Oracle & PeopleSoft: Still Work to Do

Oracle Corp. (Nasdaq: ORCL) will have to work hard if it is to keep its newly acquired PeopleSoft Inc. (Nasdaq: PSFT) customers, warns analyst firm The Yankee Group.

The Boston, Mass.-based company recently surveyed 192 PeopleSoft users to gauge their feelings on an acquisition that was one of the IT industrys biggest soap operas of recent years (see Oracle Takes Control of PeopleSoft and PeopleSoft Plot Thickens).

So, after Oracle supremo Larry Ellison fought a war of attrition to get his hands on them, are PeopleSoft users thrilled to be part of one, big, happy Oracle family?

Not really, according to the Yankee Group research.

Nearly half the respondents suggested they could well switch applications, with Service Level Agreements (SLAs) cited as a major concern by users, rather than product functionality.This is hardly surprising. PeopleSoft’s product set was already highly regarded (hence the acquisition); even Oracle’s own customers have been itching to get their hands on the Pleasanton, Calif. firm’s Enterprise Resource Planning (ERP) offerings (see Oracle Users Eye PeopleSoft ).

Services are something else altogether. A number of PeopleSoft users have already voiced their concerns to NDCF about issues such as long-term support (see Uneasy Days for PeopleSoft Users and PeopleSoft Posse Still Peeved).

Oracle has done a good job of maintaining existing agreements and extending them, says Sheryl Kingstone, Customer Relationship Management (CRM) program manager at Yankee Group. But the Redwood Shores, Calif., firm is still walking something of a tightrope, she adds: “If they don’t continue [that support] then they will be setting themselves up for defections."

Oracle has already outlined support for PeopleSoft’s enterprise and core J.D. Edwards families through at least 2013, and provided an estimated roadmap for other releases (see Oracle Shares PeopleSoft Plans).

The company also unveiled the grandiosely titled "Project Fusion," an architecture combining the best features of both companies' products. The first of these new applications will be available in 2007.But one area identified as a potential problem by Yankee Group relates to users running PeopleSoft’s J.D. Edwards product suite on IBM Corp.'s (NYSE: IBM) AS/400 platform, the workhorse midrange server that has been rebranded iSeries. For these users in particular, rising maintenance costs and dwindling service levels are a distinct possibility, Yankee Group warns.

That's because Oracle and IBM are still major competitors, prompting The Yankee Group to warn that AS/400 users could feel the strain during the next two years. This will either force them to implement an alternative ERP product or re-evaluate their entire platform, says the analyst firm.

All this upheaval could spell good news for rival vendors such as SAP AG (NYSE/Frankfurt: SAP), Siebel Systems Inc. (Nasdaq: SEBL), and Microsoft Corp. (Nasdaq: MSFT). German software giant SAP, for example, has already fluttered its eyelashes in the direction of any disgruntled PeopleSoft users (see SAP Sidles Up to PeopleSoft Users and SAP Offers Safe Passage).

Although Oracle still offers the most viable ERP alternative for many users, The Yankee Group warns that Ellison should nonetheless be prepared to mount a solid defensive strategy to retain customers.

Oracle did not respond to NDCF’s request for comment.— James Rogers, Site Editor, Next-Gen Data Center Forum