Oracle vs. PeopleSoftRyan MartinSean Ogle Tiare Packard5/23/06BA 471 10AMDr. Reitsma0AbstractFollowing the technology boom of the 1990’s, the database company Oracle initiated a hostile takeover of the ERP specialist PeopleSoft. Oracle’s technology had reached a mature phase and it needed PeopleSoft to renew itself. PeopleSoft who was unwilling to be bought, fought against the acquisition by making its own acquisitions and through other measures. During the course of the feud, the Department of Justice became involved regarding possible monopolistic practices. The DOJ’s verdict was in favor of Oracle, allowing for the largest software merger in history. IntroductionThe Oracle and PeopleSoft takeover of the early 2000’s was one of the most compelling business events in the information system industry that took place in quite some time. Oracle decided that in order to expand, it needed to evolve into the business of ERP. The best way for it to accomplish this was to take over a smaller company that already had the capabilities Oracle needed. PeopleSoft was that company. Through the course of about 18 months the two corporations battled it out as Oracle made bid after bid to buy PeopleSoft. In this report, we present the companies, what ERP is and a detailed account of what happened between Oracle and PeopleSoft.Overview of the Two Companies1Oracle was one of the largest IT companies of the late 1990s. It was founded in 1977 by Larry Ellison, who at one point shared the title of richest man in the world with Bill Gates. It wasoriginally titled Software Development Laboratories, and has now expanded into 145 countries with a total of more than 50,000 employees. In order to understand why this takeover was as hostile and aggressive as it was, one needs to understand Larry Ellison. Considered the most eligible man in Silicon Valley, he is currently 9th on the list of wealthiest people in America, with a net worth of $19.4 billion. His rather brash nature has earned him a reputation of being a brilliant businessman. He is adventurous, and his hobbies include boat racing and flying fighter planes. He almost died while navigating his boat on his way to winning the America’s Cup. He also at one point tried to purchase a Russian MiG fighter jet. However U.S. customs wouldn’t allow it in the country. These are just a few examples of the type of personality he has. Oracle has long been considered the leader in database and infrastructure systems. These databases consist of a series of programsthat work together to allow a company to run its information infrastructure.PeopleSoft was founded a decade later than Oracle in 1987 by David Duffield. Duffield first worked for a company called Integral. However, he ventured off on his own after Integral turned down his idea for a Client-Server System. PeopleSoft was a much smaller company than Oracle, but ir still served thousands of other companies and governments with its ERP products. The takeover was a major concern for these clients, because they didn’t want to lose support for the products they had been using for a long time. ERP2ERP stands for Enterprise Resource Planning. ERP consolidates all of a business’ “back offices” tasks into one large, integrated program. A “back office” task is anything customers do not see, such as logistics, shipping, receiving, finances, etc. The main difference between an ERPsystem that PeopleSoft specialized in and the infrastructure systems that Oracle specialized in was the fact that an ERP system is one big program whereas an Oracle infrastructure system is a series of programs that work together.These systems are expensive to implement; many companies spend millions of dollars setting up an ERP system. The problem is that many do not know how to do so successfully. Thisis where the productivity paradox applies. Companies are spending all of this money, but productivity is staying relatively constant because they do not have the knowledge of how to run one of these systems. However, ERP implementations helped solve the productivity paradox in the end. So why did Oracle want PeopleSoft? While Oracle was number one in databases, they were number two behind SAP in ERP software. In order to gain market share and maintain long term growth, Oracle decided it needed to acquire PeopleSoft due to the fact that PeopleSoft had the capabilities Oracle needed.Oracle as a Mature CompanyIn the 1990’s, Oracle was a leader in the high-tech industry and in its own segment of database computing. Today the company is still a leader, but it faces two issues that must be considered. The first issue is that the product has reached a mature phase in its lifecycle. Oracle is no longer experiencing growth and it could in fact be in the decline phase shortly if new innovations are not created to help revive the company. The second issue is that of competition in3the market. When Oracle was at its peak, it was a leader among just a few other large companies.Now that the company has been around for many years, smaller companies are entering the market and are posing a threat to Oracle. The concern of Oracle and other traditional database companies having a mature technology can be explained by the type of data that its products help manage. Structured data, i.e. the data can be queried and reported based on certain relationships. Examples of this are running models, typical number crunching, or forecasting. The other type of data prevalent in thebusiness world today is unstructured data. Examples of the data include audio files, images, webvideo or documents such as spreadsheet files or word processed documents (Weglarz, 2004). In order for Oracle to innovate, entering this market of unstructured databases is a good idea. Another challenge Oracle has encountered is the competitors in the market. Small entrants are quickly nibbling away at the database market. They are also a large threat to Oracle because the small companies offer innovative improvements on existing products. An example isa “diskless” database that typically runs much faster because of 64-bit computing as opposed to 32-bit. The Oracle vs. PeopleSoft StorySince Oracle needed a way to incorporate ERP production into its company, it had one of two options. First, it could have made an ERP system itself, but that would have cost millions of dollars as well as taken away precious time. The other option for Oracle was to acquire a company that
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