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DOJ: Oracle-PeopleSoft rivalry fueled innovation

Oracle executive says Microsoft could serve largest businesses--in contrast to Larry Ellison's usual statements.

SAN FRANCISCO--Competition from PeopleSoft has spurred Oracle to add new features to its applications software, according to documents exhibited at the Oracle antitrust trial Friday.

In U.S. District Court, the Department of Justice displayed the documents while questioning Oracle Executive Vice President Ron Wohl, an Oracle witness. The agency is trying to convince the court to block Oracle from buying PeopleSoft, charging that innovation would decline and customers would suffer if the two companies combined.

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Wohl said Oracle develops new features and product in response to pressure from a variety of competitors, not only PeopleSoft.

The exhibits included Oracle e-mail and business planning documents and appeared to support the Justice Department's contention that the PeopleSoft-Oracle rivalry has been the source of innovation in the market for human resources and corporate accounting software.

"To combat PeopleSoft's Enterprise Services Automation products? (Oracle) development will be releasing Contingent Workforce Automation by the end of the calendar year, where we will automate the purchasing of temporary services and contingent labor," Oracle executive Tony Kender stated in an e-mail to Wohl and others at Oracle last year.

Questioned about the e-mail, Wohl rejected the idea that any single competitor shapes its development plans. "I don't think it was a response to what PeopleSoft had done," Wohl said. "It was a response to a need in the marketplace. SAP was doing it; PeopleSoft was doing it; and a number of smaller rivals were doing it."

Under questioning from Oracle's lawyers, Wohl said there was nothing to prevent Microsoft from beefing up its business applications programs to handle the demands of big, multinational corporations. "It's not the extremely difficult research problem that it was five or 10 years ago," Wohl said.

Oracle has contended throughout the trial that Microsoft is a growing competitive threat in the applications market and would check Oracle's boosted market power, following the proposed PeopleSoft acquisition.

The government--and Microsoft--says Microsoft's products aren't designed for large, complex companies and are therefore not a good alternative to Oracle, SAP or PeopleSoft, the three primary competitors in the applications market. A Microsoft executive testified earlier this week that his company has no plans to sell its business applications to companies with more than 5,000 employees--a customer segment at the center of the agency's antitrust concerns.

Wohl's statements are somewhat ironic. Oracle chief executive Larry Ellison has frequently derided Microsoft's technology for its lack of "scalability"--the ability of a software program to process a large number of transactions or handle many simultaneous users without slowing down or crashing. Yet Wohl indicated to the court that scalability--Oracle's competitive calling card--is no longer much of a differentiating feature.

Oracle filed a motion on Thursday, asking Judge Vaughn Walker to dismiss the case on the grounds that the government's case lacks evidence. The judge has not ruled on the motion. Instead, the judge asked each party in the case on Friday to agree upon common definitions for industry terms, such as enterprise resource planning and enterprise applications software.

Oracle President Safra Catz is expected to testify for the remainder of the day. The trial opened June 7, with the Justice Department presenting its case. Oracle began presenting it witnesses on Tuesday and is expected to rest its case sometime next week.