Last Friday, in a move that took the software industry by surprise, PeopleSoft's Board of Directors fired its CEO, Craig Conway. The Board stated that its decision was due to a loss of confidence in Conway's ability to lead the company. At the same time, the Board stressed that it was not dismissing Conway because it disagreed with him about resisting Oracle Corporation's hostile takeover bid. As Board member Skip Battle stated in a hastily arranged press conference, "There is no position that the Transaction Committee took [on the Oracle offer] that was at odds with Mr. Conway, and every decision of the Transaction Committee was unanimous."

At the press conference, the Board announced that it had appointed Dave Duffield, PeopleSoft's fonder and chief executive until 1999, as its new CEO. The company also appointed Kevin Parker and Phil Wilmington as Co-Presidents. Parker will retain his role as the company's CFO while Wilmington will manage worldwide field operations.

Steady as She Goes?

In their statements during the press conference, the newly appointed executives gave every indication that they will maintain course on existing strategies. If that's the case, it's good news for iSeries customers because those strategies include a five-year technology and marketing agreement that PeopleSoft and IBM announced two weeks ago. Under the agreement, the two companies will jointly invest $1 billion and commit hundreds of their developers to tightly integrate PeopleSoft's applications with Big Blue's core middleware offerings. These offerings will include WebSphere Business Integration, WebSphere Application Server, WebSphere Portal Server, and the WebSphere Studio suite of development tools. PeopleSoft will ship OEM versions of these middleware products with all of its applications.

In addition, IBM and PeopleSoft will jointly develop and market solutions for specific industries. The initial solutions will focus on banks, financial services, insurance firms, and telecommunications providers. The two vendors will also establish a Business Process Interoperability Lab where developers will integrate and test applications from multiple vendors. Many of the industry-specific solutions that the two vendors create will undoubtedly come from the new lab.

Though IBM and PeopleSoft have had a historically close relationship, the agreement takes that relationship to a new level. This does not mean that IBM intends to take an ownership position in PeopleSoft--a highly unlikely event--to fend off Oracle. What it does mean is that IBM is risking serious money to make PeopleSoft's products support its On Demand vision and--coincidentally--make them harder for Oracle to assimilate. If Big Blue's middleware becomes integral to the way that PeopleSoft applications function, Oracle will gain less revenue from the vendor's customers and incur higher costs trying to support them.

While IBM may be risking its money and developers to sell more of its middleware and protect PeopleSoft, it is also running other risks. One of these is the possibility that the alliance will harm its relationship with SAP, the world's largest enterprise software vendor. Every year, SAP deployments drive billions of dollars worth of IBM's hardware, software, and services. In recent years, however, SAP's NetWeaver platform has become a competitor to IBM's middleware in many enterprises. While IBM downplays this conflict, its agreement with PeopleSoft could be interpreted by SAP as a competitive move. That could induce SAP to strengthen its relationship with Microsoft and increase its efforts to integrate NetWeaver with Microsoft's .NET platform. Such a move could hurt IBM in many of the accounts that it shares with SAP.

While the IBM-PeopleSoft alliance holds both benefits and risks for the two vendors, it is an unqualified victory for iSeries customers. The alliance ratifies and strengthens an agreement that IBM signed two years ago with J.D. Edwards, the iSeries application vendor that PeopleSoft acquired in 2003. Under that agreement, J.D. Edwards committed to integrating its software with selected WebSphere products and IBM's DB2 database. Because of that agreement, PeopleSoft's World and EnterpriseOne applications already utilize much of IBM's middleware. Under the new agreement, both solutions will receive additional middleware functions. Those functions could make it easier for customers to model their business processes, use those models to rapidly change the behavior of their applications, and then integrate those applications at the presentation level via WebSphere Portal.

If PeopleSoft and IBM stick to their agreement in the wake of Conway's departure, it could indicate that the Board's row with its former CEO was more over the style rather than the substance of his leadership. However, the acid test of that hypothesis will be the position that Duffield and his lieutenants take on Oracle's takeover bid. If PeopleSoft becomes more open to its archrival's advances, it would signal to customers that other strategy changes could be in the wind. Only time will tell if the new leadership team believes that its partnership with IBM is as valuable as Craig Conway thought it was.

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..

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Lee Kroon is a Senior Industry Analyst for Andrews Consulting Group, a firm that helps mid-sized companies manage business transformation through technology.