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1	IN RE:
2	THE MATTER OF ORACLE'S PROPOSED ACQUISITION OF PEOPLESOFT
3	CIVIL INVESTIGATIVE DEMAND NO. 22722
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7	Washington, D.C.
8	Tuesday, December 16, 2003
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13	Videotaped Deposition of KEITH BLOCK, a witness
14	herein, called for examination in the above-entitled matter,
15	pursuant to notice, taken at the offices of the United States
16	Department of Justice, Antitrust Division, 600 E Street NW,
17	Suite 9500, Washington, D.C, 20530, beginning at 10:10 A.M.
18	before Christina Anderson Smith, RPR, a Registered
19	Professional Reporter and Notary Public in and for the
20	District of Columbia.
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1	PROCEEDINGS
2	(10:10 A.M.)
3	(Government's Exhibit 1 was
4	marked for identification.)
5	EXAMINATION BY COUNSEL FOR THE DEPARTMENT OF JUSTICE
6	BY MR. SCOTT:
7	Q. All right, sir. Could you state your name
8	for the record, please.
9	A. Keith Block.
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1	Q. All right. So now you understand that we'll
2	be asking you a series of questions today designed to
3	elicit information pursuant relating to the proposed
4	acquisition of PeopleSoft by Oracle.
5	A. Right.
6	Q. And you are required to, as you are under
7	oath, to respond to those questions as truthfully as
8	possible.
9	A. Uh-huh.
10	Q. You have to say yes or no for the record.
11	A. Yes.
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18	Q. All right, sir. Could you give us -- tell us
19	who you're currently employed by.
20	A. Oracle Corporation.
21	Q. All right, sir. And what's your work
22	address?

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1	A. 1000 Winter Street, Waltham, Massachusetts.
2	Q. And how long have you been with Oracle?
3	A. Since 1986.
4	Q. All right, sir. And very briefly, could you
5	describe your educational background?
6	A. I have a Bachelor's and a Master's Degree from
7	Carnegie-Mellon University.
8	Q. And what are those degrees in?
9	A. Bachelor's Degree in Information Systems and a
10	Master's Degree in Management and Public Policy.
11	Q. All right, sir. Beginning in 1986 and coming
12	forward to today, could you describe for me briefly the
13	positions you've held at Oracle.
14	A. Sure. I started out with Oracle consulting as
15	a consultant, and worked my way up through the
16	management chain holding various management positions,
17	running geographic practices; got promoted to vice
18	president, moved up the vice president chain running
19	industry-specific practices, the CPG industry
20	particularly. And about a year ago I was asked to run
21	both the licensed sale software sales organizations
22	North America, as well as the North American consulting

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1	organization.
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6	Q. All right, sir. And the current position
7	that you hold, your title is what?
8	A. Executive Vice President North America.
9	Q. And your duties and responsibilities, could
10	you describe those briefly for us?
11	A. I'm responsible for the software sales in the
12	North American commercial account base, as well as the
13	consulting, both government and commercial, in North
14	America.
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19	Q. You may have said this earlier, so I
20	apologize. When did you take the -- when did you --
21	were you put in this position?
22	A. Approximately a year ago.

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16	Q. All right, sir. Now, then you said under
17	the -- in addition to the strategic accounts, there's
18	an applications group?
19	A. Uh-huh.
20	Q. You have to say yes or no for her.
21	A. Yes. I'm sorry.
22	Q. And the applications group, could you

