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Oracle to buy PeopleSoft; what's in it for the customer?

UPDATED: The battle for PeopleSoft is over and Oracle has won.

Now the question becomes: How will Oracle's pending $10.3 billion acquisition of PeopleSoft affect both companies' customers?

One customer who has experience with products from both vendors calls Oracle lucky. "I think [Oracle is] very fortunate in being able to take over a competitor with a superior product and a reputation for customer service," Gary Patrick, a programmer/developer in northern Virginia, said in an e-mail to ADT. "If Oracle has any business sense, they will take the better product and run with it, rather than squash it ... PeopleSoft deserves better."

Meanwhile, Rick Fleeman, a software design manager and PeopleSoft developer at International Coal Group, Inc., based in Ashland, Ky., hopes Oracle will improve their product support.

“We have been nervous for months as news broke about the potential merger of PeopleSoft and Oracle,” Fleeman said. “Our hopes would be that Oracle would take on the PeopleSoft model of support and software development. However, previous experience with Oracle products makes us fear they will tend to make the product cumbersome to deal with and require much more support.”

In a statement directed at PeopleSoft customers that Oracle posted on its Web site Monday, the company said it will extend support for PeopleSoft’s’ product line and will not force its customers to migrate.

“We expect PeopleSoft customers to experience a higher level of service with one-stop support for applications, databases, and other technologies from a stronger vendor under one roof,” the statement read.

Meanwhile, one analyst hailed the deal, saying it helps customers of both companies.

"This is good news for the industry in general, and both companies" clients in particular, that this is now over," said Philip Carnelley, research director at Ovum Ltd., an analyst and consulting company. "PeopleSoft's customers had been suffering from uncertainty over future directions. At least now they'll get some certainty."

Carnelley said the deal is also good for the ERP market.

"A stronger, equivalent competitor to SAP - even if it'll take some time to emerge properly - will be good for the industry and future buyers."

Tony Baer, an ADT columnist and IT analyst, called the acquisition "pretty inevitable," given the many vendors in the ERP market. But Baer says it will take time before PeopleSoft customers notice any changes.

"In the short run, don't expect a vast sea of PeopleSoft refugees" from among its nearly 13,000 customers, Baer says. "ERP systems just can't be swapped in and out at will; the market therefore moves at a glacial pace. It's also costly to do a migration.

As for what Oracle might do with PeopleSoft's products, Baer says Oracle can't afford to pull the plug on PeopleSoft 9, which is in development, but expects that the J.D. Edwards properties that PeopleSoft bought in 2003, just before Oracle announced its bid to buy PeopleSoft, will likely be spun off.

The announcement of the deal comes in the same week both companies were scheduled to go before a Delaware court. The court would have been asked to rule on the legality of PeopleSoft's "poison pill" defense against an Oracle takeover. Last month, more than 60% of PeopleSoft shareholders had agreed to tender their shares to Oracle, and early today, PeopleSoft's board approved a buyout at $26.50 a share, which Oracle says is good through Dec. 28. Oracle's previous offer in its 18-month-long takeover bid had been $24; its initial offer was $16 per share.

Oracle said it expects the deal to become final next month.

Announcement of the deal comes on the same day Oracle released financial results from its most recent quarter. Oracle President Larry Ellison said the results marked a "great quarter," highlighted by a 57 percent growth in the company's applications business.

"This merger gives Oracle even more scale and momentum," and will make the applications business stronger, Ellison said in a statement.

Last week, at Oracle OpenWorld, the company's annual user conference, Ellison sought to ease concerns about how his company might treat PeopleSoft customers if Oracle succeeds in acquiring it. "We're going to over-support the PeopleSoft customers," he said. "We intend to finish PeopleSoft 9, and we're going to do as good a job on that as we know how."

Ellison did concede that PeopleSoft 9 would be the last PeopleSoft product Oracle would bring to market, but he promised to build a "successor product" to both PeopleSoft and Oracle. Ellison said Oracle would produce a "functionally merged product," which seemed to contradict an earlier comment by company president Charles Phillips that Oracle would never merge the PeopleSoft and Oracle code bases, providing customers with "two separate applications tracks."

Ellison spoke about the PeopleSoft acquisition last week as though it were a done deal, anticipating a successful merger with characteristic bravado: "We're going to invest more in the applications than Oracle or PeopleSoft could have done alone," he said. "We're going to give SAP a run for their money in this business. To do that, we need more customers and more engineers."

ADT Correspondent John K. Waters contributed to this story.

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