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Worried Yet?

Consolidation. Litigation. Forced migration. Is this any way to run an industry?

Let's see if we've got this right: SCO Group revoked IBM's Unix license and upped the damages it's seeking from IBM in an intellectual-property lawsuit to $3 billion. PeopleSoft Inc. enhanced the financial terms of its proposed $1.8 billion acquisition of J.D. Edwards & Co. to avoid Oracle's hostile takeover attempt. Oracle sweetened its offer for PeopleSoft to $6.3 billion and countersued PeopleSoft and J.D. Edwards. And the state of Connecticut, a PeopleSoft customer working on a $100 million project, filed an antitrust suit against Oracle, claiming a takeover would have dire consequences. All of which happened within 72 hours of sitting down at your desk last Monday morning.

So much for the software industry's doldrums. With Unix proprietor SCO Group ratcheting up its intellectual-property battle against Linux distributors, and Oracle's aggressive play for PeopleSoft, the job of choosing the right technology platform just got a lot harder. "We've talked to our legal counsel already," says Scott Hicar, CIO of disk-drive manufacturer Maxtor Corp., regarding the company's use of Linux in some parts of its business. "And we'll probably do [that] on a fairly regular basis."

If you're not worried yet, consider this: There's no end in sight to SCO Group's pursuit of licensing fees for Unix code it claims has been misappropriated. Customers of IBM's AIX operating system have likewise been put on notice. If Oracle has its way, PeopleSoft's apps will be put into "maintenance mode." And if PeopleSoft is no longer a safe bet, what about Siebel Systems Inc. or dozens of smaller software companies?

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All of this comes just when many business-technology professionals were beginning to feel better about the overall business climate. Attitudes on the economic outlook jumped in InformationWeek Research's just-completed IT Confidence Index (see story, "Confidence In Economy Rises, Now What About I.T.?"). Uncertainty about the software industry could cause some companies to hold back on IT spending, even when the macro picture is brightening.

Case in point: Nielsen Media Research, which collects and analyzes TV viewership data, was already cautious about implementing Linux. The current legal scrap adds to that hesitation. "That's one of the reasons we've taken a more reserved approach," says Kamal Nasser, VP of IT strategy.

But it's not all bad. Some insiders predict software prices actually will come down in the long run. And certain vendors recognize an opportunity when they see one. "I got a voice mail from SAP," says Joseph Vossen, VP of information services at Smead Manufacturing Co., a PeopleSoft user. "They say they're offering a really good deal to bail out of PeopleSoft." For its part, PeopleSoft last week initiated an exchange offer for shares of J.D. Edwards, and PeopleSoft's board recommended shareholders reject Oracle's $6.3 billion deal.

Tracy Wundrock -- Photo by Bruce Fritz

Not just the vendors' business is affected, but users', too, says Wundrock, IS director at Electronic Theatre Controls.
Still, uncertainty is causing tech buyers to sweat. "I'm nervous about the Oracle acquisition," says Tracy Wundrock, director of IS with Electronic Theatre Controls, which manages lighting for events and uses version 8.8 of PeopleSoft's apps. "The biggest problem would be migration. It's not [just] a matter of PeopleSoft's business or Oracle's business, but every single customer's business. This impacts our bottom line, too."

Smead's Vossen estimates it would cost his company close to $25 million, and about 18 months of work by 70 internal IT employees, to swap out its just-completed PeopleSoft 8 implementation. "There would be direct costs from the standpoint of licensing, costs to switch our technology from SQL Server to an Oracle database, and it would take a massive amount of effort to switch, with no productive value for the company," he says.

Photo of Tracy Wundrock by Bruce Fritz

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