As Foes Stew, SAP Ascends

A Freeze in the Market

"Oracle has frozen the CRM market," said Sheryl Kingstone, manager of the customer relationship management (CRM) practice for The Yankee Group. "They win no matter what happens."

Both Gartner and The Yankee Group, companies that make a living advising other companies on IT strategy, are suggesting that customers wait until the dust clears to make significant CRM software investments. Simply put, IT customers that spend millions of dollars to buy and maintain enterprise software want stability. Having a software vendor disappear into another company makes them nervous.

Making the FUD factor even more critical this week is the calendar -- PeopleSoft's second quarter will close in just a few weeks, a crucial time period in which as much as 60% of a software company's license revenue is clinched. "It's hard to argue that (PeopleSoft's) risk profile hasn't increased," said J.P. Morgan analyst Adam Holt, which has no banking relationship with any of the firms mentioned.

There's no way to estimate how much license revenue could disappear, or be postponed, but the last time there was a crisis at the end of the quarter (the outbreak of war in late March), many software companies were hit, and early April shows a flurry of missed-quarter warnings.

PeopleSoft, for one, initially told analysts to expect first-quarter license revenue of $125 million to $135 million. It came in at $85 million.

PeopleSoft hasn't forgotten, of course. And the furious response by CEO Craig Conway, who called the offer "atrociously bad behavior from a company with a history of atrociously bad behavior," and then supposedly threatened (and later withdrew) a lawsuit shows how sharply the company has been stung.

His partner in the J.D. Edwards merger, CEO Bob Dutkowsky, has been making antitrust noises, but probably more to the point, has been bombarding corporate customers with email alerts as the M&A war continues.