Technology analysis

When
Oracle raised the price of its hostile takeover bid for Peoplesoft from $5.1bn
(£3bn) to $6.3bn (£3.8bn), it wasn’t just Peoplesoft customers who were left
feeling anxious.

Amid
the flurry of takeover bids and lawsuits that had beset the enterprise software
space in previous weeks, Oracle’s renewed offer raised the stakes in a battle
that has far-reaching implications for the entire HR community.

Launching
its bid this month, Oracle made it clear that customers of the target company were
in for an interesting ride.  In a move
that provoked outrage, it declared that if the bid went through, it would cease
development of future generations of Peoplesoft products.

While
CEO Larry Ellison later threw in some sweeteners about extending support for
those products for 10 years, the message was clear: at some point, users would
have to migrate to the Oracle platform.

The
problem is, shifting to a new product architecture is a major task and many
Peoplesoft users have only recently completed a similar migration from their
older product sets to its newer internet-based architecture, version 8.

Fighting
back

While
users of older Peoplesoft applications may be less fazed – they faced an
upgrade of some kind anyway – these recent platform converts are being asked to
expend IT resources on an initiative that, today at least, offers little
tangible return.

It
is no surprise, then, that some customers are fighting back. The state of
Connecticut has begun legal proceedings in an effort to have the takeover
blocked on anti-competitive grounds, an argument that had been touted by
Peoplesoft itself. Pointing out that it was in the midst of a $100m (£60m)
Peoplesoft implementation and would be hit hard if the takeover went through,
the state vowed to bring other users into the fray.

With
Peoplesoft and Oracle exchanging their own lawsuits, the battle is set to get
more complex. For one thing, Peoplesoft has stepped up the pace of its own
proposed acquisition of mid-market enterprise software vendor J D Edwards, a
takeover that first prompted Ellison’s move and that offers an alternative path
forward for shareholders.

Major
consolidation

But
for the broader HR IT user community, the outcome is not the only issue.
Oracle’s bid for People-soft shows that the application software industry, hit
hard by the hi-tech slowdown, is due for a period of major consolidation.

Ellison
may have come under fire for shrugging off the huge investments Peoplesoft
users have poured into their existing HR set-ups and forcing them to switch
platforms, but a charitable view is he’s only stating out loud what some have
done before.

The
risk of disruptive change is ever-present in the software arena, but in today’s
climate, it should be a top priority when planning your future HRIT strategy.

By
Keith Rodgers,  co-founder of Webster
Buchanan Research, a research company specialising in human capital management

www.websterb.com

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