreement, IBM will invest the significant technical resources in the hundreds really dedicated to this effort to work side by side with the application programmers at PeopleSoft.

We will also increase the amount of go-to-market activities that we do from a marketing standpoint to generate leads and demand as we do with other partners. But again, the sheer size of PeopleSoft’s business and the breadth of their commitment to IBM middleware make this a very positive step forward for both companies.

How is this different from the many software alliances that IBM establishes every year?

You bring up a very good point. Of course, we are not in the applications business, and we are very committed to partnering with companies. It’s not a matter of just a few partnerships. It’s not even about dozens. But literally thousands of companies that we work with that embrace open standards—those companies that want to build those applications and deliver them with IBM middleware and IBM e-server offerings.

What makes this one different is the size and the number of end-users that it will ultimately reach. I want to be very clear: What is exciting is the amount of feedback that we have gotten from the market from other IBM partners who view this as a very positive announcement, and from other partners who use other middleware infrastructure from some of our competitors who are saying they also would like to talk to IBM about similar type of agreement.

And of course, that is exactly what we would like to do because we believe in the importance of having many partners to give us the broadest reach to the marketplace.

How do IBM and its customers benefit from this particular alliance?

There is no question that the customer feedback has been strong, and it has been strong because this allows PeopleSoft to do that they do best, and that is building world-class, industry-specific applications. And it allows us to [focus] on what we do best, and that is building the infrastructure that really has become the industry leader.

You know WebSphere is the market share leader today, and I think our customers have the confidence to know that as we are teaming up more closely to deliver these solutions together, this is real benefit to them.

Next Page: IBM as PeopleSoft’s white knight?

Do you have any estimate of the number of IBM developers that will be assigned to this project?

We have thousands of developers in the IBM company. There is no question that much of the work that many of them do will be leveraged into this relationship. But more specifically, it is fair to say that we will dedicate several hundred developers to work on this initiative in the coming years.

Some commentators have suggested that IBM is standing in the background as a white knight to help PeopleSoft fend off Oracle’s hostile buyout bid. How can that be if IBM isn’t making a direct investment in PeopleSoft?

IBM is not in the applications business. We don’t have any intention of getting into the applications business. We are in the partnering business with world-class leaders like PeopleSoft. So, I want to be perfectly clear that this is a very important agreement that will give a very positive impact to our customers and to both of our companies.

This is also the type of agreement that we are working and frankly will do with other companies.

To read more about IBM’s middleware strategy, click here.

How long have IBM and PeopleSoft discussed this alliance?

Well over a year. For those who would try to tie this to some type of reaction to the Oracle-PeopleSoft situation, that frankly would be incorrect.

Looking at the PeopleSoft side, how would this help the company in terms of broadening the reach of PeopleSoft applications?

There are three very clear benefits here to PeopleSoft and to other partners that we would do a similar arrangement with. The first is it allows them to focus on the application solutions themselves and not to having to build middleware infrastructure.

The second is that through partnering with a company like IBM—which is not in the applications business, who does not compete with them—they can broaden their reach to the market.

Click here to read about Conway’s comments about Oracle in his Connect keynote.

And thirdly, I think our business is more and more recognized as really in a leadership position in terms of our market share, with DB2 and our WebSphere offerings as examples. That brings real benefits and additional strength to the PeopleSoft offerings.

Why is it really necessary to build the Business Process Interoperability lab?

I think it is a clear indication of just how serious both companies are about working closely together to gain the maximum efficiency out of our efforts. The fact that we will not only work with IBM software developers and PeopleSoft developers side by side to deliver current offerings, but also to work together on requirements for future market needs.

This interoperability lab really provides a structure to bring our two teams very closely together.

How will the two companies jointly market and deliver the solutions that are produced as a result of this alliance?

The IBM sales force will not be paid for selling PeopleSoft applications—again as part of our strategy not to be in the applications business. However, we will make significant investment for demand-generation effort such as co-marketing activities—lead-generation activities. We will work closely together … to help support our mutual customers.

How soon will work actually start on this alliance?

Work has already started. We would expect to see the first offerings in the market in the first quarter of 2005, specially with solutions that will be available to the banking, the insurance and the telecommunications industries.

Do you think that this alliance will help PeopleSoft competitively in this market, with SAP being as strong as it is and with PeopleSoft being pressured as it is by Oracle and others?

SAP is and will continue to be a very important partner of IBM. In fact, they are one of IBM’s largest partners in the applications space. There is no question, though, that this will be a win-win for our customers with PeopleSoft in the ability to deliver a world-class middleware infrastructure to be even more tightly connected than before to the IBM sales and services organization, and I think we will see benefits all the way around.

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