Future Shock?

By Larry Dignan Print this article Print

PeopleSoft customers wonder whether they will get stroked or shafted by new boss Oracle.

John Webster has been dealing for the last four years with the same handful of managers at PeopleSoft, as he irons out kinks in customer relationship software. The PeopleSoft program manager at Dakota State University doesn't want that to change-or kink removal will get tougher.

"Every contact I have at PeopleSoft says it's business as usual, but I know that can't be the reality," Webster says. "I don't know who the hell is going to be there."

Customers like Webster are key to whether Oracle gets the boost to its bottom line that Larry Ellison expects for the $10.3 billion he's plunking down for the Pleasanton, Calif., provider of business applications, from financial reporting to human capital management.

Technology and business executives expect Oracle to honor existing contracts, and if they do want to make a move, it won't come lightly.

Renegotiating contracts could lead to lesser service. Switching vendors is not an impulse decision. Any judgment can't even begin to be made until after a get-acquainted period. "In 90 days, we should know what the smell of Oracle is," Webster says.

The biggest question is whether Oracle continues to develop its PeopleSoft and J.D. Edwards applications over time. According to an AMR Research survey of PeopleSoft customers, 64 percent say they have low expectations for the fate of their products, with 47 percent expecting Oracle to offer no new functionality and 17 percent predicting "minimal" enhancements.

Technology executives' main concern is that they won't get the people part of PeopleSoft that they're used to: the support and customer service. They also worry that they will be squeezed on maintenance costs and be stuck with applications that Oracle, in the end, won't support. In the AMR survey, 63 percent say they would drop maintenance and move to a third-party provider such as Bryan, Texas-based TomorrowNow, if Oracle stops enhancing PeopleSoft products.

For its part, Oracle is saying all the right things. Its executives say the company plans to support PeopleSoft products for 10 years and develop the next generation of PeopleSoft 9, its flagship enterprise resource planning program, and J.D. Edwards 6, another ERP application.

"We have to deliver good service and spend the time and effort to make sure that customers don't have a reason to go anywhere else," explains Charles Phillips, Oracle co-president and the point man for the integration of the two companies.

Oracle even says it will support PeopleSoft's EnterpriseOne and World software products running on IBM iSeries hardware, but the company notes that "IBM cooperation will be required."

Even with assurances, Oracle may have a tough sell. Each PeopleSoft customer has a wish list used to judge Oracle. David Ramsey, chief information officer at medical supply distributor PSS/World Medical, wants a product road map from Oracle clarifying where PeopleSoft products will be in a decade. Jeff Weiler, chief financial officer of Georgia's Gwinnett County School District, wants Oracle to provide easy-to-use integration tools to move to the 11i generation of Oracle database software and applications, if he ultimately has to abandon his PeopleSoft applications. And they all want Oracle to deliver a time line to migrate the company's five primary enterprise application flavors-Oracle 11i, PeopleSoft 8 and 9, and J.D. Edwards 5 and 6-to one. "If I do have to migrate to something else, I don't want a huge integration project," says Ramsey, who expects such a project to be on his dime. "I'm probably asking for a miracle."

So what do you do?

"The promises are nice, but you'd be foolish not to plan for a worst-case scenario," Webster says. "The big thing is, don't be complacent. Your plan doesn't have to be for today, but a year from now."

In the meantime, here are three things you can do today to prepare for Ellison's next move:

  • Look to 2006, and 2010.

    For 2005, your PeopleSoft and J.D. Edwards applications will run as usual. Oracle has made it clear it will support existing applications and isn't about to annoy Wall Street by losing customers right out of the gate. In the case of PSS/World Medical, a J.D. Edwards customer, Ramsey reckons he can get another five years out of his applications, which govern financial, inventory, accounts payable and receivable, and customer service.

    According to Ramsey, PSS/World Medical spends $500,000 a year on PeopleSoft product support and maintenance. He has a technology budget of $26 million, with $7 million to $10 million spent on customizing J.D. Edwards. Since one of the company's businesses is distributing medical supplies to independent doctors, it needs the customization to account for inventory items to sell to physicians who want, say, a hard-to-find brand of scalpel. "We don't deliver on pallets. We deliver whatever doctors want in bags," says PSS/World Medical CEO David A. Smith.

    Ramsey's bigger wish, however, is for Oracle to articulate a clear road map for the future, something he claims PeopleSoft was "mealy-mouthed" about in regards to J.D. Edwards. "For better or worse, I don't think Oracle will be that way," Ramsey says. "I figure we have five years until we'll have to move to something else. So what I want to hear is what the product is going to be in year six."

  • Get active in user groups.

    Weiler says he plans to become much more involved in PeopleSoft user groups and industry associations. Gwinnett uses PeopleSoft for human resources, payroll, financials and supplier relationship management, and Weiler doesn't have any immediate thoughts as to what his next move will be. He runs PeopleSoft versions 8.4 and 8.8.

    "There are a lot of questions I can't answer right now," Weiler says. Will Oracle really dedicate resources to developing PeopleSoft? Will PeopleSoft customers be second-class customers? Will there be freedom to use non-Oracle databases? Will ultimately moving to Oracle applications from PeopleSoft be like an upgrade or a full-blown implementation?

    To get answers, Weiler is betting that some networking will help. In the education industry, school districts often share information about everything from procuring supplies in bulk to the best practices for implementing applications. Weiler says SAP wasn't seriously considered-and didn't bid for Gwinnett's business-because other districts had troubles implementing the software in the late 1990s. In regards to Oracle's takeover of PeopleSoft, Weiler will monitor user groups to get anecdotal evidence on Oracle's service levels and commitment to PeopleSoft applications.

    "You don't have to have all the answers," Weiler points out. "PeopleSoft has a good user group community, and there are a lot of school systems that get together. These groups could influence Oracle."

  • Examine other vendors.

    Dakota State's Webster has a two-part plan when it comes to figuring out whether to look to a new vendor if Oracle's acquisition of PeopleSoft doesn't work out. Phase one: Look at third-party maintenance providers such as TomorrowNow. "The functionality we have could last 10 years," he says. "A third party could cut costs and provide a hedge should Oracle discontinue support or raise prices."

    Webster reckons that TomorrowNow, which was founded by former PeopleSoft executives, could give PeopleSoft customers a way to decouple themselves from Oracle and put off upgrades. AMR Research estimates that the average enterprise planning support contracts average 15 percent to 22 percent of the license fee. TomorrowNow does it for half that rate.

    As for phase two-longer-term plans-Webster is going to see what Oracle does with PeopleSoft. Among his questions: Will Oracle optimize PeopleSoft on Oracle databases? Webster has Microsoft SQL databases. Will support improve? What will PeopleSoft 9 look like?

    "We're on PeopleSoft 8.8 now, so we're fine," he says. "We're going to hang back and avoid being a first-mover."

    Although Webster acknowledges that his choices are largely limited to Oracle and SAP these days, he doesn't expect that to be the case forever: "If you can hold on for five years, you may be able to outsource your core functionality in the future. Larry [Ellison] may wind up being India's best friend."

    This article was originally published on 2005-01-14
    Business Editor
    Larry formerly served as the East Coast news editor and Finance Editor at CNET News.com. Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.
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