Author: Site Staff

Dear Head-Counter:

Senior managers and CFOs are notorious for refusing new head count. The primary reason behind their resistance is that they often see employees as an expense rather than an asset. The fewer you have, the more money you save.

It’s possible to do a quantitative analysis to demonstrate to a cynical CFO whether you have “too many” or “too few” employees. I call that process determining “head-count fat.” The process can be used for either justifying new positions or demonstrating the need for layoffs.

Determining whether you need more positions is based on a series of ratios or relationships. The process assumes that there is a relatively fixed ratio between the number of employees needed and certain business metrics. By looking at historical patterns within the firm, you can generally determine a reasonable range for these ratios.

For example, some firms start with a simple ratio known as revenue per employee to determine the number of employees they need. If you have 10 employees and you generate $500,000 in revenue, then the firm’s standard revenue-to-employee ratio is one employee for every $50,000 in revenue. Using this formula, you can justify an added position every time that corporate revenues (or revenue forecasts) go up by $50,000.

There are, however, other more complex internal ratios than revenue per employee that can be used to determine whether you have too many or too few employees. Some of these other ratios include:

• Employees to managers

  
  

• Employees to new customer orders or backlogged orders

  
  

• Employees to inventory levels

  
  

• Employees to number of customers

  
  

• Regular employees to overhead employees (for adding overhead head count)

  
  

• Labor costs to all production costs

  
  

• Employees to the percent utilization of production capacity

  
  

Beyond these internal ratios, some external factors can also indicate the need for additional hiring. For example, as the economy grows, many firms begin to hire so that the newly hired employees will be well trained by the time the increased economic growth eventually leads to increased sales. Some other external factors that often cause companies to increase head count include:

• An increase in consumer spending

  
  

• A decrease in the unemployment rate

  
  

• An increase in consumer disposable income

  
  

• Increased purchases of durable goods

  
  

• Increased housing purchases

  
  

• Lower interest rates

  
  

Whichever ratio you select, work with your CFO’s office to ensure first that they buy into the concept of a fixed ratio, and second that the calculations for that ratio are credible and reliable.

If the ratio concept doesn’t work, the only other viable approach is to shift the burden to influential business-unit managers. They often have more political pull than human resources and can successfully argue that since they were budgeted the money, they ought to be allowed to spend it.

Incidentally, across-the-board hiring freezes are generally silly because they hamper the business units that need to grow rapidly, even during tough economic times. A freeze that focuses exclusively on overhead and no-growth/low-profit business-unit hiring makes more sense.

SOURCE: John Sullivan, head and professor of the Human Resource Management College of Business at San Francisco State University, November 3, 2003.

LEARN MORE: Did You Get the Employee You Wanted?

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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Dear Workforce Newsletter

MBA students and graduates apparently don’t think too highly of businesspeople–at least when it comes to ethics.

The Committee of 200–a group representing women in business–commissioned the Center for Women’s Business Research to conduct the study of MBA students and MBA graduates who had received their degrees between five and ten years ago. The committee surveyed both men and women. Only 39 percent of student respondents say that businesses “are honest and ethical.” On top of that, only 35 percent said that businesses “care about employees.”

Recent grads had similar opinions. Thirty-six percent say that businesses are honest and ethical and 25 percent say that businesses care about employees.

Women surveyed generally had more negative impressions of business ethics than men.

The survey also found that the Internet is the most popular source of advice for both women and men in business school or early in their careers. They rely on it more than they rely on spouses/partners, friends, colleagues and associations.

A visa program called the H-1B allows 65,000 foreign employees to enter the United States between Oct. 1, 2004, and Sept. 30, 2005. The cap has already been reached, according to CNET.

High-tech companies are big users of the H-1B. They’re lobbying Congress to raise the cap, particularly for foreign students who graduate from schools in the United States with advanced degrees. The U.S. Chamber of Commerce, a lobbying group for business interests, says that “28 percent of U.S. Ph.D. graduates in science and engineering are foreign-born individuals, and it is imperative that U.S. companies are able to recruit from this talent pool.” Among the other groups lobbying for a higher visa cap is Compete America, a coalition of 200 corporations.

Unions and labor advocates, including the AFL-CIO, say that there are so many unemployed technical employees that an increase in the cap is unnecessary.

More on immigration is available online.

Sometimes companies give “stay” bonuses to keep top executives in place, but don’t extend those retention sweeteners to the rank and file. Last week, PeopleSoft turned that model on its head.

