Ellison extends support promise in PeopleSoft bid

Oracle will bypass the PeopleSoft board and speak directly to their shareholders in an attempt to gain support for its hostile bid, Larry Ellison, chief executive of Oracle said during a keynote speech at the Oracle AppsWorld conference in London today. He also said that PeopleSoft customers would benefit from a takeover because Oracle would extend support for older versions of PeopleSoft products beyond the timescales set by PeopleSoft.

"Craig Conway (PeopleSoft's chief executive) said he wouldn't sell at any price -- that's not a good position to begin negotiations," said Ellison. "PeopleSoft has said it will terminate support for PeopleSoft version 7 at the end of this calendar year. We are going to extend support beyond that -- for several years," said Ellison who confirmed Oracle's commitment to support PeopleSoft version 8 for ten years, should the hostile bid be successful.

Ellison was the only executive at AppsWorld to speak about the proposed takeover because discussion of the subject was banned from other keynotes and round-table sessions.

Ellison also questioned the hype surrounding Web services, which he believes cause huge administrative problems: "There is no way that a clever systems integrator, using Web services or any other method, can solve this problem." He went on to explain that if a company used Web services to 'glue together' separate packages for its various departments, and one of the suppliers released an updated version of its package, "you would have to unglue that system, upgrade it and then glue it back."

Customer Resource Management (CRM) systems were next on Ellison's list of targets: "A CRM product can never give you a 360-degree view of your customers -- unless the customers never pay you. Because CRM systems do not bill customers, they have no idea which customer has paid. They cannot do what they are supposed to do." According to Ellison, in order for an enterprise system to provide a full picture of a customer, it needs to not only have access to general information about that customer, but it must also have access to accounting and other financial information, on a global level. "There is no reason to have computer systems that are organised around national boundaries. We have to organise our taxes within national boundaries because that is the law."

But analysts believe that Oracle is desperately trying to increase interest in other areas of its business to fight the general decline in the enterprise applications market.

Evan Kirchheimer, lead analyst and manager CRM at Datamonitor, estimates that the enterprise software market has declined by 25 percent over the past two years, which is why, he believes, the market is consolidating and companies such as Oracle are looking to expand their sales activities.

"Companies like Oracle have seen their enterprise application divisions shrink. The likes of Oracle, Siebel, SAP and PeopleSoft -- who are all at the top end of the market -- are trying to profit from growth in key sectors." said Kirchheimer who estimates that the market shrank so much in the past two years that it will not return to the levels of 2001 for another four years.

Kirchheimer also believes that the increasing complexity of many enterprise applications actually makes them less cost effective: "Enterprise apps are extremely expensive and they haven't proven themselves. So a lot of projects go beyond their original scope and many users don't use the applications the way they were intended, which means user licences are wasted," he added.

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