Fighting Back: PeopleSoft Turns To IBM Again

But in its absorption with Oracle's advances, PeopleSoft seems to have given short shrift to its competitive stance--especially in the midmarket. For now, though, PeopleSoft is clearly focused on its most immediate concern: writhing out of Oracle's crushing maw.

And make no mistake, Oracle does intend to crush the Pleasanton, Calif., company. Should it succeed with its hostile takeover, Oracle has said it will lay off more than 6,000 PeopleSoft employees. Two weeks ago, PeopleSoft issued its latest parry with the announcement that all employees laid off by Oracle would receive three months salary and three months' worth of medical coverage.

Other countermeasures include the so-called poison pill, which would have PeopleSoft dramatically increasing its number of shares outstanding; and its Customer Assurance Program, which would offer customers refunds of up to five times their license fees should Oracle make major changes to PeopleSoft's products.

And last week, at the PeopleSoft Connect 2004 user conference in San Francisco, President and CEO Craig Conway announced what he called "the most far-reaching strategic agreement with IBM in our history." That announcement: PeopleSoft would rearchitect its Enterprise product family for IBM's WebSphere and DB2; bundle IBM's products, at no additional charge, with each Enterprise application; as well as co-market, cross-sell and upsell with IBM. In addition, the two would jointly invest $1 billion, primarily in head count, to staff their joint development work. This marks the third time PeopleSoft has returned to the same IBM well it drank from for two joint efforts this spring.

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"Aligning themselves with IBM makes them stronger at staying away from Oracle," said a Boston-based PeopleSoft professional services partner who asked not to be named. "The big question is what will happen to that agreement if Oracle does manage to succeed."

Many PeopleSoft Connect attendees could be heard discussing all of these moves. One topic not mentioned, however, is how PeopleSoft intends to beef up its midmarket efforts.

In 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. But even with that 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 up to $200 million in revenue.

On June 14, PeopleSoft was set to unveil a partner program it hoped would put some more zip in its channel. PeopleSoft delayed its announcement because of concerns over how U.S. District Judge Vaughn Walker, presiding over the Oracle/ Department of Justice antitrust trial, would react to its midmarket efforts, according to a company spokeswoman.

The program would have included "aggressive" sales and pricing terms, lead generation, co-op marketing funds, sales collateral targeted at specific industries and training in PeopleSoft's proprietary implementation methodologies, said Les Wyatt, group vice president of PeopleSoft EnterpriseOne, at the time. Partners would also have had "complete support" access to PeopleSoft internal support people, he said.

For PeopleSoft, the program was to have been a major step up from its earlier campaign with IBM. In effect, IBM will allow PeopleSoft to tap into its tens of thousands of channel partners.

"We are dramatically expanding the reach in the market by adding resellers who can touch those tens of thousands of customers in that under $100 million range," Wyatt had told CRN.

And what of that $100 million revenue ceiling? "We have an explicit program that says if [resellers] find an opportunity that's greater than $100 million, they refer it to PeopleSoft," Wyatt said. "We get that business direct, but we give them the full lead-referral agent percentage."

Tim Schinke, PeopleSoft's newly named vice president of North American channels, would not comment on the status of the program detailed in June. He did say he expects to unveil an expanded channel strategy within a month.