Amid the threat of a hostile takeover by Oracle, which could cause thousands of layoffs at PeopleSoft, the board of directors fired CEO Craig Conway. It also approved a plan to recognize the role workers have played in the course of the 16-month takeover battle and to alleviate their concerns “regarding their long-term employment prospects,” according to a Securities and Exchange Commission filing.

The plan, which is triggered when another company takes control of PeopleSoft and fires its staff, gives executives between 150 percent and 200 percent of their annual salary and bonus, plus up to two years of health coverage. Before, they received 75 percent to 100 percent of their salary and bonus. Conway, whose compensation packaged was sweetened earlier, was not included in the new plan.

All employees will collect at least 12 weeks’ salary and health benefits; previously it was one week of salary for each year of service, with a maximum of three months’ salary. In addition, the plan accelerated the vesting schedule for employee stock options, allowing them to be exercised and sold immediately.

Workforce Management will provide further information on retention at PeopleSoft in an upcoming issue of the Workforce Recruiting newsletter.

–Ellen Lee

Absence rates are lower this year than last for most employers, according to the latest figures from the Bureau of National Affairs, a private research and publishing company.

Absence rates (the median percent of scheduled workdays that employees aren’t in attendance) are lowest for companies of 2,500 or more employees. These large firms experienced 1 percent absence rates in the first half of this year, down from 1.3 percent during the same period last year.

In the Western United States, the 1.7 percent absence rates are higher than the 1.4 percent figure in the Northeast. Manufacturing companies, at 1.4 percent, have lower absence rates than in health-care companies, at 1.9 percent.

More on attendance is available online, including the article “Sickened by the Cost of Absenteeism,” as well as absenteeism formulas and information on dealing with attendance problems in call centers.

Dear Befuddled:



Your challenge is not uncommon, especially given the economic chaos of the past three years. That has led to more new managers in the workforce. Don’t let that be a reason to uproot performance-management processes or change programs.

Your company’s leadership needs to demonstrate how serious performance management is, including being accountable. It doesn’t matter whether your organization uses one-way, multi-rater, 360-degree or other performance measures: upper management should understand the process and advocate it. Too many CEOs preach performance management to their employees yet show a woeful lack of knowledge about the process at year’s end.

View this as a great opportunity rather than a problem. It gives new managers a chance to demonstrate the importance they attach to good performance management, as well as approach the situation with honesty and care. At the least, new managers should do self-assessments and set goals with their own managers, be it the CEO or another executive. Draw organizational attention to this important step, and even share managers’ goals, ranging from economic to developmental, with the broader organization.

Although it may be unfair to ask new managers to comment on an employee’s past performance, they certainly ought to be involved in setting future goals. Being new to the company is not an excuse to abdicate that responsibility. New and existing managers should collaborate on a fair rating system. Leaving the responsibility only to existing managers sends the wrong message to both new managers and employees.

Collaboration is important for another reason: performance assessments are often tied to employee compensation. Have new managers poll several existing company managers for whom an employee has worked. Have them consult other data, such as customer feedback (internal and/or external), about the employee. Human resources should play an integral role, ensuring consistency in approach and fairness.

Change brings opportunity. This is a chance to elevate the importance and integrity of performance management within your organization. Don’t let the opportunity pass you by.

SOURCE: Matthew C. Levin,Hudson Highland Group, Chicago, November 10, 2003.

LEARN MORE:How Do I Change the Perception of Appraisals?

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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Dear Workforce Newsletter

Dear Befuddled:



Many organizations have a Field of Dreams approach to e-learning. They believe that if they build it, employees will come. The truth is that organizations face many obstacles that keep learners from accessing online learning. Some employees may have such a heavy workload that little time is available for training. Others may feel intimidated by the technology. Still others may resist changing to self-paced or synchronous online instruction, preferring traditional classroom-based training.

Below are some ways that organizations have increased the rate of user engagement in e-learning.

Give employees enough time and space for e-learning classes
Minimize distractions for learners as much as possible so they can concentrate on the training they need. There are several ways to do that, including:

• Setting up a separate area for e-learning (e.g., computer lab).
  
• Posting visual reminders that someone is “in class.”
  
• Forwarding e-mails and calls.
  

Tie e-learning to consequences
Let learners know how important e-learning is by tying course usage or completion to performance reviews. You should:

• Talk about training expectations during performance appraisals.
  
• Make e-learning a prerequisite to classroom learning.
  
