Oracle Trial: DaimlerChrysler Fears Costs from PeopleSoft Buyout

SAN FRANCISCO—DaimlerChrysler AG would likely have to spend $50 Million to $100 million to replace its PeopleSoft Inc. applications if Oracle is allowed to buyout the enterprise software company, a senior IT executive with the multinational auto maker testified Tuesday.

As in earlier testimony presented by senior executives from large corporations who are PeopleSoft customers, Michael Gorriz, DaimlerChrysler vice president of IT business systems, said his company has only three viable customers enterprise resource planning software, PeopleSoft, Oracle and SAP.

The Department of Justice is suing Oracle Corp. in U.S. District Court here to obtain a permanent injunction blocking Oracle’s hostile bid for PeopleSoft.

If Oracle buys out PeopleSoft, DaimlerChrysler will lose much of the negotiation leverage that it has with these software vendors, Gorriz said. The automaker is a major user of both SAP and PeopleSoft applications.

Click here about the concerns IBM and Verizon have about a PeopleSoft buyout.

It is in the midst of implementing a new $30 million PeopleSoft human resources management application to serve the company’s 100,000 employees in the United States. Like most large corporations, DaimlerChrysler is able to wring major discounts from its vendors by playing one off against the other, Gorriz conceded.

If the Oracle-PeopleSoft buyout goes through, DaimlerChrysler would likely be cut off from long-term maintenance upgrade for its existing PeopleSoft applications and would likely have to pay hefty prices if it decided to switch to SAP as a defensive measure, he suggested.

Furthermore Gorriz said he believed that without robust competition between the three companies, there will be less incentive for SAP and Oracle to rapidly enhance their products.

Under cross examination by Oracle attorney Tom Rosch, Gorriz agreed that DaimlerChrysler would face the same problems if PeopleSoft was bought out by another company or if it went bankrupt.

Click here to read about the judge’s efforts to nail down a clear definition of the enterprise application software market.

Rosch also questioned the reasons why DaimlerChrysler became a major PeopleSoft customer, citing evidence that there was a “friendship” or “personal relationship” between PeopleSoft President and CEO Craig Conway and Gorriz’ superior, Sue Unger, DaimlerChrysler CIO.

Gorriz responded that he didn’t know what Rosch meant by a “personal relationship” or whether there was any relationship between the two beyond a simple business acquaintance.

Rosch also asked whether Microsoft Corp., Lawson Software Inc. and Sage Group plc, along with PeopleSoft, Oracle and SAP had the “core functionality” that DaimlerChrysler expected to find in software that it might consider using. Gorriz conceded that the software did have the core functionality, but stuck to his testimony that only the three largest vendors provided the functionality that met DaimlerChrysler’s needs.

Still, Gorriz admitted that DaimlerChrysler also worked with other smaller software vendors, such as Hyperion Solutions Corp.’s financial analysis and consolidation software or Automated Data Processing Inc.’s payroll processing service. However, he said these companies provided specific business applications not the large scale enterprise human resources and financial management systems offered by PeopleSoft, Oracle and SAP.

Under questioning from Judge Vaughn Walker, Gorriz testified that the largest expense for its $30 million PeopleSoft implementation was the more than $25 million expense for consulting services to program and deploy the software. The remaining cost was for software licensing and new hardware to support the software installation.

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