U.S. v. Oracle Corp.
Economic Issues
Dan Wall
Latham & Watkins LLP
Modern Computing Environment
Function
Ties together disparate
computing environments
Performs business
processes
Runs programs (Java, C),
integrates multiple programs,
manages user security
Stores data
(e.g., invoices, orders,
personnel records)
Runs logic for hardware
Hardware on which software
applications run
System
Systems Integration
Services
Enterprise Applications
Software (“EAS”)
Application Server
Solutions
Accenture, IBM, Cap Gemini,
EDS, In-House, Others
SAP, Oracle, PS, Others
IBM, Microsoft, BEA
Oracle, SAP, JBoss, Others
Database
Oracle, IBM, Microsoft,
Sybase, MySQL, Others
Operating Systems
Unix, Windows, Linux
Mainframe MVS, Others
Server Computers
IBM, Sun, Dell,
HP, Others
EAS Within the Enterprise
Customer Interface
The “Back Office”
Corporate
Administration
 Financial
management
 Human
resources
 Central
procurement
 Executive
information /
decision support
systems






Product marketing / support
Field service & support
Order entry
Sales management
Customer information systems
Product configuration
Supply Chain





Advanced planning & scheduling
Supply chain inventory visibility
Warehouse / inventory mgmt
Transportation
International trade systems
Manufacturing





Resource planning
Maintenance, repair, operations
Engineering/design
Product data management
Production management
C
U
S
T
O
M
E
R
S
S
U
P
P
L
I
E
R
S
FMS Applications
Financial Management Systems
(“FMS”) Applications

General ledger (“GL”)

Accounts payable (“A/P”)

Accounts receivable (“A/R”)

Asset management

Treasury management

Travel and expense management

Others …
HR Applications
Human Resources (“HR”) Applications

Human resources

Payroll

Time & attendance

Benefits

Compensation

Training

Learning

Performance appraisal

Others …
Industry Verticals
 Federal Government
 Communications
 State and Local
Government
 Utilities
 Education
 Healthcare Providers
 Financial Services
 Retail
 Professional Services
 Process Manufacturing
 Discrete Manufacturing
 Agriculture & Mining
Stack Competition
Consulting
Services
Oracle Consulting
Partners
IBM GlobalServices
SAP Consulting
Partners
E-Business
Suite
Microsoft
Business
Solutions
Partners
mySAP
Partners
Applications
Development
Tools
Oracle Tools / J2EE
Visual Studio .NET
Rational / WebSphere
NetWeaver / J2EE
J2EE
Application
Server 10g
.NET
WebSphere
NetWeaver
JBoss/Apache
Database
Database 10g
MS SQL Server
DB2
MySQL and others
MySQL
Operating
System
Linux
Windows
Linux
Linux
Linux
Middleware
Suite
Real Competition: The Stack
D5822R
A Non-Starter In FMS
Or In HRMS
Getting to DOJ’s Market
 Cut out the “Mid-Market”
•
DOJ focuses on the very
largest corporations in the
world.
•
Thousands of large
enterprises are
excluded from the
market – because
they indisputably
turn to other
vendors.
<2000 Companies
10-15,000
Companies
200 Word Market Definition
Price Discrimination
 A constant DOJ theme, but:
•
•
•
Price discrimination in the form of different,
customer-specific pricing was simply noted, not
explained.
Price discrimination market definition theory was
not pursued.
DOJ never established that having fewer choices
translated to unfavorable treatment.
The Secret (Better?) Market
SAP Will Remain the Leading Firm
 “ERP” (EAS Suites)
•
•
SAP Worldwide ERP Revenues:
Sum of Oracle and PeopleSoft:
$5.0 billion
$3.1 billion
Source: IDC, May 2004 (D5572)
 FMS
SAP Worldwide FMS Revenues:
Sum of Oracle and PeopleSoft:
•
•
$1.06 billion
$673 million
Source: IDC, Sept. 2003 (D5543)
 HRM
•
•
SAP Worldwide HRM Revenues:
Sum of Oracle and PeopleSoft:
$514 million
$652 million
Source: IDC, July 2003 (D5815)
From Oracle’s Opening Statement
“Localized Competition”
Theory
“Reality”
(Assuming 3-firm
market)
Customer Size
ERP Vendor Market Positioning
AMS
SAP
PeopleSoft
Oracle
Lawson
Microsoft
Vertical Scope
Sources of Customer Leverage
 Lost enterprise bids are very costly.
•
Variable costs are low; lost revenue is lost profit.
 Follow-on business.
•
More modules, pillars, infrastructure needs.
 Reference value.
 Control of key information.
•
They can learn what is important about vendors while
concealing what is important about them.
 A credible “do nothing” option.
From Oracle’s Opening Statement
Nothing Critical Will Change
Today
Post-Merger
 One or two firms negotiating
with buyer.
 Unchanged
 Buyers with leverage that don’t
need to buy at all.
 Unchanged
 Buyers can conceal their
reserve price and vendor
preferences.
 Unchanged
 Seller costs of losing are huge;
price discrimination is very
risky.
 Unchanged