PeopleSoft, IBM To Bundle, Co-Market Products

Calling it "the most far-reaching strategic agreement with IBM in our history," PeopleSoft President and CEO Craig Conway said the company will bundle IBM's WebSphere middleware software, at no charge, for its customers. In addition to distributing WebSphere with all PeopleSoft applications, the companies' developers will work jointly to optimize PeopleSoft Enterprise applications for IBM's WebSphere and DB2 software as well as cross-sell and upsell products. In addition, the two vendors will jointly invest more than $1 billion over the next five years in their optimization efforts. Most of that investment will be in the form of head count, said Steven Mills, senior vice president and group executive, IBM Software Group, in a later press conference. He stated emphatically that IBM is not taking an ownership stake in the business applications vendor.

At the opening keynote of PeopleSoft's user conference Tuesday, Conway also spoke of a company attempting to hold its own against a hostile takeover tender, described company progress in integrating and enhancing its year-old J.D. Edwards products and offered up its vision of a services-oriented world.

That IBM alliance--where the business applications vendor returned to the same IBM well it drank from for two previous joint efforts this spring--provided the clearest distinction yet between PeopleSoft's tactics for enabling composite applications and those of rival SAP. As part of that agreement, PeopleSoft will bundle, at no charge, at least four of IBM's core middleware applications with all of its Enterprise applications. It also has agreed to rearchitect its Enterprise family of applications for IBM's WebSphere and DB2 software. While PeopleSoft claims this agreement does not undercut its existing relationship with BEA Systems, the new alliance appears to defer nearly all middleware decisions and products to Big Blue.

"It's a major commitment on PeopleSoft's part to rearchitect their applications to optimize and standardize on WebSphere and DB2. in return we are committing developer resources to help in this effort," Buell Duncan, general manager of IBM Software's ISV and Developers Relations, told CRN after the announcement.

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Conway began his PeopleSoft Connect 2004 presentation after nearly 15,000 fairly subdued attendees watched scantily clad dancers writhe to deafening music. And no, he did not shun the elephant in the middle of the living room, otherwise known as Oracle. In fact, Conway started his address acknowledging Oracle's "hostile tender," saying that Judge Vaughn Walker's decision to allow Oracle to pursue its efforts "does not mean PeopleSoft will be acquired by Oracle," he said to a round of applause. He vowed to fight on with PeopleSoft's poison pill and its lawsuit against Oracle seeking an injunction and damages. He said PeopleSoft's lawyers would not allow him to elaborate. "In fact, we only have about 1,500 customers here. All the rest of you are attorneys."

Conway also spent a good part of his keynote talking about the progress the Pleasanton, Calif., business applications vendor has made with its J.D. Edwards software, which comprises the renamed PeopleSoft EnterpriseOne and PeopleSoft World. According to Conway, "PeopleSoft in the first 12 months has done more enhancements to EnterpriseOne than did J.D. Edwards in the prior five years."

He also acknowledged communication mistakes with J.D. Edwards' customers.

"It occurred to us that J.D. Edwards only offered user-based pricing. We thought they'd appreciate an alternative. We offer enterprise pricing and our customers like it, but when we offered this alternative, J.D. Edwards customers thought we were doing away with user-based pricing. It was a misunderstanding." That wasn't the only misstep with J.D. Edwards customers that Conway cited. There was also a problem with upgrade overkill, he said.

"In our determination to show how many enhancements we would do to J.D. Edwards' lines, we released so many enhancements that customers were confused about what to do and when to jump in. Besides those small glitches, we are thrilled with the combination of PeopleSoft and J.D. Edwards."

In addition, PeopleSoft is in the process of revamping its applications for a services-oriented world, providing composite applications and enabling technologies that, in many ways, are reminiscent of what rival SAP is doing with NetWeaver and XApps.

In many ways, this alliance with IBM appears to rectify a shortcoming in PeopleSoft technology that was publicized during the Oracle antitrust trial. In that trial, Oracle introduced into evidence an e-mail, dated Feb. 24, 2003, from PeopleSoft CTO Rick Bergquist. In that e-mail to Craig Conway, Bergquist wrote: "Composite apps. SAP is pushing XApps and the analysts want to know what we are doing in relationship to them." He then described that one of PeopleSoft's executives had shown Gartner analysts a concept dubbed "Transactions, Analytics, Content, Knowledge," which Gartner apparently applauded. "At this point, the concept exceeds our capability to deliver--this would take significant funding to deliver the next big thing beyond the Real Time Enterprise."

IBM's middleware products--along with PeopleSoft's newly announced focus on enabling monolithic applications to be carved into reusable business processes--now pits the company even more squarely against its larger, Germany-based rival.

One topic scrupulously not mentioned during the opening day, however, is how PeopleSoft intends to beef up its midmarket efforts. This past June, PeopleSoft had briefed CRN on plans to expand its channel program--and by extension its partner network--for its EnterpriseOne and World application lines. Together those two application families, which hail from the J.D. Edwards side of the business, represent PeopleSoft's entire midmarket push.

For PeopleSoft, the program was to have been a major step up from its two-pronged campaign with IBM, announced in late April and mid-May. In effect, IBM will allow PeopleSoft to tap into the tens of thousands of channel partners that Big Blue lays claim to. But even with its J.D. Edwards heritage, PeopleSoft's SMB drive was more rickety than rocket-powered. As of June, the vendor had a mere six North American resellers, each prohibited from selling to midmarket customers with more than $100 million in revenue. As a comparison, archrival SAP allows its midmarket partners to go after businesses with $200 million in revenue.