Special Report: Oracle, SAP square up over PeopleSoft customers (updated)


Oracle is likely to retain the majority of PeopleSoft customers successfully unless it screws up on support and service issues, according to a new study by research firm Yankee Group, but SAP is positioning to attack.

The research firm found that 46 per cent of the 193 PeopleSoft customers surveyed are thinking in terms of swapping out their current software applications, with 31 per cent remaining undecided.

When it comes to retaining satisfied PeopleSoft CRM (define) users, the Yankee Group survey reveals 23 per cent are very unlikely to replace PeopleSoft CRM, 17 per cent are very likely and 30 percent are somewhat likely to replace PeopleSoft now that Oracle has taken the reigns.

The primary concern for many customers is service level agreements (SLAs), rather than product functionality. Customers are satisfied with their HR applications and unlikely to migrate to a non-Oracle supplier, analyst Philip Fersht concludes, if Oracle follows through on its promised support and the roll out of its planned Fusion apps.

"Organisations will not uproot their HR software unless there is immense dissatisfaction with service levels, and Oracle will have to make a complete mess of what is a gold-standard operation to suffer major losses," Fersht said.

"Oracle needs to operate a solid defensive strategy, and it can prevail successfully against aggressive competition from SAP, Siebel, Microsoft and others," Fersht said. "Common trends after a merger of this nature tend to show customers should become less likely to switch their products as time progresses... We subsequently expect the number of 'undecided' customers to revert to remaining with PeopleSoft for the short-to-medium term."

One golden nugget Yankee Group said it found in the merger has been Oracle's acquisition of 70 per cent of the Fortune 1000's human resource Platforms; government contracts are another plus. Yankee's survey found this is the least likely area to suffer imminent upheaval, with only 17 per cent of users declaring a strong likelihood to convert and almost 50 per cent showing minor indecision.

Nonetheles, SAP may have a window of opportunity in fighting PeopleSoft in the HR area. Fersht cites SAP's partnership with ADP as putting the German firm in a strong position internationally.

There is also the prospect of a price drop for customers as well. Oracle is considering offering a pricing model based on a per-named-user basis, with published pricing and licensing details on its Web site. PeopleSoft currently does not publish prices for its products, but offers value pricing based on variables such as annual revenue, industry and number of employees.

Other firms have been jockeying for position in the light of the altered competitive landscape following the PeopleSoft acquisition, with analysts divided on the prospects for success of the various parties.

For example, Meta Group reckons that Siebel should be taking advantage of the current situation. In a client research note, it observes:"The loss of PeopleSoft CRM as anything but an exception-based market competitor is a windfall for almost all CRM suite vendors. PeopleSoft was the only ERP vendor's CRM product able to compete as a standalone application suite.Siebel Systems in particular is well positioned to serve new CRM customers given its functional, vertical, and analytical footprints."

For its part, SAP aims to control half of the US market for business planning software by the end of 2005 by winning away rival Oracle's customers. SAP gets about one-third of its total revenues from the United States, which is also the company's fastest-growing market"We are targeting 50 per cent," said Bill McDermott, chairman and chief executive of SAP Americas "For sure, I'd like to be in mid-to high-40s as a percentage."

McDermott claimed that SAP was taking away customers from Oracle under SAP's opportunistic "Safe Passage" programme, which is aimed at luring away former PeopleSoft customers, but declined to comment on how many former PeopleSoft customers had switched to Oracle.

He did claim that around 200 PeopleSoft customers were talking to SAP about switching and said "50 or more" Oracle customers had migrated to SAP in the past year. If that’s the case, then it’s a pretty low number given that Oracle has about 13,000 customers for its applications.

SAP’s latest attempt to bolster its US presence came last week when it was announced that SAP is to buy Retek, a maker of retail management software, for $496 million.

Retek's software lets retailers interact across the Internet with suppliers, wholesalers, transportation companies and other components of the supply chain In 2004 it posted a net profit of $8.2 million on sales of $174.2 million. It employs 525 employees in 20 countries.

Retek's board has approved the transaction and recommended that the company's stockholders accept the offer. SAP said the tender offer is expected to begin within a week and close in early April, unless extended.

Oracle president Charles Phillips argues that SAP's recent acquisitions mean that Oracle is dictating the direction the industry is taking. "It's a change in their strategy," he said. "They didn't want to make acquisitions; they said they wanted to innovate. Well, all of a sudden they changed their minds so they're reacting to what we're doing in the marketplace. I think that's good. We're going to keep them reacting in the next few years."


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