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July 18, 2003

Gloves Off

Larry Ellison pulls the rug out from under the ERP market

by David Stodder

And thus ended the genteel era in enterprise application software. Not five issues ago, Intelligent Enterprise hosted a civilized discussion that featured strategic executives from J.D. Edwards, Oracle, PeopleSoft, and SAP. We talked about delivering higher return on investment, creating component applications, and other mannered topics of conversation. We didn't discuss who would eat whom first.

In early June, with the market for enterprise applications still wilting, PeopleSoft made a friendly offer to buy J.D. Edwards, an event that put in motion Oracle CEO Larry Ellison's own devilish plan. "Disarming a competitor with a hostile bid is a classic corporate tactic," wrote Andrew Ross Sorkin in The New York Times (June 16). While Ellison called himself a serious man, it appeared that Oracle stood to gain, whatever his true intentions. PeopleSoft responded by brushing off Oracle's bid and sweetening its offer for J.D. Edwards. Meanwhile, with the fiscal quarter winding down, most ERP customers decided to take a seat, and wait and see what would happen.

ERP Goes BAM

And that's where things were left. As a breaking story, events will have surely run beyond my words here. The upshot, however, is pretty clear: Until some significant technology advantage comes along, the only market share gains to be had will come at the expense of competitors.

Perhaps that advantage will be business activity monitoring (BAM). I asked Stewart McKie, author of this issue's "The Big BAM," what he drew from the tumult. "Recent moves toward consolidation at the top end of the ERP market signal the beginning of the final stage of maturity," McKie said. "In the end, this consolidation might not be good news for businesses because ERP choices will have narrowed. And it's certainly not great news for the chasing pack of solution providers, who will have to overcome enormous brand power."

What about BAM, a significant innovation in the ERP space? "Consolidation might be good news," McKie observed. "All the major vendors recognize the value of BAM to improving ROI for existing customers and as something smart new customers desire. BAM will also grow in importance as ERP transitions from being about discrete products to loosely coupled processes that depend on both locally installed product executables and remotely accessed Web services. Then, as activities become more complex from a technology perspective and cross more boundaries from a business perspective, users of business management applications will come to wonder how they ever managed their businesses without BAM."

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