• Require certifications.
  

Keep communicating
Don’t stop communicating with employees once you launch the curriculum. Keep people engaged long after the kickoff party by regularly informing them of new courses, certifications and services. Also, communicate in a variety of ways: e-mails, pamphlets, posters, and lunch-and-learn sessions, for example. In order to make the launch more than a one-day event, try these tactics:

• Send regular e-mails.
  
• Post notices on company bulletin boards.
  
• Have regularly scheduled lunch-and-learn events.
  
• Hold an annual learning fair.
  
• Mention e-learning as a benefit of employment.
  

Reward completion
Some organizations provide reward points to employees who complete assigned training. These points can be redeemed at the company store or restaurant.

Make a module compulsory
Some people hesitate to accept change. That means they may resist e-learning without ever trying it. Develop or purchase a small, extremely engaging e-learning module and make it compulsory. Make the content fun, for example, by including instructional games, simulations, interesting assessments, etc. One of the benefits of good e-learning is that it can be addictive. Given a taste of good instructional design and presentation, your learners may be asking for more.

SOURCE: Brandon Hall, Ph.D., Lead Researcher, CEO,www.brandon-hall.com, Sunnyvale, California, Oct. 2, 2003.

LEARN MORE:Making E-Learning More Than “Pixie Dust.”

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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Dear Workforce Newsletter

Telecommuting is “alive and well and growing” even though the balance of power has shifted more toward employers in recent years, according to Gil Gordon, a consultant for employers on telecommuting and mobile work.

Gordon, based in Monmouth Junction, New Jersey, sees two trends happening. One, traditional telecommuting, where employees work some days at home and some in the office, has given way, he says, to “a broader notion of mobile work or remote officing.” This includes employees working, basically, wherever—at a client’s office, at a coffee shop or at a hotel.

Second, Gordon says, some companies—especially the most proactive—no longer see telecommuting as a favor or perk given to employees when they request it. Instead, some employers are the ones requesting it of employees. “Companies aren’t just looking at this as something that’s going to benefit the employee,” Gordon says, “they look at it as something that’s going to benefit the employer as well. Employers who look at this strictly on an accommodation basis are unnecessarily limiting themselves as far as what they can get out of telecommuting.”

“Best workplaces”

Meanwhile, Intel was named the “best workplace for commuters,” according to the U.S. Environmental Protection Agency and the U.S. Department of Transportation. The study took into account the prevalence such benefits as telecommuting, but also whether companies made life easier for people who did go to the office—such as offering flexible schedules to avoid rush hour.

Last year, 40 percent of Intel’s employees telecommuted. Also, nearly 66 percent of Intel employees say their corporation “supports a flexible work environment”—up from 37 percent in 1999. Other companies honored include EMC, which operates a shuttle service for employees traveling between offices, and Texas Instruments, which provides free rapid-transit passes to all employees that work in the North Texas area.

According to the Transportation Department and the EPA, the financial benefits of commuting benefits for an employer include a reduced demand for parking spaces and thus savings on construction costs; lower employee turnover; tax breaks; higher productivity; lower stress and fewer employee injuries.

More information on telecommuting and related issues is available on the Workforce Management site, including a sample flextime proposal, evaluation form, and telecommuting agreement. Also, the U.S. government has an “emergency ride home toolkit” as well as case studies and success stories of telecommuting benefits.

“Of all the systems we evaluated, iVantage® was the only system that had all the features and functionality we needed. The cost, features, ease of customization, and the ability to add modules, such as Employee Self Service, one step at a time were real selling points.”

E

stablished in 1985, Flad Affiliated Corp (FAC) is a private service organization that caters to a group of architecture, engineering and construction management firms including Affiliated Construction Services, Affiliated Engineers, Inc. and Flad & Associates, Inc. The firms specialize in the planning, design and construction management of innovative facilities for academic, healthcare, research, development and production clients. With offices in over 16 locations throughout the United States, the companies are nationally recognized leaders in serving the complex needs of knowledge-based organizations and providing clients with highly specialized design solutions, including the development of laboratories for industry and academic institutions and state-of-the-art healthcare facilities. FAC provides common business services for these companies in the form of accounting, benefit administration, payroll, banking, investments and project systems.

