Is Oracle's Best Good Enough?

By Deborah Gage Print this article Print

A year after its hostile takeover of PeopleSoft, Oracle has a solid management team and new products in the works. But not all customers are impressed.

Norm Fjeldheim had a lot to worry about last year when Oracle completed its hostile takeover of PeopleSoft, after an acrimonious 18-month battle.

The chief information officer of Qualcomm, a communications equipment manufacturer, has multimillion-dollar investments in both Oracle and PeopleSoft software, but he feared the bad feelings between the companies would make his PeopleSoft investment moot.

However, Fjeldheim says, he was "pleasantly surprised." Employees from PeopleSoft are integrating key recordkeeping and tracking pieces of Qualcomm's PeopleSoft applications into Oracle's next-generation applications suite, called Fusion. "I thought it would be a battle," he says.

Ray Barnard, the cio of Fluor Corp., had a similar revelation. The engineering and construction giant uses enterprise resource planning systems from sap and JD Edwards--which PeopleSoft acquired in 2003—along with Oracle database and engineering applications. But about six months ago, Oracle called Barnard to ask his advice. That had not happened before. "I appreciate being included," he says.

One year into its takeover of PeopleSoft—a deal worth $10.3 billion when it closed in January 2005—customers say Oracle is listening to them, in contrast to the company's past behavior. And while some expressed reservations about Oracle's product plans, they're happy with the new level of service.

Part of the reason for the changes, according to Fjeldheim and others, is the current management team.

Larry Ellison remain chief executive officer, although in 2004 he relinquished his chairman title and appointed two co-presidents—Charles Phillips, who came from Morgan Stanley in 2003, and Safra Catz, who came from Donaldson, Lufkin & Jenrette in 1999.

Oracle veterans John Wookey and Keith Block head application development and sales, respectively. Fjeldheim calls the current Oracle team "the best I've seen since 1989."

But they'd better be good—they have a lot to do. Since acquiring PeopleSoft, Oracle has picked up retail software vendors Retek and ProfitLogic, identity management vendor Oblix, banking software vendor i-Flex Solutions and database vendor TimesTen, among others, and was set to close a deal for Siebel, the $1.3 billion vendor of customer relationship management software, on Jan. 31.

Parts or at least ideas from all this software are being melded into Fusion, which Oracle plans to ship in 2008. The trick will be to persuade customers to stick with Oracle and upgrade to Fusion.

Most PeopleSoft customers have not committed to the new software, says Jim Shepherd, a vice president at amr Research. He adds that new licensing revenue since Oracle acquired PeopleSoft is "not very healthy." For the six months ended Nov. 30, 2005, it was $1.7 billion, a 10% gain over 2004. SAP, on the other hand, saw its second-half 2005 license revenue go up 18.5%, to $3.26 billion.

In January, Oracle publicly demonstrated some features of its current applications that will become part of Fusion. Executives showed, for example, how they could use one console to pull an order out of PeopleSoft ERP and route it through a different supplier, based on information on the supplier's performance called from an Oracle data warehouse. Wookey stressed that Fusion is based on open standards rather than proprietary Oracle standards.

But some CIOs—including Fjeldheim and Barnard—have reservations about the concept behind Fusion, which is called Service Oriented Architecture. SOA is a software architecture in which applications dynamically interact with each other over the Web.

There's a lot of software in corporate America. And platforms from Oracle, IBM, Microsoft and SAP don't work well together, these CIOs say, and basic requirements like version control—necessary for Sarbanes-Oxley compliance—are still missing. "I'm not going to invest a lot of money in it," Barnard says.

Another customer who uses both Oracle and PeopleSoft products, Stanford University, isn't thinking much about SOA—it is still wrestling with current versions of Oracle Financials.

However, controller Susan Calandra says she is far happier with Oracle now than she was in mid-2004, when she complained to Oracle about getting the school's Oracle applications to work with its PeopleSoft software. Oracle assigned Stanford senior vice president Steve Miranda, who speaks with Calandra every four to six weeks.

"Today, we have Oracle's ear," Calandra says. "The PeopleSoft applications are running fine."

Stanford has not decided what to do about Fusion, Calandra says. "We don't know how Fusion is going to work," she points out.

But Oracle's acquisition spree has made one thing easier for customers: there are fewer vendors to go after when something goes wrong. Fluor, for example, acquires four or five companies a year, and Barnard says that every one of them uses some version of Oracle or PeopleSoft. "I need throats to choke, and I hate to chase 20," he says. "Now I can chase three or four."

This article was originally published on 2006-02-06
Senior Writer
Based in Silicon Valley, Debbie was a founding member of Ziff Davis Media's Sm@rt Partner, where she developed investigative projects and wrote a column on start-ups. She has covered the high-tech industry since 1994 and has also worked for Minnesota Public Radio, covering state politics. She has written freelance op-ed pieces on public education for the San Jose Mercury News, and has also won several national awards for her work co-producing a documentary. She has a B.A. from Minnesota State University.

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