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SAP Buys PeopleSoft Support Provider

UPDATED: Looking to capitalize on the uncertainty caused by Oracle's $10.3 billion acquisition of PeopleSoft, SAP AG acquired TomorrowNow, which provides maintenance and support for PeopleSoft and J.D. Edwards (JDE) customers.

Financial terms of the deal for Bryan, Texas-based TomorrowNow were not made public. But officials said the purchase is the lynchpin for SAP to accelerate Safe Passage, a program to help SAP customers running solutions from PeopleSoft and JDE to move to SAP's enterprise resource planning solution, mySAP ERP.

Bill McDermott, president and CEO of SAP America, pledged on a conference call to provide customers maintenance and software support at 17 percent for PeopleSoft and JDE solutions.

Shai Agassi, a SAP executive board member, provided a practical example. If customers have a $1 million PeopleSoft contract and want to migrate to mySAP ERP with the same number of seats, they would earn a 75 percent credit on their original $1 million acquisition. In money terms, this means they would receive a $750,000 credit and pay up $250,000 to get MySAP and NetWeaver, he said.

Their maintenance from this point is 17 percent of the $1 million, meaning they're going down to $170,000, which is less than the 22 percent it would cost for them to move to Oracle.

So, SAP would charge a maintenance fee of 17 percent on the value of the mySAP ERP license. For that same 17 percent, SAP will also maintain customers' PeopleSoft and JDE installations through TomorrowNow while they are migrating to mySAP ERP.

The offering will initially be directed at the 4,000 companies running SAP who also run PeopleSoft and JDE software, McDermott said.

"Oracle's acquisitions of PeopleSoft and JDE is forcing customers to be very uncertain about the future of their software systems and the support for those systems, as well as the future of their product architecture," McDermott said. "Customers are telling us time and again that this is very disruptive."

To be sure, SAP's move is a strategic play to keep the distance between itself -- the No. 1 provider of enterprise applications in the world -- and Oracle, which is looking to battle SAP for that distinction. While Oracle has a long way to go, its purchase of PeopleSoft and JDE made it the clear No. 2 applications provider.

SAP's maneuver comes a day after Oracle launched the merged company at its headquarters in Redwood Shores, Calif. Oracle CEO Larry Ellison pledged to offer 10 years of PeopleSoft and JDE support.

Oracle hopes customers will be won over by Project Fusion, the company's Java-base application architecture that combines Oracle, PeopleSoft and JDE.

Agassi also refuted charges Oracle made during the Project Fusion launch that SAP does not have a standards-based platform.

He said SAP has a platform -- NetWeaver -- that supports Java. NetWeaver is a J2EE-based, open platform that is integrated and interoperable with Microsoft's .NET.

Agassi also noted that SAP's tool offering within NetWeaver is based on the Eclipse platform, while "Oracle's offering is based on a proprietary version of JBuilder."