Combined Oracle/PeopleSoft Would Face Off Against SAP, Microsoft

Oracle's proposed $5.1 billion buyout of PeopleSoft signals further consolidation in business software and puts the German software giant in a position to grow, some integrators said. See story on Oracle's bid.

"This uncertainty gives SAP an opportunity to take share," said James Hall, managing partner of technology and research at Accenture.

His advice to current PeopleSoft and J.D. Edwards customers is to hold off on additional purchases until the smoke clears. PeopleSoft had tendered a $1.7 billion friendly buyout of J.D. Edwards just four days before Oracle launched its hostile bid for PeopleSoft.

A Microsoft solution provider said consolidation as evidenced by this deal is inevitable. "This is a natural progression and is coming at an appropriate time. It is a counter to what Microsoft is doing. Microsoft bought Great Plains and Navision and built a CRM offering to go after the SMB space. PeopleSoft is [enterprise-centric] but can scale down, so it's welcome to the next theater of operations in the great software war," said Glen Gulyas, president of GigaMedia Access, Herndon, Virg.

Most analysts and solution providers agreed that while SAP is the immediate concern for Oracle, PeopleSoft, Siebel Systems, and other enterprise software players, Microsoft's shadow looms large.

SAP is trying to parlay its prodigious strength in ERP systems into CRM and other business applications and attempting to drive downmarket into small and midsize companies. At the same time, Microsoft is pouring billions of dollars into its SMB effort, and no one doubts that it will move up the food chain when it is able.

Oracle itself positions SAP as the main rival in business applications--in part, at least, to deflect antitrust concerns. On Thursday, Oracle Chairman Larry Ellison cited IDC research showing the business applications market to be fragmented. SAP weighed in with 18 percent of market share, compared with a combined market share of about 10 percent for Oracle and PeopleSoft.

From a platform perspective, an Oracle-PeopleSoft combination is a competitive threat to Microsoft. With its Linux efforts, in particular, Oracle has tried to make the underlying operating system a non-issue, analysts said. Oracle databases and applications running on Linux is a cost-competitive alternative to Microsoft SQL Server running on Windows NT or 2000, Oracle executives have said time and again.

Of course, Microsoft is careful to parse the market. Oracle remains a huge database rival, but one that does considerable business on Windows servers. Microsoft executives continue to stress that the company's business applications push targets companies far smaller than the typical Oracle, PeopleSoft or Siebel shop.

"From a business applications [point of view], all of those [enterprise] vendors have tried for a very long time to come down-market to the smaller companies that remain the focus of Microsoft Business Solutions and have not been very successful," said Lynne Stockstad, general manager of product management for Microsoft Business Solutions.

Paula Rooney contributed to this story.