FAC came to Spectrum Human Resource Systems Corporation in 2000 after they had begun to experience some growing pains when they went from 600 to 900 employees in just two years. FAC knew they had to find an HRIS that could grow with their unique structure and multiple locations. It was important that applicant and employee information was kept separate by firm and location, yet they still needed a centralized location for their system in order to administer benefits. They were in dire need of a system that could keep up with the rapid, continuous growth of the multiple locations throughout their companies, while keeping information secure for each individual location. “We needed a centralized point of entry for all information and all locations,” said Jennifer Linley, iVantage Administrator at Flad Affiliated Corp.

Although keeping information secure at individual locations was important, they also needed a simple way to quickly communicate important changes to employee records at each location. With approximately 35 HR users across different locations accessing the system everyday, it was imperative that they be able to communicate in a timely manner. “The ease of tasks and system generated emails made Spectrum’s iVantage the obvious choice,” said Linley.

FAC went live with iVantage in February 2001, allowing them to secure their data by location. “By having a location history page and basing security on location code, keeping information separate by company was no longer an issue,” said Linley. “We also added a new page for tracking multiple addresses and address types since our companies do a lot of summer intern hiring. In the past, trying to keep track of college and permanent addresses was difficult, but with iVantage, our recruiters have all the information they need right at their fingertips.”

Reporting was also a major factor in their decision to purchase iVantage. “In our business, we work with many different insurance companies, said Linley. “It was imperative that we were able to reconcile monthly billings for these companies quickly and accurately. Pulling reports in iVantage is a breeze and government reporting is virtually stress-free.” Linley also touts that with iVantage, they have greatly improved their benefits tracking and monthly reconciliations. “Employees are put on and taken off insurance in a timely fashion, which makes our billing more accurate and easier to manage,” said Linley.

Because FAC has such a large base of current and former employees, data entry was time consuming and labor-intensive, and information was difficult to track accurately. “Before iVantage, getting employee and applicant history was a long, painful and manual process,” said Linley. “With iVantage, applicant, employee and previous employee history is right at our fingertips.”

For FAC, the positive results of iVantage as their tool of choice are numerous. iVantage freed up their HR staff’s valuable time and resources – allowing them to concentrate on recruiting, retaining, training and other important HR tasks, rather than being bogged down with cumbersome data entry and number crunching for their 900 active employees. “Our HRIS administration is now located in one office and we no longer have to scramble to get information from multiple systems at multiple locations,” said Linley. “To us, the system is priceless.”

Linley was part of the HR team that evaluated over a dozen HR systems. “Of all the systems we evaluated, iVantage was the only system that had all the features and functionality we needed,” said Linley. “The cost, features, ease of customization and the ability to add modules, such as Employee Self Service, one step at a time were real selling points.”

When asked what else about iVantage she couldn’t live without, Linley raved about the Spectrum staff. “The best feature, by far, is that we have a reliable, knowledgeable and friendly support staff available to us at all times,” said Linley. “The training by the support staff is exceptional as well. I attended Sys-Ed 2003 (the national user’s conference) and the training and networking was such a wonderful experience. Now, I can call others who use the system and see how they have handled specific issues. You can’t ask for much more than that!”

* * * * *

About Spectrum Human Resource Systems Corporation

Spectrum has been providing top-of-the-line HR systems for 20 years. A team of HR professionals develop, support and sell our software with a primary focus of meeting the needs of other HR professionals. Spectrum’s Web and desktop-based HR systems include robust HR functionality and complete integrated reporting which is highly customizable and easy-to-use. As a Microsoft® Certified Solution Provider and one of the HRIS industry innovators, a Spectrum system is built on industry standard and dependable technology. With a company mission of achieving and maintaining client enthusiasm, you can be sure Spectrum will exceed your expectation every step of the way!

For additional information on Spectrum’s products and services, call 800.477.3287 or visit workforcesystems.com

Fifteen months after it launched its hostile takeover bid for PeopleSoft, Oracle has won a major victory that brings it closer to acquiring its rival. The question is whether the war of attrition has been worth it.

    When Wharton last looked at Oracle’s bid for PeopleSoft, uncertainty prevailed and the outcome of PeopleSoft’s acquisition of J.D. Edwards was unknown. That deal has been closed for more than a year, but the J.D. Edwards acquisition hasn’t helped PeopleSoft elude Oracle’s pursuit. When Oracle first bid for PeopleSoft, Wharton professors Morris Cohen and Harbir Singh said it wasn’t clear if CEO Larry Ellison was serious or just wanted to upstage rivals. Time will tell, said the professors, adding that perhaps the PeopleSoft bid was just an ego trip. Ego trip or not, it’s now clear that Ellison is serious and may just succeed.