00026
1	describe for me, first of all, who is in charge of it,
2	and then under that person how it's organized.
3	A. Okay. Paul Ciandrini is responsible for the
4	applications group. And he has an eastern North
5	American applications group, a western North American
6	applications group, and he has responsibility for the
7	applications business group which I mentioned earlier.
8	Q. And that applications -- how does that
9	applications business unit relate to Mr. Ciandrini's
10	sales efforts?
11	A. They're deep product experts, and so they'd be
12	brought in on a sales cycle to demonstrate deep product
13	knowledge or competitive knowledge.
14	Q. So, this group would have, under Mr.
15	Ciandrini, salesmen, I take it, that go out and call on
16	individual accounts?
17	A. Yes, that's correct.
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2	Q. All right. Well, let me ask you this.
3	Describe for me, in as much detail as you can, what the
4	software that will be sold to smaller companies, mid
5	market companies, the term is used in your documents,
6	will consist of?
7	A. For applications?
8	Q. Yes, sir.
9	A. Any company or entity of any size is -- can
10	buy the entire E-Business Suite modules within the
11	E-Business Suite, the functional groupings -of the
12	E-Business Suite. We don't change the software. It's
13	the same software. We don't have different versions of
14	the software based on company size.
15	Q. Are you putting together a version or a
16	package of the software to sell to smaller companies?
17	A. It's not really a software package.
18	Q. Well, what is it?
19	A. What differentiates it is pre-configured set
20	ups, versions, pre-configured set ups. These are
21	service offerings that wrap around the same software,
22	so -- and just as a point of clarification, again, that

00121
1	offering, not software, that offering, could be sold to
2	a company or entity of 15 million that's a stand alone
3	entity, or it could be a division of GE, General Motors,
4	Boeing, pick it. But the software is the software is
5	the software. We don't modify the software.
6	Q. Then what is it you're doing when you put
7	together this offering?
8	A. Right.
9	Q. What's the purpose of it?
10	A. The offering is to give customers, certain
11	customers, a set of pre-configured software, which oh,
12	by the way, is the same software. It's just configured,
13	pre-configured, as opposed to drawing on a larger
14	project, an opportunity to implement as quickly as
15	possible.
16	Q. When you say pre-configured software, what
17	does that mean?
18	A. Those pre-configured set ups that I talked
19	about earlier, so there'd be a standard chart of
20	accounts in the general ledger module.
21	Q. So they will be standard set ups in this
22	offering as opposed to the customer having -- when they

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1	implement the software, doing customized versions of
2	say general ledger, that type thing?
3	A. That's generally right.
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5	Q. Do you understand what's meant by a solution
6	in a box?
7	A. Solution in a box to me would be a
8	pre-configured pre-set up solution.
9	Q. Now is the ERP software that you sell to
10	larger companies, would you consider that a solution in
11	a box?
12	A. The ERP software that we sell to any company
13	is not a solution in a box.
14	Q. Is the package that you're putting together
15	now to sell to companies that have simpler needs, would
16	you consider this a solution in a box with your
17	pre-configured set ups?
18	A. I'm sorry. Could you ask the question again.
19	Q. You said you're currently putting together
20	some application software to sell to companies with
21	simpler needs, right? Under Mr. Ciandrini? He is
22	putting together some package like that, or at least is

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1	responsible for a number of people doing it, right?
2	A. Uh-huh.
3	Q. Yes.
4	A. That's correct.
5	Q. Would you consider what he's doing to be a
6	solution in a box?
7	A. What Paul is heading up is a solution in a
8	box.
9	Q. And by solution in a box, we mean what again?
10	A. Pre-configured set ups of the software. So
11	it's the same software, it's just pre-configured and set
12	up.
13	Q. Does the pre-configuring of the software, the
14	solution in a box have any implications regarding the
15	time and expense of implementing it?
16	A. Yes, it does.
17	Q. In what way?
18	A. A typical project, broadly speaking, would
19	include several phases to it. There would be a strategy
20	phase, a requirements definition phase, a design phase,
21	a set up and configuration phase, several phases after
22	that, build, transition, production, change, management,

