Thursday, March 11, 2004 | Merger regulation [Oracle/Peoplesoft] | Merger regulation [Oracle/Peoplesoft] "According to the DOJ, if Oracle is allowed to acquire PeopleSoft, there will be a damaging reduction in competition. (It has been encouraged in this view by PeopleSoft's boss, Craig Conway, despite the fact that, not two years ago, he actually proposed a merger to Mr Ellison.) The DOJ says that the merger would reduce competition from three firms—Oracle, PeopleSoft and SAP, the market leader—to two. But this conclusion stems entirely from the DOJ's absurdly narrow definition of the relevant market as software “that can be integrated into suites of associated functions from a single vendor with performance characteristics that meet the demands of multifaceted organisations with high-level functional needs”. In other words, to the DOJ, the market is that served by companies that sell complete suites of business software to big firms.

But it requires only a slightly broader definition to reveal a market that would remain competitive even after an Oracle-PeopleSoft merger. Big computer-services firms such as IBM and Accenture thrive precisely by sticking together different software from different suppliers, some of which (Oracle, PeopleSoft and SAP) offer everything as a bundle, while others (such as Siebel, Lawson and Geac) specialise in different sorts of software. Meanwhile, Microsoft has announced its intention to enter the high-end business-software market, and has already spent $2 billion preparing to do so. The internet's disruptive presence has also begun to intrude, through “application service providers” who supply business software over the web. And, of course, there is the growing threat of outsourcing. Has the DOJ not yet heard of Bangalore? In this highly competitive market, there is no need to fear the merger of Oracle and PeopleSoft. Indeed, such a merger might even create a firm better able to compete with Microsoft. You don't need to be God, or Mr Ellison, to see the attractions of that."

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