    On Sept. 9, Oracle won a lawsuit filed by the Department of Justice that sought to block its proposed acquisition of PeopleSoft. Oracle is offering $21 a share in cash for PeopleSoft in a bid that has been raised twice since Oracle’s June 9, 2003, initial offer of $16 a share. Barring a DOJ appeal or the European Union preventing an acquisition–securities analysts expect the EU will follow the U.S. ruling–Oracle will have cleared its regulatory hurdles.

    Wall Street analysts now put the odds of Oracle success in taking over PeopleSoft at 70 percent. The catch is that PeopleSoft’s board of directors still dismisses Oracle’s bid as a lowball offer. And PeopleSoft’s poison pill provisions preventing a takeover are also still in place. Unless more shareholders tender shares to Oracle, CEO Larry Ellison will be held at bay despite his mantra that software consolidation is inevitable–a contention few experts will argue.

    For Oracle so far, the hostile takeover attempt has improved with age. Oracle has disrupted a key rival while holding its own financially. PeopleSoft, however, is struggling and could ultimately be forced to sell out to Oracle. “PeopleSoft is definitely in trouble,” says Wharton operations and information management professor Thomas Lee. “[Oracle’s win] adds additional doubt and more uncertainty to PeopleSoft’s business.”

    PeopleSoft CEO Craig Conway is adamant about the company remaining independent. At the PeopleSoft Connect customer conference this week, Conway touted the company’s future and unveiled an alliance where its software will be tightly integrated with IBM’s Websphere platform. “Today we have eclipsed the competition,” says Conway in a news release about the IBM deal.

    But is it in PeopleSoft’s best interest to keep fighting Oracle and risk that its business further deteriorates? “PeopleSoft is trying to defend itself, but there’s this gorilla waiting right offstage,” says Lee.

    Meanwhile, the war of words goes on.

    In a letter written on Sept. 9 to PeopleSoft’s Board, Oracle chairman Jeff Henley and CEO Larry Ellison wrote: “With the removal of the U.S. antitrust issue and Oracle’s commitment to acquire PeopleSoft, we are hopeful that a transaction can occur.”

    PeopleSoft’s reply: “PeopleSoft’s Board has carefully considered and unanimously rejected each of Oracle’s offers, including its current offer of $21 per share. On May 25, 2004, the Board concluded that the current offer was inadequate and did not reflect PeopleSoft’s real value.”

    PeopleSoft continued to say it would see Oracle in court again. The company is claiming compensatory damages of more than $1 billion plus punitive damages in a lawsuit against Oracle scheduled to go to trial in Oakland, Calif., on November 1, 2004. PeopleSoft’s complaint alleges that Oracle has engaged in unfair business practices, including a deliberate campaign to mislead PeopleSoft’s customers and disrupt its business.

    What’s next? A lot of questions persist. Can PeopleSoft continue to fend off Oracle? Have the assumptions underlying Oracle’s bid changed? Has the industry changed? Did Ellison start off a new round of consolidation?

    The jury is still out, but Wharton finance professor Andrew Metrick says people should get used to the Oracle-PeopleSoft saga—it could go on for a while. “This could drag on for years,” says Metrick. “If PeopleSoft’s board continues to refuse the offer, Oracle may have to win it with several proxy fights. It’s unusual to see an acquirer this dogged.”

    Toss in another big factor–the egos of Oracle CEO Ellison and PeopleSoft CEO Conway–and it’s clear this could be a protracted war. “This is a big ego battle,” says Metrick. And amid this war is a changing industry.

Consolidation looms
    Oracle’s rationale for the PeopleSoft acquisition still holds up a year later, says Metrick. Broadly speaking, Oracle contends consolidation in the software industry is inevitable. And for its part, Oracle wants PeopleSoft’s large installed base of customer and applications used to run the human resources and finance departments of many companies. In the DOJ trial, Oracle argued successfully that it needs to beef up to compete with the likes of SAP and Microsoft, two giants that even entertained merger possibilities. Oracle’s applications business remains weak, but its database sales continue to keep the company on track with Wall Street estimates. Bottom line: Oracle needs a bigger stack of software if it wants to dominate.