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1	all that good stuff.
2	You still can go through all those phases
3	with set ups in a box. But you can cut down the
4	time to do that because you can cut pieces out of
5	the strategy phase of a project or the set up and
6	configuration phase of a project or the requirements
7	phase of a project by essentially giving a
8	customer -- here's your set up, here's your system,
9	make some minor modifications and you can go.
10	Q. So using a set up in a box would be faster
11	and cheaper for a customer to implement if they used
12	the pre-configured set ups?
13	A. It would certainly cut down on the labor and
14	time to go live, yes.
15	Q. And for, say, your -- in the package for
16	the -- that you're -- for pre-configured set ups that
17	you're working on now, you haven't worked out the
18	pricing of it, I take it, from what you said earlier.
19	A. No.
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20	Q. And you said earlier that you wouldn't
21	consider the ERPs, the enterprise software that you
22	sell to be a solution in a box, correct?

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1	A. Stand alone? No.
2	Q. What is different from -- well, first of all,
3	what do you mean by the term stand alone in your last
4	answer?
5	A. Stand alone means it's just the software.
6	There is no set up or configuration, it's just the
7	software that's on the CD. That's it.
8	Q. Is that generally how you sell the enterprise
9	software?
10	A. Yes, it is.
11	Q. As a stand alone?
12	A. Yes, it is.
13	Q. What is different between the stand alone ERP
14	software and the solution in a box?
15	A. The solution in a box would include the
16	pre-configured set ups. Again, for an example, if you
17	have the general ledger, it would have a chart of-- a
18	pre-configured chart of accounts.
19	Q. And the stand alone software, ERP software
20	would not have a pre-configured set up of accounts?
21	A. That's correct.
22	Q. Why?

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1	A. We don't sell it that way.
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12	Q. And the reason that you're standardizing --
13	doing standardized configurations in the out of the box
14	solution in a box package is because you perceive that
15	there are some customers who would want the software
16	sold in such a manner; is that accurate?
17	A. Yes.
18	Q. And what's the basis of that?
19	Why do you think that?
20	A. There are examples of other companies in the
21	market who have been able to do this, so we have been
22	able to see that there's receptivity to it. Like

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1	Salesforce.com. We've also -- customers are always
2	interested in implementing faster, cheaper, less
3	expensive ways. So if you can give them something
4	that's pre-configured and set up, they're always going
5	to be interested in that.
6	Q. Now, you sell the stand alone ERP software,
7	as I understand it, without pre-configured set ups like
8	you have in your solution in a box, correct?
9	A. We sell it stand alone without the solution in
10	a box.
11	Q. And without -- and by that statement, that
12	means that your stand alone ERP software does not have
13	pre-configured -- pre-configured aspects to it that the
14	solution in a box does have?
15	A. That's correct.
16	Q. And so would it be a fair statement that the
17	reason you sell the ERP software, stand alone software
18	without the number of pre-configured aspects to it that
19	are in the solutions in a box is because you understand
20	customers, some customers want the ERP stand alone
21	software without all those pre-done configurations?
22	A. That's correct.

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1	Q. And what's the basis for that?
2	Why do you think that?
3	A. They may want their-- they may want their
4	unique needs. They may feel their business is special.
5	They may have something proprietary, competitive
6	advantage. Could be a number of things. And they may
7	use it -- if we ever gave them or included it, they may
8	use it as a jump start to a project.
9	Q. They may use what as a jump start to a
10	project?
11	A. Pre-configured set ups.
12	Q. Typically, the folks that you sell the stand
13	alone ERP software to today, though, don't buy the
14	pre-configured set ups that you have in the solution in
15	a box product?
16	A. It's not bundled together.
17	Q. And do you have -- can you identify any
18	instances where you were selling the stand alone ERP
19	software where people, in order to jump start the
20	project, as you put it, also ask for the solution in a
21	box product?
22	A. Well, they're not aware of the solution in the

