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: Stay Calm"> Stay Calm

To navigate a changing landscape, customers must think ahead to possible upheavals in the marketplace when they negotiate contracts with vendors, and as they design the underlying architecture for their enterprise systems. And when changes do catch them by surprise, they need to focus on their own operational plans, and not just react to the headlines. "The first rule is not to do anything in knee-jerk fashion—that's how you hurt yourself," says Jamie Lewis, chief executive of the Burton Group, a consulting firm that advises large companies on infrastructure technologies.

Remaining calm doesn't mean doing nothing. "Boys will be boys," says Dennis Callahan, executive vice president and CIO of $6.7 billion Guardian Life Insurance Co. of America, referring to the ego clash between Ellison and recently ousted PeopleSoft Chief Executive Craig Conway. Callahan sounds sanguine, but he isn't taking any chances: When he found himself caught in the software industry's biggest turf war to date, he quickly marked his own territory. The New York City-based company is an Oracle database customer as well as one of the first companies to sign on with PeopleSoft after Oracle announced its PeopleSoft takeover bid in 2003: The company will go live on PeopleSoft financials in early 2005. "Oracle can't afford to thumb its nose at its own installed base," he says.

Callahan reviewed the terms of his PeopleSoft contract and spoke extensively with Oracle and PeopleSoft executives as the takeover rhetoric fluctuated between scorched earth and sweet talk. "I will watch the situation closely, but I don't see a loss of support if Oracle wins," he says. "We'll be okay."

Other potential users have been scared off by takeover deals. "We've had clients considering PeopleSoft who have said, 'The hell with it, we'll go with SAP,' " says Michael Doane, a senior vice president at META Group Inc. One of the moves that undid Conway at PeopleSoft was his less-than-credible assertion that the uncertainty over the Oracle offer was having no impact on prospective buyers. And Burton's Lewis says he knows of one company, which he would not name, that pulled back on the deployment of Netegrity software after the CA announcement. "If you haven't deployed yet, that's the time to stop," says Lewis. "If you are just evaluating, or on the cusp of doing it, you can rethink. And you should rethink, even if you end up going ahead with the implementation. But if you are well into a project, or in production, yanking it can cause substantial damage."

10 Big Deals
The trend toward software industry consolidation may accelerate, but change has been a constant for enterprise software customers. Some big deals through the years:
OraclePeopleSoftpending$9.2 billion
Computer AssociatesNetegrity2004$439 million
PeopleSoftJ.D. Edwards2003$1.8 billion
EMCLegato2003$1.3 billion
IBMRational2002$2.1 billion
MicrosoftGreat Plains2001$1.1 billion
IBMInformix (database unit)2001$1 billion
Siebel SystemsOpenSite2000$440 million
Computer AssociatesPlatinum1999$3.5 billion
IBMLotus1995$3.5 billion
source: CIO Insight

That's where Heger finds himself. He says upgrading with PeopleSoft makes sense in light of Russ Berrie's needs and its investment of time and money in the software. "We've gotten very much better over time at understanding the tools," he says. "And we need them." The upgrade will allow everyone at the company to work over the Internet, and better support Russ Berrie's distribution facilities, including locations in China and the U.K. "An upgrade is built into our return-on-investment plan," he says. "We don't want to wait a year and then find out that nothing happens with the acquisition."

For Heger, the proposed buyout is déjà vu all over again. Russ Berrie bought its ERP software from J.D. Edwards in 2002, shortly before J.D. Edwards was swallowed by PeopleSoft. The difference is that Heger was pleased with that deal, because he believed, correctly, that PeopleSoft would support the products it was buying. His future with Oracle depends on establishing that same kind of trust. "We want a partner with skin in the game," he says.

Ironically, Heger has now cycled through his original short list of vendors from top to bottom and then from bottom to top. "Our choice came down to J.D. Edwards, PeopleSoft and Oracle, in that order," he says. Now he may end up as a customer of each of them, without ever changing his software.

This article was originally published on 12-01-2004
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