Oracle-PeopleSoft merger would boost competition, says SAP

An Oracle-PeopleSoft merger would boost competition in the market for enterprise applications, an SAP executive testified in the...

An Oracle-PeopleSoft merger would boost competition in the market for enterprise applications, an SAP executive testified in the US government's case to block the proposed merger.

"We anticipate a greater amount of competitiveness," Richard Knowles, vice-president of SAP, a subsidiary of Germany's SAP, said.

Knowles testimony was called by Oracle, which is challenging the US government's attempt to block its $7.7bn (£4.2bn) hostile bid for rival PeopleSoft.

Knowles also said all SAP buyers have high functional needs and that SAP competes against a number of suppliers, not just PeopleSoft and Oracle.

The testimony undermines the US Department of Justice's argument that only Oracle, PeopleSoft and SAP can meet the human resources and financial management software needs of large and complex enterprises.

In the US, SAP holds 34% of the enterprise application market. If the acquisition of PeopleSoft by Oracle goes through, Oracle would have 38% market share, leap-frogging SAP, Knowles said.

"Oracle would become the number one provider in the US, 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 sales people being marshaled into a position competing against us."

Knowles added that the enterprise applications firm is "neutral" in the case against the merger.

The DOJ does not see Knowles' testimony hurting its case, said Thomas Barnett, deputy assistant attorney general.

"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 suppliers in the segment such as Lawson Software, American Management Systems and Microsoft.

The DOJ's case rests largely on convincing the judge that a market for "high function" human resources and financial management software for large and complex organisations exists. This is the market where the DOJ argues Oracle, PeopleSoft and SAP have no real competition.

Joris Evers writes for IDG News Service

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