Seal The Deal

Dave Kelley, Contributing Editor

1/1/2005

Usually, discussion and analysis of a particular subject is a matter of bringing in a number of viewpoints, weighing them and making a case for the most likely futures. This year, however, is different, at least when the subject is ERP. This year, we can throw out the templates, because as 2004 wound to a close, the only story anybody really seemed to care or talk about in ERP land was the massive merger of Oracle and PeopleSoft.

A Done Deal
The two giants battled for much of 2004, with PeopleSoft struggling mightily to hold off Oracle's unwanted advances, but in December the merger became a done deal. And the implications began to show themselves almost instantly.

In his keynote speech at Oracle's OpenWorld, CEO Larry Ellison said Oracle would finish developing PeopleSoft 9.0, but then, "we are going to take the combined resources of Oracle and PeopleSoft enterprise teams and build a functionally merged product, so when PeopleSoft and Oracle people upgrade, it will be an easy and graceful upgrade. They will get a functionally richer, easier to use product." If that didn't prick up the ears over at SAP, what Ellison went on to say certainly did. "We are going to give SAP a good run for their money in this business. To do that, we need more customers and developers."

Altered States
There's no doubt the Oracle/PeopleSoft merger is going to alter the ERP landscape, but it's going to be a while before the real effects are felt by current clients of either company. For the near-term future, though, there will likely be little noticeable change, as both PeopleSoft and Oracle products will continue on their current development cycles. Perhaps the only really visible effect will be a slight speed-up on the PeopleSoft development side since PeopleSoft won't be spending so much time and energy fighting a takeover bid. And, as Ellison said at OpenWorld, "we are going to over support the PeopleSoft customers and invest heavily, to make sure we do a good job supporting PeopleSoft."

There's no official timetable -- yet -- for the future merging of the Oracle and PeopleSoft products, but it's safe to say that it won't happen for at least a few years. When the "functional merging" of the products does happen, it looks like it will be catching a wave that is just now starting to form. According to a ZDNet study, enterprise suites, including ERP, account for 50 percent of planned software projects for 2005.

SAP Dominance
SAP continues to pull in the lion's share of the ERP projects, but Ellison's planned assault on SAP's dominance may not be as quixotic as it seems. Data shows that even though the majority of IT managers wind up choosing SAP, they first look at other offerings; lately BEA, IBM and Microsoft have been getting most of the looks during the early-stage planning. That would indicate that while most IT managers do eventually go with what could be called the "safe" choice -- market-leading SAP -- those same managers are open-minded. And where minds are open, minds can be changed, creating real opportunity for the rest of the ERP field, especially if the projected growth of the segment pans out.

ERP's Future Potential
Driving at least some of that growth will be the fact that savvy IT managers and companies are really starting to exploit ERP's full potential. In a December 2004 alert, AMR Research's Kevin O'Marah pointed out that new product development and introduction (NPDI) is a critical component of the move toward demand-driven supply networks (DDSNs), and that NPDI is the "natural domain" of ERP.

According to O'Marah, "the real question for most midsize to large companies is whether their ERP backbone vendor is the best bet for building out real process and analytical tool support for NPDI. Leading companies like P&G and Gillette are still too sophisticated and complex for the first generation tools available from ERP vendors. But smart buyers are looking at the problem as another suite versus best-of-breed debate and concluding that deep-pocketed enterprise software companies like SAP and Oracle are likely to get there."

Linux is for Real
That the rich (SAP, Oracle, etc.) will probably get richer and more powerful isn't much of a surprise. What is a surprise is that the much-ballyhooed "Linux explosion" seems as though it's really going to happen in ERP. According to a Peerstone Research study, as of mid-2004, only about 2 percent of SAP, Oracle and PeopleSoft clients were running Linux as the base server operating system. No surprise there. But that percentage looks to skyrocket to 15 percent by 2007. That's somewhat surprising. What's really surprising is that of the respondents who said they'd be migrating from Unix servers, four times as many would be moving to Linux as would be migrating to Windows.

In a normal year, ERP probably wouldn't have commanded nearly the attention it did in 2004, thanks to the epic saga of Oracle and PeopleSoft. But don't look for ERP to fade away just because the merger is complete. The projected growth of ERP as a whole and the fact that Linux may really, really explode, should keep ERP on the front burner for the next several years.