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Tech Industry

Ellison's deja vu moment

CNET News.com's Charles Cooper explains why IBM's pursuit of Ray Ozzie and Lotus a decade ago offers lessons for Larry Ellison.

He's understandably giddy about receiving an unexpectedly early holiday gift, but Larry Ellison's next move should be to phone Ray Ozzie.

Ozzie, who these days is chief executive of Groove Networks, has a very personal understanding of what Ellison's going to face when Oracle takes ownership of PeopleSoft. When IBM launched a hostile bid for Lotus in June 1995, Ozzie, who invented Lotus Notes, became the subject of intense media scrutiny.

Would he stay or would he go (taking along his team of crack engineers and leaving Big Blue in the lurch)? Making sure Ozzie stuck around was key to the deal--so much so that CEO Lou Gerstner even flew by helicopter to Ozzie's Westford, Mass., headquarters to pay a personal call.

Right now, Topic No. 1 at watercoolers all across PeopleSoft's Pleasanton, Calif., campus is job security.

IBM wanted to buy Lotus because its Notes product was arguably the best commercial groupware technology product then in the market. The product also was central to Gerstner's plans to refashion IBM, which was then still recovering from the near-disastrous mismanagement of John Akers.

So IBM pulled out all the stops. Whatever Gerstner said to romance Ozzie, it worked. He stayed, and so did his team. Sweetening IBM's original $3 billion bid by half a billion bucks also helped erase lingering suspicions. But this deal primarily got done because IBM management showed a different side. Gerstner and his lieutenants went out of their way to woo Lotus as if its employees were the most important people in their world.

Of course, nothing lasts forever, and Ozzie and a good chunk of Lotus' management eventually split. But by then IBM had what it wanted, and most Lotus employees still had jobs, so neither side had major reason for complaint.

Will the PeopleSoft transition to the new regime be as smooth? Here's where a real oracle would come in handy.

The haggling around a final price might have left a bitter taste in peoples' mouths, but the decision to increase Oracle's "best and final" $24 per share offer by another 10 percent will go a long way to buy employee goodwill (at least temporarily).

Still, that's not the same as engendering loyalty. Right now, topic No. 1 at watercoolers across PeopleSoft's Pleasanton, Calif., campus is job security. I'm not talking about senior management--they're history, but they're also walking away with millions to ease the discomfort of an early retirement. I mean the top coders among the rank and file who still need regular paychecks to feed their families.

Ellison needs to orchestrate a charm offensive the likes of which we haven't seen since Adam and Eve were snookered into biting the apple.

Ellison has pledged to keep PeopleSoft's product lines alive for quite some time, but what does that really mean? And how many PeopleSoft employees will Oracle need to keep around if it's to deliver upon that promise? Keeping the best and the brightest among them now becomes Ellison's top priority.

Above all, Oracle needs to buy time. And if it's going to keep the PeopleSoft talent pool intact--at least for the next year or so--Ellison needs to orchestrate a charm offensive the likes of which we haven't seen since Adam and Eve were snookered into biting the apple. Or at a minimum he needs to avoid treating his new employees like a conquered army.

Oracle does have something working for it: The rebound in the Silicon Valley job market remains tepid at best. (On Friday, Santa Clara County reported that it had lost 1,600 jobs in November.) Even if the PeopleSoft crew can't stomach their new bosses, there are mortgages and car loans to pay down. Unless Ellison pushes these folks out the door, most will be tempted to stay put. Six months from now, however, the tech market may be in a lot better shape, and that's when the resumes could start flying off the presses.