MBS Partners Prep For Acquisitions, Opportunities In Oracle-PeopleSoft Era


Soon after the deal between Oracle and PeopleSoft was announced Monday, several partners predicted Microsoft will either re-engage in merger talks with SAP, or make a play for Lawson Software, Siebel Systems or other enterprise application vendors. Microsoft confirmed this past May that it had held discussions with SAP about a possible merger. "Microsoft will not be happy about this [the Oracle/PeopleSoft merger]," said one partner close to Microsoft, claiming that the Redmond, Wash., vendor recently considered making a play at parts of PeopleSoft before the merger was approved. "This may make Microsoft more acquisitive in the coming months."

Oracle and Microsoft--and their partners--will clash increasingly as Microsoft moves upstream into the enterprise market and Oracle moves downstream, partners say.

"The game is on. Long term, it would appear to me that all ISVs, especially the large players like Microsoft, will seek expansion through acquisition," said Elmer Baldwin, CEO of Born Information Services, which serves customers with Oracle, PeopleSoft and Microsoft installations under one roof. "I hope Microsoft continues to buy best of breed, not just big offerings."

Microsoft would not comment for this story except to note that the company remains committed to its existing business applications strategy of serving small and midmarket enterprises and investing in Microsoft Business Solutions (MBS) for the long term, a spokesperson said.

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What is clear is that Microsoft will depend heavily on its channel partners--especially MBS partner--to face off against Oracle.

One partner said it will be a big blow to Microsoft if it can't migrate PeopleSoft's EnterpriseOne or World customers to its Navision or Axapta enterprise applications, because those installed bases--which became part of PeopleSoft with its acquisition last year of J.D. Edwards--will go to Oracle rather than Microsoft SQL Server.

Similar in capabilities, PeopleSoft EnterpriseOne and PeopleSoft World, which runs exclusively on the IBM AS/400 database, have both made strong inroads in the midmarket manufacturing sector. Microsoft's Navision and Axapta application suites target the same audience.

"If you control the app, you control the stack. Unless Microsoft aggressively sells Axapta to [migrate] World customers to Axapta, it'll have a detrimental impact on Microsoft," said Mike Gillis, president of Iteration2, an Irvine, Calif.-based solution provider. "If they are swift and come up with aggressive campaigning for PeopleSoft to Axapta, there will be a big opportunity," he said.

As Microsoft ponders its strategic response to the merger, Microsoft partners worry about Oracle trying to shift PeopleSoft installations off Microsoft SQL Server to increase its database share. But they also see a silver lining in the consolidation: more opportunities in the field for MBS and price stabilization.

"Anytime a competitor is removed from the playing field, the remaining players have an opportunity to gain market share," said Andy Vabulus, president of Atlanta-based IBIS, noting that MBS partners can approach customers now that the deal is done. "I can't wait to sell into the installed base of PeopleSoft and J.D. Edwards."

Partners say they have a better chance competing against Oracle in the midmarket than against PeopleSoft. They acknowledge the threat to Microsoft depends on how much Oracle wants to grow its value-added ERP business. Still, they are optimistic that their conversations with customers can now focus on the overall platform, where Microsoft has an advantage.

"I do see an opportunity to introduce Microsoft's Navision, Axapta and other MBS apps to the larger market, maybe more aggressively," said Born CEO Baldwin, noting that Microsoft's operating system, server applications and business applications integration strategy will help Microsoft. "It also puts the technology stack center stage for many companies making their ERP decisions. But our clients will not like Oracle making their platform decisions."

The battle lines are still fuzzy. Microsoft primarily plays in the midmarket space while Oracle-PeopleSoft focuses on tier-one enterprise deals, partners observe. Nevertheless, Microsoft will light a fire under its MBS unit—and its partners—to protect its hold in the lower end and break more ground into the upper midmarket, where it will face Oracle head on.

"The deal should shine more light on Navision and Axapta; which scale very high," said Larry Schiff, president of Business Management International, a Microsoft partner in New York that has an offering targeted at migrating EnterpriseOne customers to MBS with Axapta. "It's not quite tier-one, but if it's priced right, Microsoft has a real shot at the upper midmarket space, which ranges from $500 million to $1 billion."

He said consolidation will help stem some of the price cutting going on in the field and help Microsoft compete more vigorously when prices stabilize. Shiff added that a deal with SAP would be interesting because it would give Microsoft "top to bottom in [midmarket and enterprise] product lines, and there is only one major overlap between MBS and SAP's midmarket BusinessOne offering."

Others partners were less enthusiastic. While they say consolidation in the business applications business is good for all, including Microsoft's database and platform business in the enterprise, they see little change from Microsoft's current strategy.

Reginald Howatson, a practice director at Nexxlink Technologies, a Microsoft partner in Montreal, agreed. "The Oracle-PeopleSoft deal will not stop Microsoft from steamrolling straight ahead dominating the small and medium-size business categories," Howatson said.

Another partner agreed. "Microsoft will stay its course, focusing on the middle-tier ERP customers with the Microsoft Business Solutions offerings and focusing on the entire enterprise by continuing to build strong, affordable standards-based operating systems, server platforms and desktop productivity software," said Douglas McDowell, principal consultant for Intellinet, Atlanta. "With the prevalence of Oracle applications running on Windows and PeopleSoft implementations using SQL Server as a database platform, Microsoft will still see growth thanks to this merger."

Still, there's no doubt that the deal will make Microsoft ever more diligent against rival Oracle, whose market power undoubtedly increases through the merger with PeopleSoft.

John Parkinson, chief technologist for North America at integrator Capgemini, said he doesn't envision Microsoft acquiring a Siebel or Lawson, but said the software giant will certainly ramp up its MBS efforts now that the deal is done.

"They will beef up MBS and accelerate the Project Green time line," said Parkinson, about the next-generation MBS strategy. "They will also get closer to SAP for SQL deals targeted at PeopleSoft refugees."