X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Oracle Vs Peoplesoft: The implications - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Oracle Vs Peoplesoft: The implications
Dec 15, 2004

The acquisition of the enterprise software major, Peoplesoft, by its larger peer, Oracle, goes in the direction of consolidation taking place in the global technology industry. Companies are acquiring either to break into a new domain or to extend their offerings in the same domain, but a new sub-domain. Key acquisitions that have been witnessed in the past include IBM acquiring the consulting arm of PricewaterhouseCooper’s (US$ 3.5 bn) and HP acquiring Compaq (US$ 25 bn) in 2002, Peoplesoft acquiring JD Edwards (US$ 1.8 bn) in 2003 and now Oracle taking over Peoplesoft (US$ 10.3 bn). The latest deal involving the world’s second (Oracle) and third (Peoplesoft) largest enterprise software makers would catapult Oracle into a closing distance of the market leader, SAP. This deal also would have ramifications for Indian software companies, who act as implementation partners for these majors who actually develop the enterprise software (see table below).

Enterprise Software leaders
Vendor License revenues*
SAP 4,475
Oracle 3,961
Peoplesoft 422
Siebel 326
* US$ m, 9mFY05 figures

Leading Indian software companies like Infosys, Wipro, TCS and Satyam provide package implementation services to their clients. These companies implement packaged solutions in areas of enterprise resource planning (ERP), supply chain management (SCM) and customer relationship management (CRM) to their clients. Here is the list of packages that Infosys, for example, implements through this offering.

Enterprise Software Vendor
ERP SAP, Oracle, Peoplesoft (and JD Edwards)
SCM i2, Manugistics, Oracle APS, Yantra, Ariba,
SAP APO
CRM Siebel, Oracle CRM, Peoplesoft CRM, mySAP,
Vantive, Amdocs Clarify

Let us understand what will be the impact of this merger for the companies involved and customers who use their products.

Oracle:  Apart from gaining a deeper penetration into the ERP and CRM domains of the enterprise segment, Oracle has successfully ‘removed’ one of its key competitors. This would go a long way in convincing Oracle’s clients that the company is now a one-stop shop for all their enterprise needs. The company will also stand to benefit from Peoplesoft’s technical strengths in the ERP and CRM spaces and will absorb the latter’s sales team and existing clients into its own.

Peoplesoft:  While bidding for Peoplesoft, Oracle had clarified its intent of not carrying forward with Peoplesoft’s products after the merger and only providing support and maintenance services to the concerned clients. Oracle has further stated that this support will continue till 2013. Thus, the merger puts existing users of Peoplesoft applications on the back-foot, as sooner or later, they would have to shift to an alternative product, either from Oracle or SAP.

Indian software companies:  As mentioned earlier, leading Indian software companies have been acting as implementation partners for enterprise software form Peoplesoft. This merger, thus, provides these companies with the opportunity to tap customers who will, sooner or later, have to shift from Peoplesoft to either Oracle or SAP. However, this might be a medium term opportunity as, after the initial period of the merger, the merged company might actually create less work as competition in the sector decreases. Over that, Oracle has reportedly stated that it will continue to support Peoplesoft applications until 2013. While this might be a positive for the existing users of Peoplesoft applications, as a shift would involve a huge expenditure, new users might be difficult to come by as implementation of enterprise applications form part of the long-term strategy of a company. As such, smaller companies like Hexaware, which derive a significant chunk of their revenues (almost 33%) from Peoplesoft implementation might stand to lose in the long-term on account of the shrinking market for the company’s products, if they fail to diversify. Hexaware actually has the second largest team working on Peoplesoft Technologies outside the US.

Conclusion
While package implementation does not form a major proportion of Indian software companies’ revenues (see chart above), the fact that the confusion with regard to the merger has now got over shall provide some relief to these companies. Over that, the medium term opportunity with regards to the shift from Peoplesoft to either Oracle or SAP might provide them the added momentum to grow this services segment.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE IT


Feb 21, 2018 03:23 PM

S&P BSE IT 5-YR ANALYSIS

COMPARE COMPANY

MARKET STATS