SAP: Oracle-PeopleSoft tangle causing price pressure

The brawl that’s erupted between Oracle Corp. and PeopleSoft Inc. over Oracle’s attempted hostile takeover of its rival is placing pricing pressure on vendors throughout the enterprise applications market, SAP AG executives said Thursday during a New York press conference following the company’s second-quarter earnings report.

“We are faced with some extraordinary things that people are willing to do on the other side, that requires from us a certain amount of flexibility that we would not have normally (offered),” said Leo Apotheker, SAP’s president of global field operations.

In direct competition against Oracle, SAP won several significant deals this quarter with companies including Maytag Corp., Fender Musical Instruments Corp. and Newell Rubbermaid Inc., said SAP America Inc. CEO Bill McDermott.

“We beat Oracle, where they substantially discounted beyond the market norms,” he said.

Without directly invoking Oracle’s name, SAP CEO Henning Kagermann criticized the company’s tactics in launching its unsolicited bid for PeopleSoft.

“We have seen this consolidation (trend) in the market, and we are a little concerned that the way it was handled was not very professional. Normally, our industry relies on trust, long-term trust from our clients,” he said. “We feel there is short-term damage to our industry.”

SAP launched last month an advertising campaign aimed at wooing disenchanted PeopleSoft and Oracle customers. The campaign isn’t intended to generate immediate sales, but rather to prime future opportunities for SAP, executives said.

“The campaign cannot deliver any short-term results because the cycles are still going to be the same. A customer who has to make an important decision like this will take his time,” Apotheker said. “What it did generate is the opportunity to talk to a certain number of customers using competitive products, and these talks are continuing.”

Apotheker said he can’t predict how long the industry’s price warfare will continue.

“It depends on how (the PeopleSoft/Oracle battle) is going to play out,” he said. “If it’s going to drag on for another year or so, and that’s possible, then I do believe the pricing pressure will cease. There’s an element of suicide here.”