Successful software takeover could cost university millions

By Matthew Meyerhofer

If Oracle Corporation succeeds in their bid to acquire Pleasanton-based PeopleSoft, Inc., it could wind up costing Santa Clara $5 million or more if the university decides to switch platforms as a result, officials say.

Santa Clara's Chief Information Officer Ron Danielson said in addition to the minimum $5 million price tag, any switchover from PeopleSoft administrative software to a competing platform would probably take at least three years.

Redwood City-based Oracle is attempting to grow its business through acquiring PeopleSoft by means of a hostile takeover, offering PeopleSoft shareholders $19.50 a share. Thus far, however, shareholders have been, for the most part, unwilling to part with their shares.

If the takeover suceeds, Oracle has pledged that it will continue to support and develop the PeopleSoft product line for at least 10 years.

"PeopleSoft products will be enhanced and supported and Oracle will protect and improve the substantial investment PeopleSoft customers have already made," stated Charles E. Phillips, Oracle's executive vice president, in a June 30th press release. "It is not necessary for PeopleSoft customers to migrate to a new platform."

However, Danielson was skeptical that Oracle would continue to develop the PeopleSoft line of products sufficiently to meet Santa Clara's needs.

"They have said that they will maintain the PeopleSoft line of products for ten years, but they haven't said what 'maintain' means."

"They don't have to continue to provide new and enhanced functions for the software," Danielson said. "If it turns out that Oracle turned the PeopleSoft product into an orphan so that it was not being developed anymore, then we would have to go looking for new software in order to continue to improve the administrative services that we offer to the campus."

People Soft's board of directors took a firm stance against the takeover in July.

"Oracle's statements regarding its plans for PeopleSoft's products create serious uncertainty as to the level of support and enhancements that PeopleSoft customers could expect. Customers will not commit millions of dollars to enterprise software that is subject to such uncertainties," stated Peoplesoft's board of directors in an letter to its stockholders.

Danielson also said that Oracle is new to the field of administrative software for institutions of higher education, and that this might affect the quality of their software and services.

"Any time you are dealing with new code there are going to be bugs. Any time you are dealing with a company that has not worked closely in higher education there are going to be things they don't understand about higher education," Danielson said. "Three or four years from now those concerns may be allayed because they've had time to get the bugs worked out, but right now it causes me real concern."

Santa Clara first signed a contract with PeopleSoft in 1996, and the first modules were implemented in 1998.

"In retrospect, I think it was the right decision," Danielson said. "It hasn't been an easy five years, but I think given where we are now and where the market is now for administrative software, Santa Clara made the right decision."

Santa Clara uses PeopleSoft software to run its finance, human resources, and student systems administration (such as eCampus).

"I think it's fair to say that we now believe the PeopleSoft systems provide very good support for university operations," Danielson said. "We typically find each new release provides improved functionality and reliability."

Oracle announced on Oct. 10, 2003, that it extended the $19.50 offer for all of the common stock of PeopleSoft to midnight EST on Wednesday, Dec. 31, 2003. However, PeopleSoft is currently trading well above Oracle's offering price, closing at $20.73 on Tuesday. Additionally, Oracle is still waiting for federal approval of their proposed acquisition.

"What I would recommend to the campus if there was a hostile takeover by Oracle, and it turns out that Oracle was not able to provide us the support for the PeopleSoft product that we needed, is that we start again from scratch."

Contact Matthew Meyerhofer at (408) 554-4546 or at Mmeyerhofer@scu.edu.