    Meanwhile, the software industry’s rebound from the time of Oracle’s initial offer has waned substantially. A host of companies such as Siebel Systems issued profit warnings last quarter. For the Sept. 30 quarter, firms such as Lawson Software have also sounded alarms. Corporate spending is down. The Federal Reserve’s Beige Book release for August tells the tale. “A new tone of caution has emerged for the short-term outlook of software and the IT markets,” notes the Federal Reserve. All these are factors that favor consolidation. According to Merrill Lynch, the Internet and software sectors are the only two pockets of technology that have shed 20 percent of their companies since the first quarter of 2002.

    One of the bombshells of the Oracle trial was the fact that SAP and Microsoft were pondering a merger. If those two giants felt the need to merge, what’s left for the thousands of smaller companies?

    A.G. Edwards analyst Kevin Buttigieg says software buyers are on strike because of Sarbanes-Oxley expenditures and uncertainty about the economy. He argues that buyers have no compelling reason to blow their budgets on software, especially without “must have” versions. Metrick agrees and say that’s why there’s a big push toward consolidation. Customers are seeking out the bigger vendors. “Everything Oracle has said about consolidation in general is true,” says Metrick.

No-win scenario?
    Despite the logic behind consolidation and an Oracle-PeopleSoft deal, it is possible that this war of attrition won’t pay for either party. For now, Oracle is holding its own, but doubts remain. In its first quarter ending August 31, Oracle reported net income of $509 million, or 10 cents a share, on revenues of $2.2 billion. The results, coming in a seasonally slow quarter, impressed Wall Street analysts. The biggest issue was applications revenues were down 37 percent to $497 million.

   Fifteen months after its first bid for PeopleSoft, Oracle results are showing pockets of strength and performing well overall compared to other software firms. Nevertheless, Oracle has its critics. “Almost all the investors we have spoken with over the last year are against the deal because of potential integration issues,” wrote William Blair analyst Laura Lederman in a research note.

   PeopleSoft’s position is more perilous. After stringing together a series of quarters where the company delivered good quarterly results, PeopleSoft faltered in the quarter ending June 30. After issuing a profit warning, PeopleSoft delivered second quarter net income of $11 million, or 3 cents a share, on revenues of $647 million. In the same quarter a year ago, PeopleSoft reported net income of $37 million and revenues of $497 million.

   And since Oracle won the DOJ trial the uncertainty among PeopleSoft customers is going to persist, analysts say. Schwab Soundview Capital Markets analyst James Mendelson says Oracle’s victory “creates additional uncertainty for PeopleSoft and hurts the prospects for its third quarter results.”

    On the second quarter conference call, Conway refused to call the quarter disappointing, noting that the company’s performance was solely related to media coverage of the Oracle DOJ trial. “It was the big elephant in the room on every sale,” said Conway. Unfortunately for Conway, the elephant is still there since Oracle won.

    An unintended consequence of the Oracle-PeopleSoft standoff is that it benefits SAP, the current enterprise software leader, no matter what the outcome. In a research note, Lederman says SAP may be the biggest winner in the slugfest. “We believe that Oracle’s buying PeopleSoft would help SAP,” she wrote. “Our belief is that Oracle will not continue to develop PeopleSoft’s products, which, over the long run, will cause the base to have to move to either Oracle or SAP products.”

    That’s good news for SAP, since it is already taking PeopleSoft customers. On PeopleSoft’s second quarter conference call, CEO Conway acknowledged that SAP is benefiting the most from PeopleSoft’s turmoil.

    At this juncture the key question of Oracle’s hostile bid for PeopleSoft is whether it’s really worth all the effort to buy a wounded rival. Metrick believes it still can be worth it because PeopleSoft continues to have a large base of customers. Oracle would inherit those customers and gain from the maintenance revenue. Contrary to early indications, Oracle has been steadfast in saying it would support PeopleSoft’s customers. The big issue is price.

    If Oracle raises its bid to, say, $26 a share and PeopleSoft struggles, Oracle could spark a shareholder revolt among big institutional holders, says Metrick. Lee, however, notes there are no guarantees that Oracle could retain all of PeopleSoft’s customers. Some may go to SAP. PeopleSoft customers that use Oracle databases are likely to stay with Oracle just because integration would be easier.

    In the coming months, it appears that price may become the biggest obstacle for Oracle. If the price is right, PeopleSoft will have to come to the bargaining table. As Metrick notes, “There’s no such thing as a bad company, just a badly priced one.”

Republished with permission from Knowledge@Wharton–http://knowledge.wharton.upenn.edu–the online research and business analysis journal of the Wharton School of the University of Pennsylvania.