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PeopleSoft deepens ties with IBM

Tighter integration of business applications with IBM middleware seen as having little effect on PeopleSoft's Oracle problem.

SAN FRANCISCO--PeopleSoft will bundle its future business applications with IBM's infrastructure software as part of a billion-dollar technology and marketing agreement between the two companies.

At its Connect 2004 customer conference in San Francisco, PeopleSoft said Tuesday that it will integrate its enterprise applications with IBM's WebSphere middleware line, including IBM's Java application server, portal, and business process integration software. The two companies will also work to optimize PeopleSoft's applications to run on IBM's DB2 database and migrate PeopleSoft's development tools to the IBM-backed Eclipse open-source development tool program.

As part of the multiyear deal, PeopleSoft intends to ship IBM WebSphere middleware components with its applications at no extra cost to customers. The two companies did not commit to a start date for the bundled offering.

At a joint press conference at PeopleSoft's annual conference, PeopleSoft CEO Craig Conway said his company turned to IBM because it realized it lacked sufficient expertise in middleware, the software plumbing needed to connect business applications. To meet customer's needs, PeopleSoft needed a wide range of middleware infrastructure products, he said.

"This is the most ambitious, most aggressive announcement from IBM and PeopleSoft," Conway said. "Maybe the most ambitions from the enterprise applications business ever."

Conway also said the arrangement was not a skin-deep "press release announcement," noting that the letter of intent alone was more than 70 pages. The two companies will be dedicating people to joint development and expanded sales and marketing efforts, he said.

The companies will bring out tightly integrated products in regular intervals over the next few years, according to Conway and Steve Mills, senior vice president in charge of IBM's software business.

Oracle problem remains
Asked whether he was worried about the new partnership being at risk if PeopleSoft is acquired by Oracle, Mills said, "I'm not worried at all. Nobody knows the outcome of what that will be."

When Oracle first launched its unsolicited bid to acquire PeopleSoft, some industry observers speculated that IBM could step in as a "white knight" and buy PeopleSoft, an idea that Mills rejected. IBM's strategy is to partner with application providers and sell the underlying middleware, hardware and services to run those applications.

Analysts said the IBM partnership is not likely to have a large effect on Oracle's ongoing assault, though there is symbolic value to the deal.

"For PeopleSoft, this is an important vote of confidence from their most important partner," said Jim Shepherd, an analyst at AMR Research. "But it doesn't solve the underlying Oracle problem at all."

However, Meta Group analyst Barry Wilderman noted that the partnership could make an Oracle acquisition more difficult because PeopleSoft's applications will be built around IBM's technology, which competes with Oracle's own middleware line.

Aiming at NetWeaver
The closer integration between IBM's middleware and PeopleSoft applications will give customers more flexibility to modify PeopleSoft products and connect to other systems, the executives said. Because IBM's products are based on Java and Web services standards, customers will be able to plug PeopleSoft applications to other middleware products from other infrastructure software providers such as Tibco and BEA Systems, according to Mills.

The IBM partnership is a direct response to SAP NetWeaver middleware initiative, which SAP launched last year. Conway said that by going with IBM, PeopleSoft's applications will be gaining a more mature product than NetWeaver.

"NetWeaver began as a limitation in SAP's own architecture," Conway said at his morning keynote speech on Tuesday. "You have to hand it to SAP for promoting its limitation as an advantage."

For IBM, the PeopleSoft deal represents a major addition to its partner program to recruit more application providers to use IBM's middleware. IBM already had development partnerships with SAP and Siebel as well as hundreds of smaller independent software vendors in specific industries.

But Mills said the deal with PeopleSoft represents a deeper commitment than existing application partnerships.

"We're not working to do a two-headed architecture. PeopleSoft is making choices," Mills said. "Our approach is to make the middleware invisible in the context of an application purchase but make the pluggable points visible."

The partnership expands on a deal that the two companies signed last year, in which PeopleSoft enlisted IBM to help port PeopleSoft applications to Linux. The new arrangement calls for closer technical integration, as well as a joint marketing and sales initiative, according to the companies.

PeopleSoft and IBM intend to sign a definitive agreement governing the deal in the fourth quarter this year.