Tech & Work

Testimony: SAP, Microsoft would rein in Oracle

Accenture exec tells court that credible competition would still exist after an Oracle-PeopleSoft merger.

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By Alorie Gilbert
CNET News.com

SAN FRANCISCO—It's a question of when, not if, Microsoft will compete with SAP, Oracle and PeopleSoft in the market for business applications, an Accenture executive testified Wednesday at the Oracle antitrust trial.

"It's just a matter of time," said Christy Bass, a global managing partner at the computer services firm, when asked whether Microsoft and Germany's SAP compete.

Bass, who helps Accenture customers that install SAP's applications, testified on behalf of Oracle, which is defending a $7.7 billion bid to buy rival PeopleSoft against a U.S. Justice Department injunction to block the proposed merger. The Justice Department argues that such a merger would leave insufficient competition in a market that would be dominated by Oracle and the other remaining big-three firm, SAP.

Bass' testimony could bolster a central argument in Oracle's defense—that Microsoft is gearing up to increase its share of the market for software programs that help big companies with their accounting and human resources tasks. The Justice Department argues that SAP, Oracle and PeopleSoft are the only suppliers in that market, and that Microsoft is not a viable option for large, global companies.

The theme of much of Bass' testimony was the strong position that Germany's SAP holds in the business-management applications market. The Justice Department has argued that although SAP is the largest supplier of such software in the world, it is often more expensive than Oracle and PeopleSoft and therefore is not a viable option for some companies.

Bass contradicted that stance, saying that SAP's software, including installation and maintenance, is sometimes cheaper than PeopleSoft's and Oracle's and that costs vary from one customer to the next.

Oracle attorney Dan Wall said the Accenture testimony demonstrates a weakness in the government's antitrust case—the SAP factor.

"The government theory is predicated on the notion that we could unilaterally raise prices, but we can't do that if we have strong competition against us," Wall said. "SAP is a powerful inducement (for Oracle) to behave competitively now and forever."

Also Wednesday, a PeopleSoft executive testifying for the Justice Department said his company and Oracle often discount their software by 50 percent or more when they're competing with each other for big corporate accounts.

Phillip Wilmington, PeopleSoft's executive vice president of North American sales, outlined example after example of price cuts it offered customers when facing off against Oracle. Those customers included Target, Nextel Communications, Cardinal Health and CareFirst, he said.

In a similar situation with Lawson Software, PeopleSoft did not try to match Lawson's prices but won the account anyway, Wilmington said. That's because Lawson's products are viewed as less adequate by many potential customers, he added. Oracle has argued the Lawson is a up-and-coming competitor.

Wilmington was scheduled to be cross-examined by attorneys for Oracle on Thursday.

In earlier testimony Wednesday, a Justice Department witness, the chief information officer for the state of North Dakota, said it pitted Oracle and PeopleSoft against each other for a $21 million software contract. The state chose PeopleSoft and said the two companies cut their prices nearly in half during the state's meticulous review process.

"I don't believe we would have seen that kind of price competition if we hadn't had the head-to-head competition," between Oracle and PeopleSoft, said Curtis Wolfe, the North Dakota CIO.

The trial opened June 7 with the Justice Department presenting its case. Testimony has come from large companies—DaimlerChrysler, Verizon and others—that use the kind of software Oracle and its competitors sell. The Justice Department's witnesses have expressed concern that software implementations would cost millions of dollars more in a market without PeopleSoft, and current PeopleSoft customers have said they fear Oracle will stop supporting their software, making costly new systems a necessity.

Oracle is expected to present its case after the Justice Department finishes. The nonjury trial is about four weeks.

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