Oracle-PeopleSoft: One year on

And who said it wouldn't last?

After a contentious, protracted courtship, the Oracle-PeopleSoft merger has hit its one-year anniversary mark, with the post-merger marriage going relatively smoothly. PeopleSoft customers have not defected en masse in search of better software applications, and Oracle executives have touted a relatively quick integration of the two former rivals since the deal closed last year on 7 January.

But while the operations of the newly combined company have largely moved ahead as planned, the overall success of the merger in its first year has been a mixed bag. The company's stock remains lacklustre, and uncertainty still persists as to whether PeopleSoft customers will ultimately adopt Oracle's software once the technologies are integrated into its line of Fusion applications that are slated to hit the market in 2008.

"It's like saying the operation was a success, but we still have to figure out what to do with the patient's third leg," said Bruce Richardson, an analyst at AMR Research. "With the merger, Oracle got operating efficiency, but you have to ask yourself, what else did they get, once the dust settles."

Oracle has been able to retain more than 95 percent of PeopleSoft support customers following the merger, said Jeb Dasteel, vice-president of Oracle global customer programs. While the company ideally hoped to hang on to all customers, it set a goal of 94 percent to 96 percent retention, he added.

"We listened to the voice of the customer and helped them with the transition. We've done a good job at keeping a finger on the pulse of PeopleSoft customers as they have migrated to the Oracle environment," Dasteel said.

Before the merger's close, PeopleSoft customers had several looming concerns.

"They were mostly worried about Oracle [bilking] them on maintenance costs," Richardson said. Oracle and other enterprise software makers typically charge customers an annual fee, based on a percentage of the software licensing cost, for upgrades and bug fixes.

Customers were also leery of Oracle discontinuing support and development for the PeopleSoft applications they were running, he added. These software suites can sometimes cost millions of dollars and often require additional assistance from consultants to install, Richardson noted.

That concern was particularly valid, given comments that Oracle's chief executive, Larry Ellison, made shortly after announcing plans to launch a hostile takeover attempt of PeopleSoft. Ellison touted plans to discontinue PeopleSoft products and push customers to Oracle's software.

One PeopleSoft customer noted that there have been few surprises from Oracle since the merger closed.

"It's gone fairly well, even though I'm no fan of Oracle," said Peg Nicholson, former president of PeopleSoft's International Customer Advisory Board. "They took a short amount of time to figure out what they wanted to do, and they communicated that information to us quickly."

As the 2003 ICAB president, she had voiced concerns that the merger would reduce competition and leave consumers with few alternatives if Oracle dropped support for PeopleSoft products.

And while Nicholson, chief information officer at golf ball maker Acushnet, agreed the level of customer support hasn't declined, she noted that wasn't exactly a hard thing to accomplish.

"It's no worse, but it's hard to believe...

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