PeopleSoft Users on the Fence: Report

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Companies that run PeopleSoft software are doing some serious soul-searching these days, according to a report due this week from Yankee Group.

The IT analyst group found 46 percent of the 193 PeopleSoft customers (including JD Edwards users) surveyed are leaning toward swapping out their current software applications, with 31 percent remaining undecided. The report also found that a primary concern for many customers is service level agreements (SLAs), rather than product functionality. Yankee Group did its survey in December and January, before Oracle officially launched the January 18 merger.

At first glance, the report sounds like great news for Oracle rivals SAP, Siebel and Microsoft . However, Yankee Group analyst and report author Philip Fersht said when researchers actually look at preferred alternative enterprise resource planning (ERP) products, Oracle is the number-one alternative.

"Oracle needs to operate a solid defensive strategy, and it can prevail successfully against aggressive competition from SAP, Siebel, Microsoft and others," Fersht said in a statement. "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."

Oracle's roadmap for PeopleSoft and JD Edwards is clear. The database software vendor, now the world's second-largest business-software maker, said it plans to continue to build and support PeopleSoft and J. D. Edwards major product lines until at least 2013. Oracle said it will distribute PeopleSoft Enterprise version 8.9 in 2005 and version 9.0 in 2006. The company is set to update its Java-based integration product called Project Fusion in the next few months.

"In most cases my clients are telling me that they will stay with the most current version of PeopleSoft and will not migrate to another application just because Oracle has bought PeopleSoft," Derek Tomei, CEO of DMT Solutions, told internetnews.com. DMT runs support sites like PSoftPros.com, ERPCareer.com and SAP-Pros.com. "They feel they have invested too much time and money to get their application to where it is today, and they would rather just maintain what they have going forward."

One golden nugget Yankee Group said it found in the merger has been Oracle's acquisition of 70 percent 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 percent of users declaring a strong likelihood to convert and almost 50 percent showing minor indecision.

"Organizations 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.

SAP may have a window of opportunity in fighting PeopleSoft in the HR area, especially if companies are looking at HR platforms within outsourcing contracts. Fersht points out that SAP's partnership with ADP puts the German outfit in a strong position internationally. SAP may already be taking advantage of this weakness in Oracle's armor, as it announced its intentions to acquire retail software specialist Retek for $496 million Monday.

"With growing market trends toward the outsourcing of core business services like HR, Finance and Accounting and Supply Chain, Oracle and SAP need to focus heavily on securing stronger partnerships to push future product," Fersht said. "Companies like HP and IBM will need appeasing in the BPO [Business Process Outsourcing] and services domains. Moreover, if EDS can rebound its market position, its reliance on SAP will come into question."

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

Another side effect of the merger, according to Fersht, is that Oracle and IBM may be indicating that they want to start working together more closely. The analyst's point is that Oracle could clearly benefit from developing closer ties with IBM as it works on fusing its applications and middleware offerings.

"If the two companies continue to attack each other with offerings that are not complimentary to enterprises, then this will further play into the hands of competitors, most notably SAP, Microsoft, Lawson and BEA," Fersht said.

The most positive news for customers is that Oracle is evaluating PeopleSoft's cryptic pricing model. Oracle is considering offering a pricing model based on a per-named-user basis, with published pricing and licensing details on its Web site, Fersht said. PeopleSoft currently does not publish prices for its products. Instead, PeopleSoft uses value pricing based on esoteric variables such as annual revenue, industry and number of employees.

"Depending on the prospect, prices could drop," Fersht said.

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