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1	box product.
2	Q. Why is that?
3	A. Well, it's not really generally available to
4	the market yet.
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14	Let me ask this. Are you familiar with
15	the process by which sales of stand alone ERP
16	enterprise software are made by Oracle?
17	A. Yes.
18	Q. And how much do you get involved in the sales
19	process?
20	A. I'm typically active in a discrete number of
21	opportunities playing an executive sponsorship role and
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1	Q. What is meant by executive sponsorship role
2	in executive selling?
3	A. A lot of customers want to sit across from an
4	executive and understand what the high level value
5	proposition is, what Oracle brings to the table, or on
6	risk mitigation, about demonstrating return on
7	investment for the client in a corporate commitment.
8	Q. Are you also in a position where you are kept
9	apprised as of transactions as they're ongoing as to
10	what's in the pipe line, what's likely to come in,
11	what's likely not to come in, that type of thing?
12	A. I track a discrete number of sales pursuits.
13	And I also get overall pipe line information and
14	forecast information.
15	Q. Now, as the process goes forward in selling
16	an account, do you also become involved in discussions
17	regarding price?
18	A. Typically not. And if I do, it's usually at
19	the end of a sale cycle.
20	Q. How is the pricing for your products, your
21	application software licensing done?
22	A. It can be done on a suite basis. There's a

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1	standard set of prices for the suite. It can be done on
2	an employee basis, number of employees.
3	Q. So I take it there is a list price for the
4	products that you sell?
5	A. Yes, there is.
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20	Q. Now, is the pricing for the -- is it typical
21	for, in the pricing of the applications that you folks
22	sell, for there to be some discounting off of the list

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1	price, however that list price is computed?
2	A. Yes.
3	Q. And what are the -- are there set or standard
4	discounts that can be given by different levels of
5	personnel at Oracle?
6	A. Yes.
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12	Q. At what levels are there approvals for
13	discounts?
14	A. I believe there's a discount approval level
15	before me, below me. There may be more to be candid
16	with you. And there is one above me.
17	Q. All right. And what's your level of discount
18	that you're authorized to go to?
19	A. I believe it's 70 percent.
20	Q. And that would be 70 percent off the list
21	price?
22	A. Right.

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1	Q. And the -- who above you has the authority?
2	A. Safra Catz.
3	Q. And what is her level of authority?
4	A. Unlimited.
5	Q. And the one below you, who is that?
6	A. That would be my direct reports.
7	Q. Including Mr. Ciandrini?
8	A. Yes.
9	Q. And what is his level of discount authority?
10	A. I don't know. I believe it's 55 percent, but
11	I don't know.
12	Q. All right, sir. And then -- and the process,
13	I take it, in order for someone to get -- take a
14	discount up to your level of authority, they have to
15	come to you and seek your dispensation on doing that?
16	A. Yes, or my proxy, yes.
17	Q. Under what circumstances or what types of
18	things would lead you to authorize a discount up to
19	your level of 70 percent?
20	A. It could be a variety of factors. It could be
21	the customer's budget. In today's world the customer is
22	driving 99.9 percent of the pricing decisions anyway.

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1	It could be recognition of a significant investment over
2	time by an existing customer, so we want to reward them
3	for their investment in our products. It could be a
4	competitive situation. It could be budgetary
5	constraints. But again, primarily -the customer
6	dictates the price right now.
7	Q. A request for approval to a discount at your
8	level, do they generally come to you in writing?
9	A. They always do. They actually go to an
10	account called KB license approvals.
11	Q. This is an electronic account, something on
12	the computer?
13	A. Yes.
14	Q. KB license approval?
15	A. Yeah. KB underscore license approvals.
16	Q. Is that just for ones where your approval is
17	sought, or is that all license approvals and discounts?
18	A. Anything that needs to go to my level.
19	Q. And who maintains that electronic account?
20	A. Rich Blotner.
21	Q. And what's Mr. Blotner's title and role in
22	the company?

