Sunday, May 26, 2024

Anti-Trust and Suite-Sized Software

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As of this writing, Oracle’s attempted takeover of PeopleSoft seems to be foundering on the shores of anti-trust law. Both the U.S. Department of Justice and the European Union are weighing the possibility that legal or regulatory challenges to Oracle’s bid could be mounted shortly, putting up what many consider an unbeatable barrier.

Whichever side you happen to be on in this case, there’s a fundamental problem with the anti-trust angle: it’s dead wrong. There are lots of pros and lots of cons to this now-epic battle, but anti-trust ain’t the way to go.

At issue is an ironic truth that pits marketing rhetoric against marketing reality. The basis for any anti-trust action against Oracle is the notion that enterprise software “suite” vendors are few and far between, and will be even fewer if Oracle manages to swallow PeopleSoft.

Any anti-trust action by the DoJ or EU would have to prove that a combined Oracle-PeopleSoft would be in the position to control market competition by restricting the alternatives available to enterprise software buyers. In the reckoning of these august bodies, only a few companies — SAP, Oracle, and PeopleSoft — are able to sell a suite of products. And while three choices a competitive market make, two would be fodder for anti-trust.

That position is nonsense for three key reasons. The first is that SAP and Oracle-PeopleSoft would hardly be the only suite vendors in the market: my short list of other, highly successful and competent suite vendors would include IFS, QAD, Lawson, and SSA. Not to mention a little company called Microsoft and its Business Solutions products, Axapta, Great Plains, and Navision.

Each of these vendors has a suite of products to sell that span many, if not all, the major functions of the enterprise software world. Of course, not all suites are created equal, but when it comes to basic ERP, CRM, SCM, and other functionality that typically makes up an enterprise software suite, the five additional vendors on my short list all have what it takes or have a partner who can provide a plug-in solution. Narrowing the field by one other vendor wouldn’t change the fact that, when it comes to suites, there’s still an enormous amount of choice.

You’ve read Josh Greenbaum’s opinion. What’s yours? Let us know over at the IT Management Forum.

Reason two is that these companies compete against, and beat, SAP, Oracle, and PeopleSoft regularly, and, at times, spectacularly. Granted, one could argue, as I have, that some of my other suite vendors would have trouble servicing a $100 million global deal in every country and language supported by their products. But service trouble is something that no vendor could ever have a monopoly on. The fact is, a merged Oracle/PeopleSoft would still be able to lose deals, and would still be subject to genuine competition in the marketplace.

But reason three is the real kicker. Turns out that, despite all the marketing hype around software suites, almost no one is buying a full suite today. Take a look at the average deal size for all the vendors named in this column. Not a one can claim an average deal size north of $1 million, which means that the average deal by definition falls well short of being “suite-sized.” It’s been a fact of life for more than three years that suite-sized deals are an artifact of a more naive and cash-rich yesterday, when mega-deals were the norm and shelfware the inevitable result. Now every CIO worth his or her salt is an expert at buying only what’s needed at the moment and only what can be implemented without starting with a clean slate and a $100 million price tag.

So, credit Larry Ellison with making his life a little more complicated by espousing a marketing message that has tried for years to convince buyers to throw out their moribund IT environments and standardize on the Oracle suite. It was a good idea out of touch with market reality, and had been relegated to the ash-heap of marketing rhetoric by any serious observers of the enterprise software market. The fact that DoJ and the EU are taking this hype seriously shows how much they have to learn about enterprise software. Hopefully they understand the rest of their purviews a little better.

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