With all eyes riveted on Oracle's ( ORCL) hostile bid to take over PeopleSoft ( PSFT), Germany's SAP ( SAP), a far less flamboyant company headed by a far less flamboyant CEO, is increasingly positioned to be the real winner.

"SAP is sitting in the catbird seat," said Betsy Burton, an analyst with the influential Gartner research group. "They are sitting outside the fray and customers are going to view them as a safe choice," she said.

Indeed, Wall Street is already casting that vote. Since Oracle announced its intention Friday morning to buy PeopleSoft for $5.1 billion, or $16 a share, SAP shares have appreciated by 11%, closing Tuesday at $32.73.

Earlier Tuesday, SAP announced that it already has begun approaching customers of PeopleSoft and J.D. Edwards ( JDEC), urging them to defect. Although SAP, the world's largest supplier of enterprise application software, didn't supply details, a spokesman told reporters in Europe that financial incentives would be on the table.

It's certainly worth a try. In the last few quarters, SAP has lost a number of major deals in head-to-head competition with both PeopleSoft and J.D. Edwards, said analyst Jamie Friedman of Fulcrum Partners, who raised his target price to $35 on Tuesday. Customers that got away, he said, included DaimlerChrysler ( DCX), Rand Refinery and Pharma Resources ( PRX). With the future of both software rivals in doubt, SAP is well-positioned to take deals from them next time, he said. (Fulcrum does not have a banking relationship with SAP.)

Even Siebel Systems ( SEBL) CEO Thomas Siebel, who is not given to saying nice things about the competition, said "this (the merger bid) will certainly have a deleterious affect on PeopleSoft ... the companies that gain will be Siebel Systems (which he heads) and SAP."

SAP is aided in no small measure by what industry veterans call the FUD factor -- that is the fear, uncertainty and doubt spread by the Oracle bid, and to a lesser extent by PeopleSoft's earlier (friendly) announced effort to acquire rival software maker J.D. Edwards.

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.

In fact, his company launched more than 6,000 notes to customers less than two hours after Oracle announced its bid. "Our clear priority right now is the merger with PeopleSoft," said a company spokesman. "But we are, of course, remaining a great partner to our customers."

JDEC has a bit more breathing room; its fiscal third quarter doesn't close until the end of July.

Although Oracle appears to be on top of its game now, Rod Johnson, vice president of AMR Research, said the company will have to perform surgery on its image to keep the trust of customers. "SAP is looking like a saint now because Oracle's actions are far from being customer-centric," he said.

SAP is doing more than just playing good cop, said Burton. "They have methodically, and now aggressively, moved on a broader infrastructure strategy, including middleware." And an SAP that could position itself as a platform player would be formidable competition for a combined Oracle/PeopleSoft and even IBM ( IBM), she said.

Good for Siebel, Too

And what about Siebel Systems, a troubled company clinging desperately to its market share lead over SAP in the CRM space?

"They are being backed into a corner," said The Yankee Group's Kingstone. The trend is for companies to offer broader and broader offerings, she said, but Siebel hasn't moved from its core business of front-office applications into the back office, where SAP dominates.

Nevertheless, Siebel Executive Vice President David Schmaier said that the merger flurry "would be good for Siebel." Why?

"This is an attempt by a struggling application provider to bolster its share by buying customers," Schmaier said. In the short run, he says, competing execs will be too busy with internal issues to go after sales.

Longer term, many PeopleSoft customers may not want to migrate to Oracle applications if the merger succeeds, Schmaier said. So his company is already developing software that will make it easy for former PeopleSoft customers to port their applications to Siebel.

In fact, a note to customers by Gartner suggests that Siebel might be a good choice for companies that can't wait until the smoke clears to buy new software.

Can Siebel stand alone? "We are entering an era of dramatic consolidation. The winners will be the companies who sell broad portfolios," said Rod Johnson, vice president of AMR Research. Siebel, he said, is too narrow. It doesn't have the applications.

One solution: buy them. Companies like Lawson ( LWSN), a PeopleSoft competitor, or even JDEC, if the deal with PeopleSoft dies, would fit the bill, Johnson said.

The other alternative is less to Schmaier's liking: be purchased. Oracle in the past reportedly talked to CEO Thomas Siebel, a former Oracle executive, about a merger. And some analysts think IBM would be a great parent. After all, in an era of top-to-bottom software stacks, Big Blue still lacks significant presence in the application market. It would be a major change, of course, because IBM now teams up with application companies like PeopleSoft.

But if PeopleSoft disappears, why not buy Siebel. "In the long run, IBM could be the biggest winner of all," says Kingstone.