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Oracle and PeopleSoft: Bad for Consumers?

Oracle and PeopleSoft: Bad for Consumers?

    PeopleSoft was established in 1987 as a software company that offered solutions to governments, large corporations, and organizations. The company began with an original idea about a client-server, which was a new idea at the time. Over the next ten years, PeopleSoft established itself firmly in the industry, expanding its product line to provide student tracking software services to universities, such as the California State University system. In the late 1990’s, PeopleSoft began receiving complaints as to the quality of their products. Cleveland State University sued over lost student records; several Midwestern universities followed suit, complaining about quality and performance issues; finally, California State University followed with its own complaint. After spending $500 million on PeopleSoft software, the university system experienced so many problems that the California legislature was forced to intervene with an investigation. In 2003, PeopleSoft acquired J.D. Edwards as a means of providing products to smaller companies who could not afford the PeopleSoft products. Oracle began a hostile takeover process in 2003, which led to antitrust investigations.

    Oracle has its own extensive line of software products, including a popular data mining program. Its competitors at the time of the takeover were PeopleSoft and J.D. Edwards. Because J.D. Edwards became a part of PeopleSoft, Oracle’s hostile takeover bid meant absorbing all competition and essentially becoming a monopoly. When an industry has many competitors, consumers benefit both from the choices available as well as competitive pricing strategies. Oracle’s position as the only provider of such client-server software means that consumers will have few options in regard to software choices and prices. In addition, Oracle’s hostile takeover will dissuade other software manufacturers from getting into the client-server software business. Such lack of competition will result in fewer innovations in the future.

    There are advantages and disadvantages to Oracle’s takeover of PeopleSoft. It is possible that the takeover will turn out to be a good prospect for consumers. PeopleSoft has had a problem with bugs in its various software programs, and these bugs have led to problems for their customers, and ultimately, lawsuits. Ellison’s plan for their software was to incorporate it, but not market it separately. This means that they will be responsible for PeopleSoft’s products, and potentially will be able to provide new eyes for PeopleSoft’s software problems. As long as Oracle supports PeopleSoft’s products, than consumers will benefit from the merger.

    There are certain conditions under which consumers will not benefit from the takeover. The first is if Oracle has any plans to discontinue the distribution or support of PeopleSoft products. These products are relatively expensive, and as such, it would be difficult for corporations, organizations and governments to restructure its databases around new Oracle products. If Oracle does not support PeopleSoft products, then customers whose software contains bugs might not get the help they need. The next factor is that of J.D. Edwards. As this company was acquired in order to provide consumers with a less expensive version of PeopleSoft software, Oracle needs to maintain the availability and price of J.D. Edwards products. Finally, the 2005 success of Oracle’s hostile takeover bid is shocking in light of the problems that Microsoft has had with antitrust issues. Oracle needs to be watched carefully in the future in order to monitor its potential to become a monopoly.