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Oracle Shifts to Integration Mode

Oracle has begun laying the foundation for its eventual marriage with PeopleSoft .

In a briefing with reporters, Oracle President Charles Phillips reaffirmed the company's plans to solidify the deal before Dec. 30. The executive is expected to meet with PeopleSoft brass today to offer an olive branch to PeopleSoft employees, customers, resellers, partners . . . and in the process, discuss the transition plan.

"Operationally, this [merged company] will hit the ground running in January. PeopleSoft employees will become Oracle employees and you should see a successful transmission over the next few months," Phillips said.

Regarding PeopleSoft's 11,600 employees, Phillips stuck by the same story he gave at last week's Oracle OpenWorld conference: to retain the developers and support organization staff and shave the redundant positions in administration staff. Previously, Oracle considered layoffs of as much as 6,000.

Job cuts or no, Michael Dortch, a principal analyst with IT consultancy Robert Frances Group said now the real fun of integrating the No. 2 and No. 3 enterprise resource planning software vendors begins.

"Oracle has to literally cash the check its mouth has been writing for several months about continuing to enhance, maintain, and support PeopleSoft solutions," Dortch told internetnews.com.

The challenge for Oracle, even Phillips admitted, is how many customers stay on board with their maintenance contracts, which was one of the motivations for acquiring PeopleSoft in the first place. Oracle said its software license updates and product support increased 12 percent to $1.25 billion in the last three quarters. PeopleSoft reported license revenue of $161 million for its third quarter for products like its recently revamped Enterprise One and World Product lines.

Even before the merger contract was signed, Oracle publicly committed to enhance PeopleSoft 8 and develop a PeopleSoft 9, as well as enhance JD Edwards 5 and develop a JD Edwards 6.

"These are a lot of smaller customers we can't reach," Phillips said in reference to the JD Edwards line. "We also would like them to take a look at the Oracle eBusiness Suite special edition, which is our mid-market product."

Oracle released the eBusiness Special Edition earlier this year in anticipation of its need to migrate JD Edwards customers. Phillips said Oracle continues to sign up resellers.

The executive said Oracle was very impressed by the breadth of alliances that PeopleSoft had amassed in the past 18 months since the announcement of the unsolicited offer. PeopleSoft added 138 new customers during its fiscal third quarter. Some of the relationships would be valuable and some not, Phillips added.

One of those relationships just happens to be with IBM . The joint $1 billion, five-year partnership bundles WebSphere middleware in every future shipment of PeopleSoft products.

Phillips said he was not privy to the details of the agreement but added he is skeptical that a contract was ever actually signed.

"It's not clear what PeopleSoft committed to do with WebSphere," he said. We have a strong application server that we think is better. We are not interested in adding more IBM technology to the stack."

In addition to IBM, Phillips said PeopleSoft's other partnerships with the U.S. government and financial services firms would prove extremely valuable. The acquisition gives Oracle the keys to the U.S. Federal payroll unless the Congress requests a proposal for a re-bid on the contract.

"PeopleSoft's strong presence in the federal government, as well as state and local governments and the education sector, made the company a more attractive acquisition target," Phillips said.