Oracle Announces Its PeopleSoft Integration Strategy

Analysis of News Events
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Last Tuesday, thousands of IT customers had their eyes glued on Oracle Corporation as it held a Webcast to announce its strategy for bringing PeopleSoft into its operations. To the relief of many, the software vendor pledged its long-term support for PeopleSoft's customers--including those who use the iSeries--on the middleware and servers that they currently use. At the same time, the company pointed the way toward a future solutions platform that will act as an upgrade path for all of its enterprise applications.

If there was one theme that Oracle stressed during the Webcast, it was that it will continue to support and enhance the applications it acquired at levels that meet or exceed the expectations of customers. To underline the point, the company committed itself to supporting PeopleSoft's three product lines on their existing middleware and servers through 2013. In addition, Oracle formally extended support for OneWorld XE and EnterpriseOne 8.0 until February 2007. The latter announcement comes as a huge relief to users, as PeopleSoft was going to end support for the two releases in a matter of weeks. Customers who contract with Oracle for support will likely pay annual fees amounting to 22% of their license costs.

Besides extending support for PeopleSoft's products, Oracle's executives turned many of their earlier musings about product enhancements into statements of direction. As expected, the software vendor pledged to complete PeopleSoft Enterprise 8.9 this year and then release Enterprise 9.0 in 2006. Similarly, the company intends to release all EnterpriseOne 8.11 modules by the end of this year and then ship EnterpriseOne 8.12 next year. In a surprise announcement, Oracle also committed to releasing "enhancement sets" for PeopleSoft World every 12 to 15 months. According to John Wookey, Oracle's Senior VP for Applications, "We're going to continue to do this through 2005, 2006, and beyond."

For IBM's iSeries customers, the good news in these pronouncements is that they should receive World and EnterpriseOne enhancements on their current databases and middleware. This will require Oracle to develop a good working relationship with IBM, and Oracle's executives noted this during the Webcast. For instance, Oracle President Charles Phillips mentioned that the vendor has been working to get closer to IBM ever since it launched the PeopleSoft takeover attempt. Now that the merger is complete, Phillips expects that "Our relationship will hopefully get a lot better going forward."

While Oracle may enhance World and EnterpriseOne on IBM products for several more years, it will not do so indefinitely. Instead, the vendor is beginning work on a modular application suite that will integrate Oracle's diverse application suites on its own database, middleware, and development tools. The effort, known as Project Fusion, will combine the best features of PeopleSoft and Oracle applications within a Java-based, service-oriented architecture. According to Ellison, who will dedicate much of his time to Fusion, some of the new offering's components should ship during 2007, with the full suite shipping during 2008. After that, customers will have plenty of time to upgrade to the suite and its underlying Oracle middleware. As Ellison quipped during the Webcast, "We certainly would be thrilled if you choose Oracle's database and middleware, but we will continue to support IBM's database and middleware until at least 2013, unless IBM goes out of business before then. But for now they look pretty safe."

SAP Strikes Back

While IBM may look safe to Oracle, some software firms are trying to convince PeopleSoft customers that Oracle is a far different matter. Among them is SAP, which announced last Wednesday what it called a "safe passage program" for migrating PeopleSoft applications to its solutions.

Under the program, users of World, EnterpriseOne, and Enterprise can migrate to mySAP ERP at a substantially discounted license cost. According to SAP sources, discounts could amount to 75% of what customers originally spent on the replaced applications. As part of the program, SAP will also provide customers with licenses to its NetWeaver integration middleware and connectors that span PeopleSoft and SAP applications. During the migration period, SAP will provide maintenance and support for PeopleSoft applications through TomorrowNow, a formerly independent service provider that the software giant just acquired. This may allow SAP to charge lower maintenance fees than those that Oracle will charge for the same PeopleSoft products.

While SAP's program is similar to the PeopleSoft migration offering that Microsoft launched two weeks ago, it represents a significantly greater threat to Oracle. While only a handful of PeopleSoft's 12,700 customers use Microsoft Business Solutions in their companies, around 2,000 of those customers use SAP applications. Indeed, my company advises several clients that run PeopleSoft applications in some regions or subsidiaries while using SAP in others. In such companies, SAP's migration program could influence long-term plans to deploy SAP versus Oracle or to standardize on a single vendor.

Given the threat that SAP and other vendors pose to its plans, Oracle has its work cut out for it over the next several years. As I see it, the vendor will have to do two things to retain its new customers. First, it will have to not only keep PeopleSoft's software engineers and support staff on the payroll (which it is doing in 90% of all cases), but also convince them to stay with the company. Retaining these employees will be critical to delivering the enhancements and support that Oracle promised PeopleSoft's customers last week. Second, Oracle will have to work more closely with IBM than it has in the past to satisfy PeopleSoft users on their existing IT investments, including the iSeries. While Oracle may compete with IBM in the middleware market, Ellison's crew must shelve that rivalry when it comes to the applications that they inherited.

While these two tasks will be challenging ones for Oracle, the company's statements last week indicate that it is ready to shoulder them. What remains to be seen is whether the vendor successfully translates those statements into actions. For the sake of the iSeries community and its thousands of PeopleSoft users, I hope that it does.

Lee Kroon is a Senior Industry Analyst for Andrews Consulting Group, a firm that helps mid-sized companies manage business transformation through technology. You can reach him at This email address is being protected from spambots. You need JavaScript enabled to view it..