PeopleSoft users will need reassurance, but damage may be done

Expect PeopleSoft to try to assure its customers that the company will continue to fight the Oracle takeover, but some have already put off plans to expand.

PeopleSoft Inc. customers are going to need reassurance that the ERP vendor will continue to fight Oracle Corp.'s hostile takeover bid, despite today's decision by U.S. District Court Judge Vaughn Walker allowing Oracle to proceed.

And that's just what they're going to get, predicts Stamford, Conn.-based Gartner Inc.

"We're going to see a consistent stance that although they are disappointed in the ruling, they continue to believe it's below market value and they will continue to fight," said Lee Geishecker, Gartner research vice president.

PeopleSoft stock surged in after-hours trading, reaching $20.50 after closing at $17.95.

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Nervous customers may take some comfort in that the ruling does not mean the takeover by Redwood Shores, Calif.-based Oracle will go forward unchecked.

Yet to weigh in is the European Commission, which announced its intentions to launch an investigation into the takeover attempt in November and put that on hold as the U.S. Justice Department proceeded with its case. Additionally, there is the "poison pill" that is the PeopleSoft customer assurance plan. The plan would refund new PeopleSoft customers up to three times the cost of their license fees should PeopleSoft be acquired and its product line discontinued.

Additionally, in a statement issued Wednesday, PeopleSoft noted that the DOJ has 60 days to decide whether to appeal the decision to the Ninth Circuit Court of Appeals.

That may be scant comfort to Vahid Taj, senior business analyst with San Diego-based Pyxis Corp., a medical information systems company. Pyxis went live with PeopleSoft CRM in November 2002 and has been holding off on extending PeopleSoft applications to other departments ever since Oracle announced its intentions last summer.

From our standpoint here, for the most part the damage has already been done.
Vahid Taj
Senior business analyst Pyxis Corp

"From our standpoint here, for the most part the damage has already been done," Taj said.

Pyxis runs Oracle in its back office and was moving toward PeopleSoft in the front office before executives got spooked by the takeover attempt, Taj said.

"In our vendor analysis, we did look at Oracle. We very much wanted Oracle to work. I admire Larry Ellison for trying to build it from scratch, but it didn't," he said.

The takeover has been a "dark cloud" hanging over Pyxis' technology decisions and the company has tried to avoid customization because of it, he added.

The decision also has interesting implications for users of JD Edwards and Co. technology. PeopleSoft announced its merger with JD Edwards June 2, 2003, four days before Oracle announced its hostile takeover bid of PeopleSoft. The PeopleSoft-JD Edwards merger was completed July 18.

After having focused primarily on PeopleSoft's enterprise customers, Oracle is now starting to address JD Edwards customers. PeopleSoft World, former JD Edwards technology based on IBM's iSeries, and PeopleSoft One customers, primarily the midmarket users, are starting to hear more about how Oracle will support them, Geishecker said.

"If there is a dissatisfied group within the PeopleSoft customer base, it is the JD Edwards users," she said. "They're getting an opportunity to vent and be heard now with this publicity and the awareness."

Additionally, if Oracle were to go ahead with the takeover, it would need to forge some cooperation and gain support from IBM, Geishecker added.

Existing customers holding off upgrade decisions and waiting in maintenance mode should continue that approach, Gartner advises.

"If they're evaluating PeopleSoft CRM they need to determine their risk adversity," she said. "PeopleSoft hasn't been evaluated from short lists recently, but that might spike up. For existing customers, their product is going to get supported, the question is how."

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