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1	A. He's part of the operations group.
2	Q. All right. You said that sometime you will
3	try to reward in giving larger discounts a customer's
4	investment over time. What did you mean by that?
5	A. We have some customers who have invested a lot
6	of money in our technology. They may have bought tens
7	of millions of dollars worth of software, and they may
8	have bought it at a lower discount, and we may reward
9	them for their loyalty.
10	Q. And you said that sometimes you will discount
11	because of a competitive situation. What did you mean
12	by that?
13	A. It's a buyer's market right now. And since
14	the turn of the century, candidly, it has been. So it's
15	very very competitive. Customers have limited IT spend,
16	and so it's -- we're all competing. Everybody is
17	competing very aggressively, all software vendors.
18	Q. All right, sir. Now, in addition to selling
19	application software, do you typically sell some type
20	of maintenance or support contract?
21	A. Yes, we do.
22	Q. And how is that priced?

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1	A. It's 22 percent of the discounted price of the
2	software.
3	Q. All right. And why that number as opposed to
4	23, 24 or something else?
5	A. You know, I couldn't begin to answer that
6	question.
7	Q. Who set the number?
8	A. The Oracle pricing committee.
9	Q. And what is that committee made up of? Who
10	is that committee made up of?
11	A. I don't know all eight members of the
12	committee. It's development, some key stakeholders,
13	Safra, some other folks, some people in business
14	practices who work for Safra.
15	Q. The maintenance support contracts, what type
16	of services are provided to the customer under those,
17	generally speaking?
18	A. There's standard support, which allows
19	customers to -- I would lump it up into two categories.
20	One is that that they receive update rights, so you
21	mentioned earlier something about, you know, 1158 as a
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1	entitled under their support agreement to get 1159 and
2	other point releases as well as new versions of the
3	product.
4	They also get supported from -- if there's
5	an issue with the software, or a customer needs
6	help, they can log products, product issues or
7	technical requests to resolve the issues. They can
8	speak to a support customer representative to help
9	solve those issues.
10	Q. Do the -- do most of your customers, if not
11	all of your customers, buy a maintenance and support
12	contract when they buy your application software?
13	A. Yes.
14	Q. Which is it, most or all?
15	A. All.

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16	Q. You've used the term partners in reference to
17	them. Do you have some type of formal relationship
18	with the Accentures, Bearing Points of the world that
19	lead them to promote your software?
20	A. One of the things that they actually pride
21	themselves on is being vendor neutral. So if you go
22	talk to Accenture or DeLoitte or Bearing Point they'll

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1	tell you, hey, you know we only act in the best interest
2	of the customer, and we're not going to promote
3	somebody's software over somebody else. Now, that's
4	what they'll say, and that's their stated objective.
5	That's why customers go to them to do evaluations.
6	Q. What type of relationship do you have with
7	them that would lead you to call them partners?
8	A. Partner is one of the most over used words in
9	the business world, as you probably know. But, we
10	would -- we have a very good relationship with them.
11	Sometimes we have a contractual agreement so that when
12	we work together these are the terms and conditions of
13	the agreement. A master services agreement. Mostly
14	with our consulting organization, so that if Accenture
15	does a project and they use Oracle consultants there's a
16	discount on the consulting services. It's the standard
17	discount that would apply for every deal that Accenture
18	did.
19	Q. How do you interreact with say a Bearing
20	Point or an Accenture or -- who were the other -- you
21	said big five. Who is included in the rest of them?
22	A. So Bearing Point, Accenture, DeLoitte, CGNY,

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1	Cap, Gemini, Ernst, Young and the big five is I guess
2	now the big four because PWC was acquired by IBM. But
3	we still -- we still partner with them.
4	Q. All right. Now, and when you say you partner
5	with them, what is it then exactly that your sales
6	folks do in relation to these companies, these systems
7	integrators?
8	A. Okay. So, for example, Accenture may be asked
9	to do an evaluation by a customer. And they typically
10	will have multiple teams, they may have multiple teams
11	doing evaluations demos, conference room pilots, and
12	we'll work with them to help them demo the software, put
13	together a solution for the customers. So that's one.
14	Another opportunity is sometimes a
15	customer will issue an RFP, request for proposal, to
16	a variety of partners and software providers. And
17	we may have an agreement with them that says okay on
18	this particular deal we're going to work with you
19	guys. Or we may work with many. And they may work
20	exclusively with us. They may work with many
21	software providers. That's how it works.
22	Q. When you said in relation to the earlier --

