SAP: Oracle-PeopleSoft merger would boost competition

IDG News Service - An Oracle-PeopleSoft merger would boost competition in the market for enterprise applications, an SAP America Inc. executive testified today in the U.S. government's case to block the proposed merger.
"We anticipate a greater amount of competitiveness," said Richard Knowles, vice president of SAP America, a subsidiary of Germany's SAP AG. Knowles was called in federal court in San Francisco by Oracle Corp., which is challenging the U.S. government's attempt to block its $7.7 billion hostile bid for rival PeopleSoft Inc.
During questioning by an Oracle attorney, Knowles also said all SAP buyers have high functional needs and that SAP competes against numerous vendors, not just PeopleSoft and Oracle. The testimony undermines the U.S. Department of Justice's argument that only Oracle, PeopleSoft and SAP can meet the human resources and financial management software needs of large, complex organizations.
In the U.S., SAP currently holds 34% of the enterprise application market, Knowles testified. If the acquisition of PeopleSoft by Oracle goes through, Oracle would have 38% of the market, leaping SAP, he said.
"Oracle would become the No. 1 provider in the U.S. and would do anything to keep that position. We, from an SAP position, think that would be highly competitive for us," Knowles testified. "We're going to see more salespeople being marshaled into a position competing against us."
Still, asked if SAP has a position on the merger, he said the enterprise applications giant is "neutral."
The answer appeared to surprise Judge Vaughn Walker, who oversees the case. The direct question of whether SAP would mind if one large competitor was eliminated because it was folded into another wasn't asked.
The DOJ doesn't see Knowles' testimony hurting its case, said Thomas Barnett, deputy assistant attorney general, speaking during a break in Knowles' testimony.
"The notion that two competitors are going to be better than three competitors does not follow," Barnett said. "Customers have consistently testified that they would prefer three options, rather than two. I put more weight on the customers."
The DOJ's argument is that Oracle, PeopleSoft and SAP dominate the market for human resources and financial management applications and that an Oracle-PeopleSoft merger would create a duopoly, hurting competition and resulting in escalating prices. Oracle's argument is that there are several other viable vendors in the segment such as Lawson Software Inc., American Management Systems Inc. and Microsoft Corp.
The DOJ has yet to cross-examine Knowles. The head of Microsoft's Business Solutions group, Doug Burgum, was scheduled to take the stand later today. Burgum was expected to testifythat Microsoft doesn't target the high end of the enterprise applications market and focuses instead on small and midsize businesses.