Microsoft woos PeopleSoft customers--even big ones

The Monday announcement of the program comes just after competitor Oracle closed its long, drawn-out takeover bid for former rival PeopleSoft. During a federal antitrust trial that challenged Oracle's merger proposal, Microsoft executives testified that the software giant had no immediate plans to enter the business applications software market for large corporate customers--and that, as a result, the market would have fewer competitors.

The software giant, however, is wooing PeopleSoft Enterprise customers with its Microsoft Business Solutions-Great Plains products. Meanwhile, small and medium-size businesses served by PeopleSoft EnterpriseOne and PeopleSoft World are being directed to Microsoft Business Solutions-Axapta. These customers would receive discounts on software, services and technology to ease the transition.

Under the offering, Microsoft is cutting its license fee by 25 percent through June 22, as well as reducing the cost of the first year of its Microsoft Business Solutions support and enhancement programs by 25 percent. The same offering would be applied to PeopleSoft customers switching to either Microsoft Business Solutions-Solomon or Microsoft Business Solutions-Navision.

"Businesses that use PeopleSoft technology are facing some difficult choices today, and we're committed to providing them with the best options for moving forward," Doug Burgum, senior vice president of the Microsoft Business Solutions Group, said in a statement.

Burgum, who was called as a government witness in the Oracle antitrust trial, testified that Microsoft was interested in protecting its database business, which it feared would be eroded if Oracle acquired PeopleSoft. Microsoft competes with Oracle in the database market.

That concern also drove Microsoft to approach SAP, the market leader in business applications, about a potential merger between the industry giants. But those talks stalled early last year, due to the complexity of the deal and the integration that would have followed, Burgum testified at the time.

During his testimony, Burgum stressed that Microsoft had no plans to compete with SAP, after its failed merger talks, nor with Oracle or PeopleSoft for large, complex enterprise customers seeking to buy business applications software.

He noted at the time that Microsoft was more interested in selling its business applications to midsize businesses with fewer than 500 employees.

Microsoft officials say their target market has not changed with this latest offering to PeopleSoft customers.

"Our target market has remained consistent. There is a substantial portion of PeopleSoft's business that is within our target market, from midsize customers to divisions of large corporations to very large enterprises," said Tami Reller, vice president of the Microsoft Business Solutions Group. "We think there will be a substantial number of PeopleSoft customers who will come over."

Reller said a number of issues exist as to whether Microsoft would be able to provide a large enterprise customer with the type of functionality needed.

"There may be customers with more than a $1 billion in revenues who can use us and some who cannot," Reller said.

Analysts agree.

"This is not a change in policy for Microsoft. If they wanted to go after the high end of the market, they still would need to build a product," said Jim Shepherd, an analyst at AMR Research.

Shepherd further noted that companies that have spent millions of dollars on their PeopleSoft business systems are unlikely to tear out those systems and start over just because Microsoft is offering a discount.

The Microsoft offer "is barely worth the paper the press release was written on," Shepherd said.