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1	you know, where they might be working, not the RFP
2	process, but the circumstances where they may be
3	working with multiple teams, demoing and testing the
4	software --
5	A. Yep.
6	Q. Multiple teams meaning what in that context?
7	A. At some point in the evaluation process -- and
8	you know, evaluation process goes through many rounds.
9	I mean, it's an exhaustive process. It takes a long
10	time. Especially, you know, if you're rolling out a
11	large portion of any application provider suite. Right.
12	And typically what'll happen is at some
13	point the customer will say okay, well, I think
14	it's, you know, these guys that I want to go with,
15	and so Accenture would say okay, well we're going to
16	have a team to work with this vendor, a team to work
17	with this vendor, a team to work with this vendor,
18	and eventually you get to that stage and then
19	Accenture will provide implementation bids for two
20	or three or four.
21	Q. Okay. So what will happen is Accenture,
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1	work with different vendors --
2	A. Uh-huh.
3	Q. -- so that they can run and test the software
4	of each of them against the client's requirements and
5	see who the best fit is.
6	A. That's generally right.
7	Q. Are there circumstances where you folks are
8	working with say an Accenture or a Bearing Point or a
9	CGNY where you know that there are also showing and
10	demoing other people's software?
11	A. Yes.
12	Q. Is that typical?
13	A. It's not uncommon.
14	Q. And then these companies will typically --
15	will bid to do the implementation work.
16	A. Yes. Although, on occasion, if they do the
17	evaluation, they're not asked to do the implementation
18	work.
19	Q. Okay. Do the Big 5 generally have people in
20	there capable of doing the implementation work for most
21	of the major software vendors?
22	A. Yes.

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1	Q. And that would be including you?
2	A. Yes.
3	Q. Can you think of any of the Big 5 who don't
4	have the capability of doing implementation work for
5	you, Oracle's software?
6	A. No.
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12	Q. Okay. And in the circumstances where the Big
13	5 are involved, typically won't there be some document
14	which lays out from a technical standpoint performance
15	standpoint what the customer's looking for?
16	A. Yeah, typically there'll be a high level
17	requirements definition.
18	Q. Is that -- do -- are RFPs more detailed than
19	these high level performance definitions that come
20	through the Big 5?
21	A. It depends on the customer.
22	Q. All right, sir. And in dealing with these

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1	circumstances, what type of information does the -- is
2	the client giving you making available to you regarding
3	what they want?
4	A. It could be a number of things. It may be --
5	typically it's the scope of work that they're looking
6	for, the scope, the functionality, the scope of work,
7	where the software would be deployed. It could be -- it
8	could run the whole gamut.
9	Q. Well, is there -- are these things fairly
10	uniform in the scope of work that you get from clients?
11	A. No.
12	Q. And why is that?
13	A. Broadly speaking, there are probably
14	categories of things that they will ask about. But
15	every customer is different.
16	Q. Broadly speaking -- when say they're broadly
17	speaking, there are categories of things that customers
18	will ask about, in doing that scope of work type of
19	document, what types of things typically will be in
20	such a document?
21	A. Oh, it might be things like functionality. It
22	may be platform that you run on. It may be we want to

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1	see your references. It may be -- I mean, things like
2	that.
3	Q. All right. So typically, then, in the scope
4	of work document you will get, one, from a client when
5	you're going in to sell enterprise software something
6	that describes the functionality they're looking for
7	and the software that they want to acquire, right?
8	A. Yes, at a high level.
9	Q. And by high level, what do you mean?
10	A. It's not detailed requirements. I mean
11	typically what happens is that the customer has a
12	statement, a broad statement of requirements where they