What Oracle may really be after with PeopleSoft. Oracle may be pearl diving

CBS MarketWatch

NewsTeam | CBS [MarketWatch] | POSTED: 12.13.04 @16:07

More to the point, it is estimated that 85-percent of the SAP installations use Oracle's relational database, which is still considered to be the Rolls-Royce of database managers for large enterprises.

The problem with the Rolls-Royce is that there is not much more that can be done with it. There are no more new large scale concepts that can be incorporated into the management system than those that have already been incorporated. Only performance tweaks are important and with better performing hardware, they are not as important as they once were. Microsoft has always let the hardware do most of the heavy lifting when it comes to improving performance.

So Oracle had to make a choice. It could sit there and do nothing while the competition, including the Open Source MySQL DBMS eventually caught up and undersold Oracle -- eating away at its cash cow. Or the company could do some blocking maneuvers and get into the applications business in competition with many of its customers. This is a little like Intel deciding to make branded computers, an idea the company has discussed internally, but eschewed.

Even more annoying is the fact that various ex-Oracle executives have left the company to form applications firms that exploit the Oracle database infrastructure. Salesforce and Siebel are two examples. These companies and others take advantage of the corporate need for so-called sales force automation, enterprise resource management and planning as well as general business software such as bookkeeping.

Any salesman selling these expensive systems (which can cost a company millions of dollars during the system's lifetime) will confront corporate management with all sorts of charts and graphs proving that using any of these products will manage to pay for itself in savings through new efficiencies. When done correctly this sales pitch is irresistible to today's bottom-line-oriented manager. "You can't do without it!"

But within the debate we may be overlooking the potential for real money. It's called Sarbanes-Oxley, officially known as the Public Company Accounting Reform and Investor Protection Act. It was signed into law in July 2002. This is the recent accountability law that stemmed from the corporate scandals of MCI and Enron and others.

Knowledgeable information technology experts equate it with the Y2K phenomenon for its potential to become a sinkhole of expense for large corporations. PeopleSoft has one of the most unusual Sarbanes-Oxley modules in its portfolio, PeopleSoft HCM (Human Capital Management).

On the surface Sarbanes-Oxley looks like some bookkeeping initiative. In fact there are numerous human resource requirements, lots of them, designed to keep tabs on people. A lot of the reporting necessary for compliance is more human resource reporting than bookkeeping. PeopleSoft saw this as an opportunity to meld compliance reporting with its Human Capital module. The compliance reporting which began this year is already being seen as a financial disaster by some. If this subsystem can save money (or merely prevent losses) it could be a short-term bonanza for Oracle. And become the bonus in this transaction.

According to some reports Oracle plans to quickly get rid of 6,000 PeopleSoft employees. Exactly how they plan on doing this without making a mess is hard to say. By seeing who is let go and who stays it will be effortless to figure out what Oracle is really after. I suspect this HCM module and other pearls lurk in the PeopleSoft deal. It's possible that Oracle can keep a few cherries and do better deals with the likes of SAP by shuttering the competition in the process. Goodbye PeopleSoft if that's the plan.

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Larry of course, stands in a critical junction for the future of Oracle Corporation.
Your article expresses the conundrum facing the industry as a whole, especially the giants. For, when everyone has what they need, how does a
company grow? Recently, I had the honor of sitting in on the best presentation of 2004- that of Oliver L. Velez of pristine.com. There is no doubt, that when
companies reach maximum growth- they will be turning to trading in order
to make profits on their understanding of the big picture. When corporations
put their attention to offices for trading- you will find the same sort of standards upgrades and improvements in disclosure, valuations, divestiture
terms, and so on- growing in leaps and bounds. Corporations such as
Oracle, can always become lending corporations, can rescue ailing pharmaceutical corporations- through a keen sense of analysis, application
of the best new trends for accelerating the speed of drug approval, etc.
Corporations such as Oracle- the cash cows of the world- will never have
a sad day. Obviously, it is looking at their potencial options, and actually
branching out into other industries who need their organizational skills
could mean Oracle the anything! How few people and companies have
that luxury.

Interesting point of view, but perhaps things are a lot simpler. May be Oracle just needs Peoplesoft good applications, business analysis skills and brand name.

Oracle applications portfolio is not that great. No, I am being polite: Oracle has orrible applications according to some people. Programming skills can be learned, but learning how to write good business applications is not for everybody.

I don't think that Oracle will try to fold Peoplesoft: that would be like killing the golden-eggs maker. Larry can't be that stupid. Then again I tend to see the world thru pink glasses.