News

Gartner: “Reasonable probability” Oracle will take over PeopleSoft

• By Rich Seeley
• June 7, 2003

Oracle has taken a run at a major enterprise application software provider. Is its move at PeopleSoft a sniper attack or a genuine attack? There is “a reasonable probability” that Oracle will be successful in taking over PeopleSoft, said Betsy Burton, an analyst who closely follows Oracle at the Stamford, Conn.-based consulting firm Gartner Inc.

Whether the deal goes through or not, it is likely to have an immediate negative impact on PeopleSoft and its customers, she said. Since Oracle’s plan is to migrate PeopleSoft customers to Oracle, the takeover announcement is likely to have a chilling effect on new PeopleSoft sales since customers will be skeptical of purchasing software that may be phased out, the analyst said. Meanwhile, existing PeopleSoft customers are left to wonder where they stand in the hostile takeover battle between the two vendors, Burton added.

On the plus side, Burton said Oracle does have a history of successfully migrating customers of the companies it acquires into adopting its products.

Overall, Gartner views the Oracle bid as having more to do with market share than products, the analyst said.

“This is about market control, rather than products,” Burton said. If the Oracle takeover goes through, it will add to the firm's market share in business applications, she explained.

But the risk for Oracle if the takeover bid falters is that other software giants such as IBM and Microsoft may now see a similar opportunity to gain market control through the purchase of PeopleSoft, she said. For its part, IBM has stayed clear of purchasing applications houses in recent years, preferring to partner with these players.

In its larger view of the software industry, the Oracle takeover plan for PeopleSoft, as well as PeopleSoft’s planned acquisition of J.D. Edwards -- which seemed to trigger this latest Oracle foray -- are part of an industry trend toward consolidation that Gartner has been forecasting, Burton said.

That trend has its upside and downside for customers, she explained. The positive impact, in Gartner’s view, will be a broader technology offering from a single large vendor. The potential negative factor is that IT departments may become locked into that vendor’s architecture.