IBM is a loser in Oracle/PeopleSoft deal

One aspect of the Oracle/PeopleSoft acquisition that is not getting enough press is the effect this deal will have on IBM. On one level, the acquisition was about competition in the enterprise applications space: Oracle gaining ground on market leader SAP and growing contender Microsoft.

But on another, and perhaps more significant level, the acquisition is about pulling through Oracle's database, middleware, and tools, which are a greater part of Oracle's revenue than its applications business. Oracle and IBM are fierce competitors in that segment. And, in September, PeopleSoft aligned itself more strongly with IBM, signing a five year billion dollar deal to incorporate Websphere, IBM's middleware and tools offerings, in sales of its applications, and treating IBM's DB2 as its preferred database.

Now, with Oracle's takeover of PeopleSoft, the IBM relationship appears to be a dead letter. According to Computerworld, Oracle co-President Charles Phillips said as much in a conference call with reporters yesterday,

"We don't have a lot of details on the IBM contract," said Phillips. "We're not that interested in adding more IBM to the stack. It's unclear what's been done. We have to take a look at that. Obviously, we have a strong application server we think is better. If [customers] need [J2EE-enabled technology], they can use the Oracle Application Server. With the database, it's hard to say. I would surmise at some point there would be customers who perhaps are using PeopleSoft on DB2, and they'll end up with the Oracle product and database as well."

According to an article in Internet News, Phillips also said that "he was not privy to the details of the agreement but added he is skeptical that a contract was ever actually signed [with IBM]."

Phillips' comments yesterday are further indication that over the long run, a key Oracle objective in the PeopleSoft deal is to move both the PeopleSoft and JDE product lines to Oracle technology. It won't happen in the next few years, inasmuch as Oracle has committed to enhance those product lines in the near term. But expect Oracle to begin laying the groundwork to transition them all to Oracle technology by the time the successor product to the lines (Oracle, PeopleSoft, and JDE) is developed, starting in the next three to five years.

This deal is largely about who will win the war of the technology stack. IBM just lost an important battle.

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