According to an interview with Oracle chairman Jeff Henley, the deal will close the gap with German business applications rival SAP. [We’re] in a position to overtake SAP as a leader in business management software, Henley was reported to have said in an interview with Spanish newspaper Expansion.
Henley added that the purchase of PeopleSoft will help Oracle gain market share and more customers, and will put the company in a position very close to SAP.
Analysts believe it is likely that the merged Oracle-PeopleSoft entity will initially try to extend its reach into the SMB (small-medium-sized business) market, an area which SAP started to address more seriously this year.
More interesting is the impact the merger has on the largest software maker in the world, Microsoft. According to several analyst viewpoints, the acquisition of PeopleSoft puts Microsoft in an awkward position because PeopleSoft is one of its biggest application partners.
While Oracle and Microsoft do cooperate technically to some extent, they also slug it out toe-to-toe in the database market. Microsoft also confirmed its designs on the business applications segment in 2001 and 2002 following its acquisitions of Great Plains Software and Navision A/S and the subsequent formation of its Business Solutions division. This business unit which now develops software for managing back-office functions like CRM, though aimed largely at SMBs.
Yet there are many installed PeopleSoft enterprise application sites that currently run on Microsoft’s SQL Server infrastructure.
It remains to be seen if Oracle’s ownership will burn the existing bridges built between PeopleSoft and Microsoft. Given the number of joint PeopleSoft-Microsoft customers this looks unlikely to happen in the short-term at least. But Oracle is certainly not going to make it easy for both companies to partner closely given its own database interests.
Robbing Microsoft of a major partner also creates a much bigger competitor. Microsoft is well aware of this, which is perhaps one reason why Bill Gates considered a merger with SAP last year. Ironically the revelation surfaced in an email, presented as evidence during the US Department of Justice’s challenge to the Oracle-PeopleSoft merger deal.
While a Microsoft-SAP merger did not materialize, Microsoft is expected to be one of the big four business software players left standing in the market. The others are Oracle, SAP and IBM Corp.
